MARKET REVIEW

Asia’s benchmark indices ended mostly in the negative region led by shares in South Korea (KOSPI index tumbled 1.76%) after White House announced the ongoing Trump-Kim summit had been cut short without any solid agreement achieved. The Hang Seng Index and Nikkei 225 fell 0.43% and 0.79%, respectively, while Shanghai Composite Index declined 0.44% as China's PMI (49.2, weakest in 3 years) slid for the 3rd consecutive month in February.

Similarly, Malaysia’s stock market ended in the negative territory with the FBM KLCI retraced 0.33% to 1,707.73 pts. Market breadth was bearish as losers outpaced gainers by a ratio of nearly 3-to-1. Overall traded volumes stood at 2.57bn, worth RM2.97bn. Nevertheless, only selected stocks within the export-related (Thong Guan and VS) and consumer (Padini and Aeon) segments traded actively higher.

Despite US economy grew stronger-than-expected at an annualized rate of 2.6% (vs. economist poll of 2.2%), the positive mood was offset by the Trump-Kim summit, which yielded no solid agreement. In addition, the heightened geopolitical tension between India and Pakistan contributed to the downbeat sentiment. The Dow and S&P500 fell 0.27% and 0.28%, respectively, while Nasdaq declined 0.29%.

TECHNICAL OUTLOOK: KLCI

After the FBM KLCI hit the near term high around 1,732 level, the key index has retraced more than 1% to end at 1,707.73 pts yesterday. The MACD indicators are weakening, while both the RSI and Stochastic oscillators are pointing downwards. With the negative technical readings, we expect the key index to further pullback towards the support around 1,700. Meanwhile, the resistance will be located around 1,730, followed by 1,750.

On the local front, we believe the recent relief rally would need to take a breather on the back of lackluster results season, coupled with uncertain trade developments between the US and China. Hence, we expect the sentiment may stay cautious at least for the near term as traders may lock in their profits after a decent rally amongst small cap and ACE market stocks. The FBM KLCI would rangebound between 1,700-1,730 levels.

TECHNICAL OUTLOOK: DOW JONES

After the Dow formed an inverted hammer around the 26,241 level, it has retraced over the past three trading days. The MACD Indicator could be forming a negative cross as the MACD Line moved nearer towards the Signal Line. The Stochastic oscillator is overbought, while the RSI is trending lower over the recent trading sessions. Hence, with the softer readings on most of the indicators, we may anticipate further pullback on the Dow. Upside resistance will be envisaged around 26,343, while the support will be set around 25,000-25100 (SMA200).

In the US, we opine that the retracement over the past three days may persist over the near term as traders are still having concerns over trade developments between the US and China despite Trump extending the China tariff deadline on the back of “substantial progress” achieved last week. The Dow’s upside could be capped around the 26,343 as technicals are suggesting that the Dow is weakening.

TECHNICAL TRACKER: CLOSED POSITIONS

Yesterday, we squared off our technical tracker positions on WZSATU (+2.8% gain) and ROHAS (-2.4% loss) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 1 Mar 2019