MARKET REVIEW

Key regional benchmark indices closed higher, tracking the positive performances on Wall Street overnight as well as positive statements from President Trump indicating that the trade discussions between Washington and Beijing were intact. The Nikkei 225 increased 0.99%, while Hang Seng Index and Shanghai Composite Index gained 1.23% and 1.29%, respectively.

On the local front, the FBM KLCI gained momentum and rose 0.77% to 1,676.00 pts led by banking heavyweights. However, market breadth is slightly negative with 397 decliners vs. 371 advancers. Also, we noticed overall market volumes fell to 1.57bn (worth RM1.65bn) compared to 2.07bn on Wednesday. Besides banking stocks, we noticed that most of the consumers stocks such as Nestle, Panasonic and F&N were topping the gainers list.

US equities closed on a mixed note as optimism on trade developments between the US and China has faded for the time being as investors turned slightly cautious ahead of the FOMC meeting, led to profit taking in financial stocks with the uncertain interest rate outlook. The Dow rose marginally by 0.29%, while S&P500 and Nasdaq slipped 0.02% and 0.39%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI rebounded for the second consecutive days, and the key index has surged above the previous resistance of 1,671. The MACD Histogram has recovered slightly, but the MACD Line is still hovering below zero. Meanwhile, both the RSI and Stochastic oscillators rebounded as well. With the recovering momentum, we opine that the FBM KLCI could trend higher on the back of bargain hunting activities during the window dressing period. Resistance will be located around 1,700-1,704. Support will be set around 1,671, followed by 1,658.

On the local front, we opine that the technical rebound could extend higher without any negative news headlines related to trade disputes. Also, with the recovering Brent oil prices above USD60, we should be able to expect increase trading activities in oil and gas sector at least for the near term. However, we remain cautious on the market environment and we believe the KLCI’s upside might be capped along 1,700.

TECHNICAL OUTLOOK: DOW JONES

The Dow has formed two small-bodied candles over the past two sessions, while the MACD Indicator has turned flattish below zero. The RSI and Stochastic oscillators are trending below 50. With the mixed technical reading we anticipate that the Dow may trend sideways between the ranges of 24,095-25,091 over the near term. However, should the Dow surges above the 25,091; next resistance will be located around 25,572.

In the US, following the neutral headlines on trade war, investors will be closely watching the outcome of the interest rate outlook by the Fed next week. In the meantime, energy shares should be in focus with the rising oil prices following the falling stock spikes in Oklahoma. Hence, we believe the Dow should be trending sideways (resistance: 25,091, support: 24,095) over the near term.
 

Source: Hong Leong Investment Bank Research - 14 Dec 2018