MARKET REVIEW

Asia regional benchmark indices remained negative for the session following the possible resignation of the US Attorney General Rod Rosenstein and the prolonged trade tension with the new tariffs imposition between US-China which has taken effect this week. Hang Seng Index and Shanghai Composite Index fell 1.62% and 0.58%, respectively but Nikkei 225 inched higher by 0.29%.

Meanwhile, stocks on the local bourse ended on a mixed note as the FBM KLCI fell 0.32%, but market breadth was slightly positive (393 gainers vs. 384 losers). Market traded volumes stood at 1.86bn, worth RM1.91bn. Meanwhile, oil and gas stocks (Sapura Energy and Hibiscus) were traded actively higher on the back of firmer crude oil prices.

Wall Street reversed earlier gains amid uncertain developments on the trade front as President Trump remained stern on the trade talks, resulting in further tensions between the US-China. Market participants were afraid of the prolonged trade war that could dampen corporate earnings moving forward. The Dow and S&P500 slipped 0.26% and 0.13%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has formed a bearish flag pattern after the downward violation of SMA200 as well as the 1,800 psychological level yesterday. The MACD continues to trend lower, while both the RSI and Stochastic oscillators are suggesting weaker momentum after the recent hook down formation. Hence, KLCI’s upside will be capped along 1,800-1,818 levels. Support will be pegged around 1,777, followed by 1,760.

As the markets on Wall Street maintained its mixed trading tone, we may anticipate further weakness amongst the stocks on the local front and the FBM KLCI may see extended profit taking activities over the near term. However, trading interest will be seen within O&G stocks as Brent crude oil is hovering steadily above USD80.

TECHNICAL OUTLOOK: DOW JONES

The Dow has extended another negative session after hitting the recent all-time high of 26,769.16 pts. The MACD is still hovering in the positive region, however both the RSI and Stochastic are hooking downwards from the overbought zone. We believe the Dow is undergoing a mild retracement phase and the next support will be located around 26,000. Meanwhile, the resistance will be pegged around 27,000.

The unsettled trade discussions between the economic superpowers are likely to affect the market sentiment and the Dow is likely to trend sideways between 26,000-27,000 with market participants fret a tit-for-tat dispute between Washington, Beijing and other global trade partners could spiral into a full-blown trade war that may soften the corporate earnings. Also, the two-day FOMC meeting will be one of the focuses near term.

Source: Hong Leong Investment Bank Research - 2 Oct 2018