MARKET REVIEW

In tandem with the sharp decline on Wall Street, Asia’s stock markets ended on a negative note as investors were cautious on the yield curve inversion, which may signal a potential economic slowdown, while the uncertainties hovering around the agreement struck between the US and China continue to dampen stock markets sentiment. The Nikkei 225 and Shanghai Composite Index fell 0.53% and 0.61%, respectively, while Hang Seng Index declined 1.62%.

Stocks on the local front were traded lower on the back of weaker overseas sentiment; the FBM KLCI dipped 0.40% to 1,688.27 pts. Market breadth was still negative with decliners led advancers by a ratio of 2-to-1. Market traded volumes came in slightly lower at 1.75bn, worth RM1.52bn.

Wall Street was closed for national mourning of President George HW Bush. Meanwhile, European stock markets closed in the negative territory partly due to rising doubts that both the US and China will be able to reach a comprehensive trade deal during the 90-day truce period. Also, investors are closely monitoring developments on the Brexit plan debate. The FTSE100 fell 1.44%, while CAC40 and DAX declined 1.36% and 1.19%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI is still hovering between a tight range (1,680-1,713) with a healthy support around 1,680. The MACD indicator is still flattish below the zero level, while the oscillators are hovering slightly below 50; suggesting that the KLCI is still downward bias for the moment. If the FBM KLCI can breakout above 1,713, next resistance will be at 1,730. Nevertheless, if the KLCI violates below 1,673, next support will be envisaged around 1,658.

We believe markets have digested part of the concerns on the new trade developments and China has issued a statement but lack of details to shrug off the confusions on promises made in Argentina. Hence, we believe it may provide slight optimism for bargain hunting activities to emerge, lifting the stock markets marginally over this week. The FBM KLCI could trade higher towards the 1,700 level over the near term.

TECHNICAL OUTLOOK: DOW JONES

The Dow was closed yesterday, but the current technical readings appear to be on the negative side as MACD Indicator is hooking downwards in the negative region, while both the RSI and Stochastic oscillators are below 50. Hence, we believe the Dow’s upside maybe limited around 25,840, while the support will be envisaged around 24,880, followed by 24,500.

In the US, trade developments will be one of the biggest factors that could heighten the volatility on global markets. Hence, investors will be eyeing closely on any new trade developments throughout the 90-day window for further investment decisions. Also, the inversion of yield curve will be taking part of the limelight, which may cause concerns over the economic slowdown. At this juncture, the Dow is likely to fluctuate near the SMA200 (25,100) level.

Source: Hong Leong Investment Bank Research - 6 Dec 2018