MARKET REVIEW

Following the positive statement from President Trump on the potential extension on the key trade deadline on 1st of March, most of the Asia’s stock markets ended on a firmer tone. Meanwhile, US requested that China to maintain the yuan stable as part of the trade deal and China yuan gained momentum throughout the session. The Shanghai Composite Index and Hang Seng Index rose 0.20% and 1.01%, respectively, while Nikkei 225 added 0.60%.

In tandem with the positive trade environment and decent gains amongst regional indices, the FBM KLCI surged 1.15% to 1,726.18 pts and market breadth was bullish with 724 advancers, outpacing 252 decliners for the session. Market traded volume increased to 3.82bn, worth RM3.27bn. Meanwhile, construction (+3.9%) and energy (+3.3%) sub-indices were leading the broader market for the session.

Wall Street traded higher after FOMC meeting minutes reaffirmed that the US central bank will be “patient” on the interest rate moving forward. Hence, the dovish stance continues to lift markets higher for the session; the Dow and S&P500 added 0.24% and 0.18%, respectively, while Nasdaq inched up marginally by 0.03%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI continues to surge higher on the back of strong buying interest over the past two trading days. The key index has cleared the 1,700 psychological and could be heading towards 1,730 level soon. The MACD indicator has expanded positively above zero, while both the RSI and Stochastic suggest that the positive momentum is intact. The resistance will be at 1,730-1,750, while support will be pegged around 1,700, followed by 1,682.

Without any negative news headlines and catalysts in the markets, we expect the buy ing support to extend this week at a slower pace ahead of the peak reporting season next week and upside could be limited as short term traders would be taking profits off the table after an overheated buying activity yesterday. The KLCI’s immediate resistance will be pegged around 1,730.

TECHNICAL OUTLOOK: DOW JONES

The Dow trended higher towards the 26,000 psychological level and closed slightly below the mark. The MACD Indicator remains positive hovering above zero level. However, both the RSI and Stochastic oscillators are in the overbought region. Hence, we believe the upside could be limited over the near term and potential retracement phase could be emerging soon. The support will be pegged around 25,000.

Although the Fed’s dovish view has boosted the stock markets higher, the Fed highlighted the downside risks to the economy, anticipating “the possibilities of a sharper-than-expected slowdown in global economic growth” and it may limit the upside move on the markets over the near term. As the Dow is trading near the 26,000 psychological level, investors may be looking for profit taking opportunities at this juncture.

Source: Hong Leong Investment Bank Research - 21 Feb 2019