MARKET REVIEW

Asia’s key regional benchmark indices ended mixed, tracking the lacklustre move on the overnight Wall Street. Also, the additional tariffs on the USD16bn worth of Chinese goods went into effect. The Nikkei 225 and Shanghai Composite Index rose 0.22% and 0.37%, respectively.

Meanwhile, Hang Seng Index slipped 0.49%. Meanwhile, the FBM KLCI bucked the regional trend to close higher at 1,810.87 pts (+0.71%) lifted by banking heavyweights. Market breadth was healthy with 485 gainers vs. 419 losers, accompanied by traded volumes of 2.25bn (worth RM2.46bn). Also, selected oil and gas stocks such as Hibiscus and Sapura Energy traded actively higher in tandem with the rebound in crude oil prices.

Wall Street continued with another session of negative trade as the imposition of 25% tariffs on the additional USD16bn worth of Chinese products, coupled with the political concerns in the Washington. The Dow fell 0.30%, while S&P500 slipped 0.17% and 0.13%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has surged above 1,800 despite the ongoing external concerns such as the trade discussions between the US and China. The MACD Indicator is turning positive as the MACD Line recovered near the Signal Line. Meanwhile, both the RSI and Stochastic momentum oscillators are trending higher; indicating that the positive momentum is intact and FBM KLCI could see further upside over the near term. Resistance will be envisaged around 1,840-1,850. Support will be set around 1,800, followed by 1,790.

On the local front, following the PM’s visit to China, we noticed foreign trade flows are turning positive at least for the past two trading days and it should support the FBM KLCI above the 1,800 level. Also, traders could be focusing on the O&G sector amid the strong rebound in crude oil prices.

TECHNICAL OUTLOOK: DOW JONES

The Dow continues its pullback phase after forming a shooting star formation early this week. The MACD Indicator however is still positive; suggesting that the uptrend is intact. Nevertheless, Stochastic oscillator is still overbought, while RSI is hooking down. With the technical readings on a slightly weaker tone, we believe the Dow’s upside will be limited around 26,000. Support will be set along 25,500 and 25,000.

With the ongoing trade discussions between the US and China officials, coupled with the annual Jackson Hole symposium, which gathers central bankers to discuss about global economy, we think market will trade with a cautious tone over the near term. The Dow could trend within a range of 25,500-26,000.

Source: Hong Leong Investment Bank Research - 24 Aug 2018