MARKET REVIEW

Tracking positive Wall Street overnight performances, key regional markets shrugged off concerns over global economic outlook as well as the ongoing US-China trade tensions and trended mostly higher; the Shanghai Composite Index and Hang Seng Index rose 0.41% and 0.42%, respectively, but Nikkei 225 slid marginally by 0.09%.

Similarly, stocks on the local front managed to trend higher taking cues from global markets; the FBM KLCI started on a weaker note but managed to reverse its course and closed higher by 0.32% to 1,693.59 pts led by buying interest on selected banking (Maybank and Hong Leong a Financial Group) and glove heavyweights (Hartalega and Top Glove). Market breadth was positive with 456 gainers vs. 375 losers, accompanied by 2.44bn shares (worth RM2.12bn) traded for the session.

Wall Street ended mixed as trade tensions between US and China resurfaced following comments from Commerce Secretary Wilbur Ross, stating that China and the US were not close to striking a trade deal and two countries have “lots and lots of issues” to settle. The Dow slipped marginally by 0.09%, but S&P500 and Nasdaq gained 0.14% and 0.68%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI recovered yesterday after hitting the immediate support around the 1,680 (SMA50) two trading days ago. The MACD Line is hovering above zero, but the MACD Histogram has turned flattish. Meanwhile, both the RSI and Stochastic are trending positively above 50; suggesting that the positive momentum is intact. Short term basis, the FBM KLCI is likely to trend higher to retest the 1,700 level, followed by 1,726. The support will be pegged around 1,680, followed by 1,666.

Despite the mixed tone on Wall Street and the prolong uncertainties on trade developments, sentiment on the local front is likely to stay marginally positive as traders or investors could be focusing on export-related (semiconductor, furniture and gloves) and O&G sectors on the back of weaker ringgit tone (RM4.14/USD) and firmer crude oil prices above USD60.

TECHNICAL OUTLOOK: DOW JONES

The Dow trended sideways over the past three trading days around the 24,500 level. The MACD Line has trended positively above zero, but the Stochastic is in the overbought region. With both the indicators suggesting a mixed view on the Dow, we expect the upside could be capped around the 24,965 (SMA200) over the near term. Meanwhile, support will be located around 24,000-24,279 (SMA10).

In view of the unsettled grounds on trade issues between the US and China, coupled with several inconsistencies statements from both the US and China officials, we believe that the trade deal may not be able to reached and may prolong towards at least early March (trade truce expiration). Hence, the Dow may trend sideways over the near term below the SMA200.

Source: Hong Leong Investment Bank Research - 25 Jan 2019