MARKET REVIEW

Asia’s stock markets ended on a positive note following few positive news that could point towards a de-escalation of trade tensions between the US and China; China stated it could reduce tariffs on cars made in the US from 40% to 15%, while Huawei’s CFO was granted bail by Canada, also lifted the sentiment. The Nikkei 225 and Hang Seng Index jumped 2.15% and 1.61%, respectively, while Shanghai Composite Index added 0.31%.

In tandem with the positive recovery on the regional key indices, the FBM KLCI rebounded 0.64% to 1,663.27 pts. Market breadth turned positive (394 gainers vs. 371 losers). Market traded volumes were higher at 2.07bn, worth RM1.94bn. Also, most of the consumer stocks such as BAT, Dutch Lady, F&N, Heineken and Carlsberg traded higher in tandem with the positive market environment.

Wall Street ended on a positive note following comments from President Trump that he would intervene the Justice Department’s case against the top executive of Huawei if it would help serve national securities interests or help US-China trade discussions as well as he confirmed that discussion s between Washington and Beijing were ongoing and confirmed he would not raise tariffs on Chinese imports until a comprehensive trade agreement is being struck. Meanwhile, China is working to increase access to foreign companies, aiming to improve US China trade relations. The Dow and S&P500 gained 0.64% and 0.54%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI rebounded mildly above the 1,658 resistance level, but MACD Line is still hovering below zero. Meanwhile, the RSI and Stochastic oscillators are hooking higher. Hence, we think the key index could be due for a technical rebound and may revisit the resistance along 1,680, while support will be pegged around 1,650-1,658

With the slight optimism emerged on global markets, the FBM KLCI could trend slightly higher, extending yesterday’s technical rebound. Traders could looked into stocks which have been severely bashed down with oversold status for a pure trading play such as MyEG (EPF has been increasing stakes) and Prestariang Berhad (confirmed termination of SKIN with compensation).

TECHNICAL OUTLOOK: DOW JONES

The Dow traded within the upward channel and closed near the lower band of the channel, forming a “Doji” candle with potential downward bias move. The MACD Indicator remained in the negative region, while both the RSI and Stochastic oscillators are slightly above the oversold zone. With the mixed technical readings on most of the indicators, we believe the Dow’s upside will be capped around 25,091 (SMA200) at this juncture. Meanwhile, support will be pegged along 24,095.

On Wall Street, we believe the markets would stay volatile as traders will be monitoring closely on the news headlines related to trade developments to reaffirm their stance on market directions. Also, market participants will focus on the outcome and the interest rates outlook during the FOMC meeting that will be held next week. At this juncture, the Dow is likely to trend within the range of 24,880-25,800.

Source: Hong Leong Investment Bank Research - 13 Dec 2018