MARKET REVIEW

Asia’s stock markets ended mildly lower on the back of uncertain trade developments between the US and China following a series of conflicting comments from both US and Chinese officials. Also, the market tone was rather sluggish prior to the conclusion of the FOMC meeting. The Hang Seng Index declined 0.49%, but Nikkei 225 rose 0.20% and Shanghai Composite Index traded flat.

Meanwhile, stocks on the local front ended lower tracking the weaker sentiment abroad as well as regional performances; the FBM KLCI fell 0.21% to 1,684.21 pts. Market breadth was als o negative with 469 decliners vs. 363 gainers, accompanied by market trading volume of 2.59bn, worth RM1.83bn. We noticed most of the consumer stocks such as Carlsberg, Heineken and F&N were topping the gainers list.

Wall Street ended mostly lower after confusing statements being conveyed by President Trump, commenting that US tariffs on Chinese goods could stay on for a long period of time, but a deal is “coming along nicely”. Meanwhile, the FOMC meeting (more dovish stance) is projecting no hike (vs. two hikes forecast earlier) in 2019 and intends to end the massive USD4.2 trillion balance sheet by September and the Fed trimmed economic growth forecast for 2019. The Dow and S&P500 fell 0.55% and 0.29%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has pullback mildly over the past two trading days, trading above the immediate support of 1,680. The MACD indicator has turned flattish, while the RSI is hovering below 50. Hence, with the weaker technical readings, we expect the KLCI to stay sideway s within the range of 1,680-1,700. Should the 1,680 support is violated; next support will be located around 1,666.

Under this uncertain environment across the region, we anticipate trading activities to slow down; the FBM KLCI could further consolidate below the 1,700. Sentiment on the small cap and lower liners are likely to trend sideways as investors will continue to book in profits after an overheated market last week. Hence, traders may look out for stocks under construction as they are bashed down earlier on, while investors may look into consumer stocks under this cautious market environment.

TECHNICAL OUTLOOK: DOW JONES

The Dow retraced for the past two trading days amid uncertain trade developments between US and China. The MACD Line, however is still above zero, but both the RSI and Stochastic oscillators are hooking downwards over the past session. Hence, we anticipate the Dow may further consolidate sideways with the upside capped along the 26,000 psychological level. Meanwhile, support will be located around 25,500, followed by 25,000.

In the US, we believe Wall Street may form a short term rebound as traders focused on the Fed’s dovish stance in the monetary policies, supporting equity prices. However, the trimming of global growth forecast is likely to dampen the treasury yields, and should the yield curve inverts; it may cap the upside of banking heavyweights and limits the upside potential on Wall Street.

TECHNICAL TRACKER: CLOSED POSITION

We Took Profits on OCK With a 4.3% Gain Yesterday.

Source: Hong Leong Investment Bank Research - 21 Mar 2019