MARKET REVIEW

Key regional benchmark indices ended mixed after Federal Reserve kept the interest rates unchanged and indicated no more rate hikes for 2019. Also, sentiment was cautious as investors continue to watch out for new trade developments between the US and China after several confusing statements from both US and Chinese officials earlier this week . The Shanghai Composite Index added 0.35%, but Hang Seng Index declined 0.85%.

Meanwhile, stocks on the local front suffered from a strong selling pressure after the dovish tone emerged in FOMC meeting, led to investors speculating that BNM may cut the OPR in the future and contributed towards a decline in banking heavyweights over the session. Market breadth was still negative with decliners leading advancers by a ratio of 11-to-6, while traded volume stood at 2.97bn, worth RM2.15bn.

Wall Street cheered positively as the Fed indicated a more dovish (no interest rate hikes in 2019) monetary policy moving forward. Also, technology shares such as Apple and Facebook boosted the sentiment and led to a rebound in stocks; the Dow and S&P500 rose 0.84% and 1.09%, respectively, while Nasdaq jumped 1.42%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has violated the 1,666 support level twice over the past 9 days, suggesting that the sellers are dominating at this current juncture. Also, the MACD Histogram has turned lower, while both the RSI and Stochastic oscillators are hooking downwards, hovering below 50. Hence, we believe that the upside will be limited around 1,680. Support will be located around 1,630.

Tracking the overnight Wall Street performances, we anticipate stocks on the local front could be due for a technical rebound at least for the near term. However, on the longer term, with most of the central bankers cutting down the 2019 economic outlook, upside on the key indices may be capped. The FBM KLCI’s resistance is located around 1,680-1,700.

TECHNICAL OUTLOOK: DOW JONES

The Dow snapped the two-day pullback and formed a bullish engulfing bar after the Fed’s meeting (dovish tone). The MACD Line turning flattish, hovering above zero. Meanwhile, both the RSI and Stochastic oscillators are trending higher after the surge on Dow yesterday. The next resistance will be envisaged around 26,000-26,343. Support will be located around 25,500, followed by 25,000.

On Wall Street, the relief rebound was due to the more dovish stance from the Fed and this may contribute towards the short term rally at least to retest the 26,000-26,343 on the Dow. Nevertheless, with the uncertain trade developments between the US and China, coupled with the weaker 2019 global growth forecast by Federal Reserve, we expect that will limit Wall Street’s upside potential on the longer term view.

Source: Hong Leong Investment Bank Research - 22 Mar 2019