MARKET REVIEW

Asia markets closed positively on Friday, in tandem with the bullish tone on Wall Street. Also, Japan Nikkei 225 traded in the positive territory as August consumer price index rose 0.9% YoY. Meanwhile, Shanghai Composite Index and Hang Seng Index jumped 2.50% and 1.73%, respectively as investors and traders set aside trade concerns between the US-China for the moment and focused on tech and financial stocks.

Stocks on the local front were broadly positive taking cues from bullish regional performances. The FBM KLCI gained 0.38% to 1,810.64 pts. Also, market breadth turned positive with 477 advancers vs. 389 decliners, accompanied by 2.07bn shares traded for the session worth RM3.61bn. We noticed selected O&G stocks such as Dialog, Velesto and Armada were traded actively higher.

Wall Street was located near the record high as trade tariff rates were seen lower-than expected by analysts and investors. The Dow gained 0.32%, while S&P500 and Nasdaq declined 0.04% and 0.51%, respectively. To recap, the Trump administration announced last Monday it would impose a 10% tariff on USD200bn worth of Chinese products and may rise to 25% by end of the year, while China retaliated last Tuesday by announcing levies targeting over 5,000 US products worth USD60bn would go into effect this week.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI rebounded from the near term support of 1,777 on 13th of Sept and surged higher over the past week. The MACD Indicator is recovering, while both the RSI and Stochastic oscillators are improving as well. Nevertheless, the immediate resistance will be pegged around 1,818 (downward trend line). Should there be a breakout above 1,818, next resistance will be seen near 1,827-1,830. On the flip side, if the KLCI violates below 1,777, next support will be located around 1,760.

On our local bourse, we may expect short term positive bias sentiment on the back of the decent foreign inflows last Friday, which stood at RM307.8m. Also, traders could be looking out for opportunities within the O&G on the back of firmer crude oil prices and export-oriented stocks due to the USD/RM is still ranging between the RM4.10-4.15 level.

TECHNICAL OUTLOOK: DOW JONES

The Dow maintained its upward momentum after breaching the previous all-time-high (26,616) and we view this as a bullish signal and the MACD Indicator has expanded positively last week. Nevertheless, both the RSI and Stochastic oscillators are in the overbought region. Resistance will be located around 27,000. Support will be set around 26,500, followed by 26,000.

In the US, the softer-than-expected trade tariffs that are imposed by the Trump administration could calm the market sentiment over the near term. However, traders could be mildly cautious ahead of the FOMC meeting that will be held on 25-26 Sep, whereby the Bloomberg consensus is having a 97.9% of having a rate hike. Hence, we anticipate that the Dow could be having limited upside near the psychological level of 27,000.

Source: Hong Leong Investment Bank Research - 24 Sept 2018