MARKET REVIEW

On the back of the fresh trade developments where both the US and China officials would meet up during November on trade discussion, this boosted investors’ optimism and Asia’s stock markets ended mostly higher. The Shanghai Composite Index and Hang Seng Index increased 1.11% and 1.41%, respectively, but the Nikkei 225 slipped 0.32%. Meanwhile, tracking the positive overnight performance on Wall Street, the FBM KLCI trended higher by 0.23% led by Petronas Chemical (+3.3%). However, market breadth was negative with 497 losers vs 383 gainers amid profit taking activities. Market volumes stood at 2.29bn, worth RM2.05bn. Nevertheless, selected technology related stocks such as Frontken and MPI traded actively higher.

Wall Street closed higher amid fading trade tensions, coupled with optimism following acquisition news from PepsiCo and Tyson Foods to acquire SodaStream and Keystone Foods respectively. The Dow and S&P500 0.35% and 0.24%, respectively, while Nasdaq (+0.06%) ended flattish.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI trended higher for another session, but the key index is hovering slightly below SMA200. The MACD Line is below the Signal Line but the MACD Histogram is recovering Meanwhile, both the RSI and Stochastic oscillators are weak, suggesting that the upside could be limited around the 1,800-1,810. Support will be pegged around 1,774, followed by 1,760.

With sentiment turning positive without news flows related to Turkey crisis as well as de escalation of trade concerns, we think market will trade higher over the near term. However, KLCI’s upside could be capped near the 1,800-1,810 levels amid the ongoing uncertain August reporting month.

TECHNICAL OUTLOOK: DOW JONES

The Dow rebounded higher for the third day after forming a hammer candle last week around the 25,000 level. The MACD Indicator has issued a “buy” signal while both the RSI and Stochastic oscillators are improving above 50. Hence, we think the Dow may retest the 26,000 psychological level. Support will be pegged around 25,500, followed by 25,000.

On Wall Street, we believe that the market participants will remain positive on the back of fading concerns over trade war, at least for the near term, lifted by the planned trade discussions between the US and China officials later this month. Hence, the Dow may revisit the 26,000 level.

TECHNICAL TRACKER: CLOSED POSITION

We had squared off our position in SALUTE (+9.6% return) yesterday after hitting R1 target.

Source: Hong Leong Investment Bank Research - 21 Aug 2018