MARKET REVIEW

As traders and investors shrugged off concerns over US-China trade tensions on the back of continuation of the US-China trade negotiations this week, Asia’s stock markets closed firmer. The Shanghai Composite Index and Hang Seng Index rose 0.68% and 0.10%, respectively, while Nikkei 225 jumped 2.61%.

Despite the positive performances across the regional markets, the FBM KLCI ended marginally softer at 1,687.41 pts (-0.07%). Market breadth was however slightly positive with 425 gainers vs. 406 losers. Market traded volume was much higher at 2.70bn compared to 2.58bn shares on Monday, while traded value increased to RM1.96 vs. RM1.66bn. The surge in trading volumes was contributed by heightened trading activities amongst small cap and lower liners amid the ongoing February reporting season.

Wall Street ended firmer, snapping the 4-day losing streak on the back of renewed hopes on trade developments following comments by President Donald Trump that he would consider postponing the March 1 deadline for tariffs if the US and China can reach a trade deal in the near term, coupled with congressional negotiators securing a deal in order to keep the government open and avoided a shutdown on Friday. The Dow and S&P500 rose firmly by 1.49% and 1.29%, respectively while Nasdaq added 1.46%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI continues to trend within a range between the 1,682-1,700 levels over the past 8 trading days. The MACD Line is turning flattish above the zero level, while both the RSI and Stochastic oscillators are hovering around 50. Technical readings are suggesting that the KLCI is in a consolidation phase. Resistance will be located at 1,700, while support will be pegged along 1,682, followed by 1,666. Should there be a breakout above 1,700, next target will be at 1,730.

Tracking the positive performances on Wall Street, we expect it may spill over to the local bourse, eventually lifting the FBM KLCI to retest the 1,700 level. Traders may lookout for opportunities within O&G sector as the Brent oil prices have steadied above USD60 as well as the ongoing reporting season in order to gauge the future direction of the share prices.

TECHNICAL OUTLOOK: DOW JONES

The Dow recovered after the 4-day losing streak; the MACD Indicator is trending higher above zero. Meanwhile, the Stochastic oscillator is overbought and the RSI is approaching the overbought zone. Hence, we believe that the V-shape rebound since late December could see a potential retracement phase over the near term. The resistance will be envisaged around 25,500, while the support will be anchored around 25,000 (SMA200).

With the slight relief from President Trump’s statement coupled with the US government evaded another round of shutdown, we believe there could be potential upside movement in Wall Street over the near term. However, as the technical readings are suggesting an overbought position on the Dow, upside may be limited following the sharp V-shape rebound started since December. Traders would focus closely on the trade headlines for any fresh developments to determine the direction of the markets.

Source: Hong Leong Investment Bank Research - 13 Feb 2019