MARKET REVIEW

Despite China’s 2018 GDP (lowest in 28 years) coming in within analysts’ expectations, IMF reduced the economic growth forecast yesterday, which has dampened the market sentiment throughout regional benchmark indices; the Nikkei 225 fell 0.47%, while Shanghai Composite Index and Hang Seng Index declined 1.18% and 0.70%, respectively.

Meanwhile, on the local front, profit taking activities emerged throughout the trading session before a last minute buying support, which boosted the FBM KLCI briefly higher above the 1,700 psychological level at 1,702.12 pts (+0.59%). Market breadth, however was negative with decliners leading advancers by a ratio of 5-to-3. Market traded volumes stood at 3.32bn worth RM2.12bn.

Wall Street pulled back after China released its 2018 GDP data, which is the slowest growth in 28 years, while IMF reduced its global economic forecast for 2019 and 2020 to 3.5% and 3.6% from 3.7%, respectively. The Dow and S&P500 declined 1.22% and 1.42%, respectively, while Nasdaq lost nearly 2% for the session.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI extended its breakout yesterday, surpassing the 1,700 psychological level and the MACD Indicator expanded positively above zero. Meanwhile, both the RSI and Stochastic oscillators have hooked above 50; indicating that the positive momentum is intact after the recent breakout. Hence, based on technical analysis, next target will be envisaged around 1,726-1,730, while the support will be pegged around 1,666, followed by 1,650.

In view of the economic concerns globally and tracking the negative sentiment on Wall Street overnight, we opine that the FBM KLCI may take a pause over the near term as traders could reduce their exposure ahead of long Chinese New Year break and reporting season month. Nevertheless, selected export-related stocks could stay focus on the back of weaker ringgit yesterday.

TECHNICAL OUTLOOK: DOW JONES

The Dow snapped the 4-day winning streak as it approached the resistance zone along the SMA200 level. The MACD Line, however is above zero. Nevertheless, the RSI has turned lower after trending within the overbought region, while the Stochastic oscillator is flashing a downward cross in the overbought zone. Hence, we believe the recent V-shape rebound will be taking a pause and could retrace back towards the 24,000 psychological level. Meanwhile, the resistance will be envisaged around 24,965 (SMA200).

In the US, despite the optimism on the trade development last week, the Dow snapped a 4-day winning streak as the key index trended near the resistance zone around the SMA200 level following the IMF’s move to cuts its global forecast. Hence, we believe the market sentiment may stay negative at least for the near term. The Dow’s resistance will be set along 24,965 (SMA200).

Source: Hong Leong Investment Bank Research - 23 Jan 2019