MARKET REVIEW

Asia’s stock markets declined sharply following the fear of an imminent recession following as the yield spread between the 3-month T-bill and 10-year note fell below negative for the first time in more than a decade. Also, the Fed’s economic forecast for 2019 added to the concerns. The Shanghai Composite Index and Hang Seng Index plunged 1.97% and 2.03%, respectively.

Similarly, the FBM KLCI dived 1.05% in tandem with the regional and global markets led by banking heavyweights. Market breadth was more negative compared to last Friday with 684 decliners vs. 191 gainers. Overall market traded volumes stood at 2.79bn, worth RM1.74bn. On the bright side, selected plantation counters such as United Plantation, Genting Plantation and United Melaka managed to trade higher for the day.

On Wall Street, the major indexes fluctuated between the positive and negative territories throughout the session as investors remain wary on a potential global economic slowdown with the inverted yield curve (between 3-month and 10-year T-bill) after the Fed signalled a potential slowdown in 2019. The Dow inched up marginally by 0.06%, while S&P500 and Nasdaq fell 0.08% and 0.07%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI gapped down yesterday after violating below the 1,666 and 1,650 level. The MACD Indicator has expanded negatively, but the Stochastic oscillator is in the oversold region. Hence, with the oversold momentum oscillator, the key index could be due for a technical rebound. However, the upside will be capped along 1,666. Support will be located around 1,630.

With the rising concerns over global growth outlook after several central bankers downgraded the outlook for 2019, coupled with the uncertain trade developments between US and China, we believe the sentiment on the local front may remain subdued and the downward bias mode on the FBM KLCI may persist at least over the near term.

TECHNICAL OUTLOOK: DOW JONES

The Dow has trended sideways after the sharp fall on Friday as mild bargain hunting could be supporting the Dow at this juncture. The MACD Line is trending lower towards zero, while both the RSI and Stochastic oscillators are below 50. Hence, we believe the downward bias could persist. Should there be any rebound towards 26,000-26,343, profit taking activities are likely to emerge. Support will be set around 25,000.

We believe the current market sentiment will be wobbly in the US as investors will be keeping an eye on the inverted yield curve, which could be a signal of a further slowdown in economic activities moving forward. At the same time, with the unsettled trade disputes between the US and China may fuel further uncertainties in the markets. Hence, upside of the Dow will be envisaged around 26,000.

Source: Hong Leong Investment Bank Research - 26 Mar 2019