MARKET REVIEW

Similarly, tracking the regional performances, FBM KLCI added 0.19% to 1,679.42 pts. Market breadth was positive with 413 gainers vs. 374 losers, accompanied by 2.40bn shares traded for the session, worth RM1.87bn. We noticed construction (+1.38%), property (+1.33%) and transportation and logistics (+1.27%) sectors rebounded higher as market participants could see resurfaced values after they were severely bashed down in 2018.

Despite UK lawmakers voting against the Brexit plans of UK Prime Minister Theresa May and investors deploying risk-off mode at the start of the session, most of the major indexes managed rebound higher led by Netflix on plans to raise its monthly membership prices (biggest price hike since it launched its streaming service more than a decade); the Dow rose 0.65%, while S&P500 and Nasdaq advanced 1.07% and 1.71%, respectively.

TECHNICAL OUTLOOK: KLCI

Still, the FBM KLCI trended within the range between the 1,666-1,687 levels for the 9th consecutive days. The MACD Line is approaching zero, but the MACD Histogram continues to weaken further. Meanwhile, both the RSI and Stochastic oscillators are hovering around 50. With the mixed technical reading on the indicators, we believe that the key index may stay sideways with resistance envisaged around 1,700, while support will be located around 1,666, followed by 1,650.

Regionally, we see positive trading tone to emerge as China commented to cut taxes “on a larger scale” to help support its slowing economy, especially for small businesses and manufacturing sector. Also, with decent performance on overnight Wall Street, we may see further rebound amongst stocks on the local front and traders can focus on O&G stocks amid recovery of Brent oil prices above USD60.

TECHNICAL OUTLOOK: DOW JONES

The Dow extended the recent V-shape rebound, surpassing the 24,000 psychological level and the MACD Line (in the negative zone) is trending towards the zero level. Meanwhile, the RSI is above 50, but the Stochastic oscillator is overbought. With the mixed technical readings at this juncture, we believe the recent rebound could slow down as the key index is trading nearer to the resistance level of 24,175, while next resistance will be set around 24,962 (SMA200). The Dow’s key support will be located around the region of 23,000-23,500.

With China vowing to put in more stimulus to support the slowing economy, it could lift global stock markets higher at least for the near term, eventually spilling over towards US stock markets. In the meantime, investors will focus on the ongoing earnings season and developments on the trade front. Should there be any negative surprises from the above two events, we may anticipate heightened volatility in markets moving forward.

Source: Hong Leong Investment Bank Research - 16 Jan 2019