MARKET REVIEW

Tracking the overnight losses on Wall Street, Asia’s stock markets were mostly lower on the back of rising trade tensions between the US and China as Chinese tech giant Huawei filed a lawsuit against the US on Thursday. The Nikkei 225 and Hang Seng Index declined 0.65% and 0.89%, respectively, while Shanghai Composite Index added 0.14%.

On the local bourse, the KLCI gapped down after the opening bell, but quickly reversed into the positive territory, closing the session marginally higher by 0.01% to 1,686.95pts. Market breadth was mildly negative with 429 gainers vs. 459 decliners. Market traded volumes remains above 3.0bn mark at 3.06bn, worth RM2.41bn. Meanwhile, construction and building material (cement and steels) segments traded actively higher on the back of the potential revival of the ECRL project.

US equities ended mostly lower following the economic growth forecast downgrade (cut from 1.7% to 1.1% for Eurozone) by ECB, coupled with announcing a new round of stimulus measures to encourage lending. Besides, the lack of details on the trade front continues to dampen the sentiment; the Dow and S&P500 0.78% and 0.81%, respectively, while Nasdaq declined 1.13%.

TECHNICAL OUTLOOK: KLCI

Although the FBM KLCI closed marginally higher yesterday, the short term trend is still negative and it remains downward biased as technical readings on most of the indicators are still pointing down south; the MACD Line is trending towards zero, while both the RSI and Stochastic oscillators are hovering below 50. Hence, the upside could be capped along 1,700, followed by 1,730, while the support will be located around 1,682, followed by 1,666.

On the local bourse, taking cues from the negative overnight Wall Street performance, we may anticipate further selling pressure on the broader market, capping the upside potential on the FBM KLCI. Nevertheless, with the news headlines hopeful on a potential revival of the ECRL at a lower cost, we remain positive on the building material and construction sectors at least over the near term after a severe down trend on both sectors after GE14.

TECHNICAL OUTLOOK: DOW JONES

After violating the short term 10D SMA, the Dow extended its retracement phase, closing lower for the 4th trading day. The MACD Histogram expanded negatively, while both the RSI and Stochastic oscillators are hovering below 50. Hence, we believe the Dow could continue to stay in the retracement phase over the near term, with the upside cap around the 26,000- 26,343. Meanwhile, support will be pegged around 25,000-25,125(SMA200).

In the US, investors are still concern over the trade developments between the US and China, especially after Chinese tech giant Huawei has filed a lawsuit against the US. Also, the rising worries on the global economic slowdown following growth forecast cuts by ECB may pressure global equities at this juncture. Hence, we believe Wall Street may undergo another session of consolidation.

Source: Hong Leong Investment Bank Research - 8 Mar 2019