MARKET REVIEW

Asia’s stock market closed mixed, tracking the negative overnight Wall Street performance as traders and investors were undecided after the trade discussions between US and China officials ended without major developments. The Nikkei 225 and Shanghai Composite Index rose 0.85% and 0.18%, respectively, while Hang Seng Index dropped 0.43%.

Meanwhile, stocks on the local front reversed the buying momentum as profit taking emerged after sentiment was dampened further by Sapura Energy’s rights issue announcement. The FBM KLCI slipped 0.13%. Market breadth was negative with 638 decliners vs 267 advancers. Nevertheless, selected export-related counter such as Wegmans, Frontken and Hartalega traded higher.

Wall Street trended fairly bullish led by technology sector and S&P500 and Nasdaq ended in the all-time-high zone lifted by Netflix. Also, the Fed’s Chairman Jerome Powell commented that the US economy is “strong” and would maintain the interest rate up-cycle moving forward. The Dow added 0.52%, while S&P500 and Nasdaq climbed 0.62% and 0.86%, respectively.

TECHNICAL OUTLOOK: KLCI

Despite a softer closing last Friday, the FBM KLCI trended positively on the weekly basis, forming a bullish candle. The weekly MACD indicator continues to recover after forming a “buy” signal. Should there be any committed breakout above 1,810; next target will be located around 1,830, while the support will be located around 1,800, follows by 1,790.

As we approached the peak of the August reporting season, we believe traders will trade on a cautious manner. The FBM KLCI may trend sideways between the range of 1,790-1,810 over the near term. Meanwhile, we still see opportunities within the export-related and selected O&G stocks on the back of weaker ringgit prospects and firmer crude oil prices, respectively.

TECHNICAL OUTLOOK: DOW JONES

The Dow snapped a 4-day losing streak and formed a flag pattern breakout. The MACD indicator is trending higher. However, the momentum oscillators are suggesting mixed signals; RSI is above 50, but Stochastic oscillator is overbought. Hence, we believe the Dow could trend sideways before another rebound to revisit 26,000. Support will be pegged around 25,500, followed by 25,000.

On Wall Street, as the mid-level trade talks concluded without any fresh developments, it could generate short term positive trade flows in the market. However, on trade fronts, the next watch out period will be the public hearing in September for the proposed list worth USD200bn on Chinese goods.

Source: Hong Leong Investment Bank Research - 27 Aug 2018