MARKET REVIEW

Asia’s stock markets ended on a mixed tone with the resurfacing of trade tensions between the US and China as DOJ filed criminal charges on Huawei’s CFO as well as market participants were trading cautiously ahead of the high level trade talks which led by Chinese Vice Premier Liu He. The Nikkei 225 and Shanghai Composite Index fell 0.52% and 0.72%, respectively, but Hang Seng Index gained 0.40%.

Meanwhile, stocks on the local front succumbed to profit taking activities ahead of the Chinese New Year break and softer sentiment across the region; the FBM KLCI slipped 0.37% to 1,684.11 pts. Market traded volumes fell below the 2.00bn mark at 1.92bn, worth RM1.73bn. Market breadth was negative with losers led gainers by a ratio of 4-to-3.

Wall Street turned bullish following better-than-expected results from Boeing and Apple, coupled with the conclusion of FOMC meeting with a slightly dovish stance by Federal Reserve, commenting that the Fed will keep the interest rates unchanged and it will be ‘patient’ on the interest rate outlook. The Dow and S&P500 gained 1.77% and 1.55%, respectively while Nasdaq jumped 2.20%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI continues to retrace for the third consecutive day and the MACD indicator has turned weaker at this juncture. Meanwhile, both the RSI and Stochastic oscillator trended lower; suggesting that the positive momentum is weakening. Nevertheless, with the positive sentiment abroad, it may cushion the downside risk around the immediate support of 1,680, followed by 1,666. The resistance will be envisaged around 1,700, followed by 1,730.

Positive sentiment across the globe could spill over towards local bourse, especially technology stocks following the release of Apple’s results. Besides, the oil & gas sector is likely to remain actively traded with the firmer Brent oil prices above USD60. The FBM KLCI could retest 1,700 level over the near term.

TECHNICAL OUTLOOK: DOW JONES

The Dow jumped more than 1%, surpassing the SMA200 (24,965) and 25,000 psychological level. The MACD Indicator continues to stay above the zero level. However, both the RSI and Stochastic oscillators are in the overbought region. Hence, we believe the upside could be limited after the V-shape rebound persisted more than one month. The immediate resistance will be set around 25,500. Meanwhile, support will be anchored around 24,000.

With Apple and Boeing showing healthy results, we anticipate further upside on Wall Street at least for the near term. However, market participants are likely to stay mildly cautious ahead of the high level trade talks between the US and China that will conclude later today. The Dow has surged above 25,000, next resistance will be located around 25,500.

Source: Hong Leong Investment Bank Research - 31 Jan 2019