MARKET REVIEW

Following a quiet trading on Tuesday, Asia’s stock markets trended higher on the back of trade optimism as both US and China will resume trade talks in Washington and could be nearer to securing a trade agreement in the near term. The Shanghai Composite Index and Hang Seng Index rose 1.24% and 1.22%, respectively, while Nasdaq added 0.97%.

In tandem with the steady regional performances, the FBM KLCI increased 0.64% to 1,643.21 pts. Market breadth was slightly more bullish with 490 gainers vs. 329 losers, accompanied by 2.67bn (worth RM1.93bn). On the broader market, we noticed most of the construction stocks were traded higher on the back of potential revival of ECRL in the near term.

Wall Street ended on a positive tone helped by easing concerns over trade war between the US and China and market participants are awaiting some deals to be struck over the near term. Meanwhile, technology-related stocks which were heavily affected by the US-China trade tensions boosted the overall sentiment on Wall Street. The Dow and S&P500 added 0.15% and 0.21%, respectively, while Nasdaq increased 0.60%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has rebounded for the second consecutive days and the MACD Histogram recovered over the past two sessions could be suggesting that the momentum could persist over the near term. Also, both the RSI and Stochastic oscillators are trending higher, after moving out from the oversold region. Hence, we believe the short term momentum could point KLCI towards 1,650-1,666, while the support will be located around 1,626.

We believe the rebound on the KLCI may sustain amid easing concerns over inverted yield curve as well as anticipation of positive news on trade discussions in Washington. Hence, with the recovering sentiment, traders are advise to focus on the construction sector and O&G sector; the latter likely to stay positive with the firmer crude oil prices (still hovering above USD69 despite the unexpected build-up in inventories suggested by EIA).

TECHNICAL OUTLOOK: DOW JONES

Although the Dow trended sideways slightly below the resistance of 26,300, the MACD indicator is recovering above zero. Moreover, both the RSI and Stochastic oscillators are trending higher above 50; suggesting the positive momentum is intact. The Dow could poise for a breakout above 26,300, next resistance will be envisaged around 26,951, while support is anchored around 25,206 (SMA200).

With the comments from Myron Brilliant, the executive VP for international affairs at this US Chamber of Commerce, that a deal is 90% done, but the last 10% is the hardest part, traders are having feel-good factor on the progress of the trade discussions. Hence, we opine that the Dow may poise for a breakout above 26,300. However, should the details in the agreement are not favourable to US or China, the uncertainties may persist, eventually limiting the upside potential on Wall Street.

Source: Hong Leong Investment Bank Research - 4 Apr 2019