MARKET REVIEW

Despite the ongoing uncertain trade developments, Asia stock markets were mostly positive led by Japan Nikkei 225, which rallied 1.36% on the back of favourable unemployment rate, industrial output and retails sales. Meanwhile, Shanghai Composite Index and Hang Seng Index rose 1.06% and 0.26%, respectively.

On the local bourse, the FBM KLCI, however declined 0.31% led by extended profit taking activities. Nevertheless, the market breadth was positive with 434 gainers vs. 395 losers, accompanied by market volumes of 2.11bn, worth RM2.68bn. We also noticed most of the gloves stocks were traded actively higher as TOCOM rubber ended lower for the 3rd consecutive quarter.

Wall Street pared gains as investors sentiment were clouded by Facebook’s security issue that is affecting 50m accounts. The Dow (+0.07%) and S&P500 ended flat but increased more than 9% and 7.2%, respectively in 3Q.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has been trending sideways within a symmetrical triangle formation over the past two months and the key index has declined below the SMA200 last week. With the flattening MACD indicator and weakening momentum oscillators (RSI & Stochastic), we believe the key index may stay sideways over the near term between 1,777-1,818.

As September performance has ended on a lacklustre mood, we believe market participants are still searching for re-rating catalyst for Malaysia, focusing on the next corporate earnings season and Budget 2019 that will be held in November. Hence, for the near term, trading themes such as export oriented and O&G will be under traders’ radar.

TECHNICAL OUTLOOK: DOW JONES

The Dow has traded into a sideways formation last week, flat lined near the 26,400 level. The MACD indicator remained flattish and both the momentum indicator are hovering above 50. Hence, with the momentum oscillators suggesting that the positive momentum is intact, we opine that the uptrend still has some legs to move higher after a mild consolidation. Support will be at 26,000, while resistance is envisaged around 27,000.

For the US, investors are likely to maintain cautious amid the uncertain trade developments, as President Trump’s stern actions towards its trading partners are still causing uneasiness amongst investors. Hence, we see the Dow’s upside to be capped over the near term.

Source: Hong Leong Investment Bank Research - 1 Oct 2018