MARKET REVIEW

Asia’s stock markets were mostly lower following the conclusion of the 3-day trade negotiation between the US and China, coupled with lower-than-expected official Chinese inflation data for the month of December. The Nikkei 225 and Shanghai Composite Index declined 1.29% and 0.36%, respectively, but Hang Seng Index added 0.22%. Meanwhile, FBM KLCI managed to trend higher after a two-day consolidation after the conclusion of the US-China trade discussions; the key index added 0.66%. Market breadth was neutral with 435 advancers and decliners, respectively, accompanied by 3.45bn shares traded for the session, valued at RM2.66bn.

Wall Street had a negative trading tone after the opening bell as Macy cut its revenue and earnings forecast for FY18 amid weaker demand during December. However, buying interest was noted in utilities stocks and Boeing after the latter was upgraded by Morgan Stanley to overweight. The Dow and S&P500 gained 0.51% and 0.45%, respectively, while Nasdaq rose 0.42%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has trended sideways between the 1,666-1,687 levels over the past 6 days despite the strong rebound in Wall Street. The MACD indicator stayed flattish, but the MACD Histogram has gained strength yesterday. Meanwhile, both the RSI and Stochastic oscillators are hovering above 50. With most of the technical indicators trending higher, the key index may retest 1,687-1,700 over the near term. The support will be set around 1,650-1,666.

While we expect positive sentiment to spill over towards Malaysia’s equities, profit taking activities are likely to emerge on the broader market after the recent relief rebound on bashed down stocks within the technology and construction sectors. Nevertheless, traders may continue to lookout for opportunities within the O&G sector amid healthy recovery in Brent oil prices.

TECHNICAL OUTLOOK: DOW JONES

The Dow extended its V-shape rebound and briefly crossing above the 24,000 psychological level. Both the MACD and RSI indicators are trending higher. However, the Stochastic oscillator is suggesting that the Dow is overbought approaching the 24,000-24,175 resistance zone. Support will be anchored around 23,000-23,500.

In the US, we believe the current rebound in stock markets could be due for a pullback on the back of potential weakness in the upcoming reporting season which will be starting next week. Also, market participants could be eyeing on the trade developments between the US-China before the deadline in early March. Should there be any negative surprises from the trade front, we opine that the Wall Street may retrace with heighten volatility moving toward.

Source: Hong Leong Investment Bank Research - 11 Jan 2019