Asia’s stock markets ended mixed on the back of renewed uncertainties emerging from the UK overnight after several important ministers resigned from Prime Minister Theresa May’s government. The Shanghai Composite Index and Hang Seng Index gained 0.41% and 0.31%, while Nikkei 225 dipped 0.57%.

Meanwhile, stocks on the local front managed to trade higher and the FBM KLCI gapped up above the 1,700 psychological level to close at 1,706.38 pts (+0.72%). Market breadth was positive with 450 gainers, 345 losers, accompanied by 1.85bn shares traded for the session, worth RM1.89bn. Most of the export-driven sectors such as semiconductor and furniture traded actively higher. The Dow ended higher on Friday as the positive sentiment was lifted on the back of a trade framework that both President Trump and President Xi may agree during the G20 summit. However, the key index posted sharp weekly losses led by selldown in technology giants like Facebook, Apple and Amazon on the back of softer outlook guidance from most of the tech giants. The Dow and S&P500 rose 0.49% and 0.26%, but Nasdaq fell 0.15%.

TECHNICAL OUTLOOK: KLCI

After the recent gap-up formation on FBM KLCI, we may anticipate further upside to be seen towards 1,730 after most of the technical indicators are turning positive. The MACD Indicator is climbing towards zero, while the RSI and Stochastic oscillators are trending higher. Should there be any breakout above 1,730, next resistance will be at 1,750, while the support will be pegged around 1,700, followed by 1,673.

On the local front, sentiment may stay positive, tracking Wall Street overnight. However, with the ongoing reporting season, volatility may increase throughout this period and local equities could have downside risk if corporate earnings are weaker-than-expected. Meanwhile, traders could focus on export-oriented as the ringgit trend continues to trend weaker last week.

TECHNICAL OUTLOOK: DOW JONES

The Dow has retested the SMA200 and rebounded over the past two trading days. The MACD Line is approaching zero, while both the RSI and Stochastic oscillators are hovering near the 50 zone. The Dow is likely to break above the immediate resistance of 25,500, targeting 25,803, followed by 26,000. Support will be located around 25,093 (SMA200), followed by 24,500 (lower band of the uptrend channel).

As both the US and China and preparing for the trade discussion in the upcoming G20 summit, we may anticipate the market volatility to remain over the near term. Should there be any negative surprises from the summit, it could impact global stock markets towards the downside. Traders will also be monitoring the FOMC meeting on 17-18 Dec. Meanwhile, Donald Trump commented that US is likely to go ahead with the increase of tariffs on China products in January 2019.

Source: Hong Leong Investment Bank Research - 19 Nov 2018