MARKET REVIEW

Asia’s equities mostly traded higher amid the optimism on the progressing trade discussion between the US and China last week, where President Trump commented that the conclusion will be known within the next four weeks. Also, Chinese Vice Premier Liu He stated that a new consensus had been reached between Beijing and Washington on US-China trade. The Nikkei 225 and Kospi Index rose 0.38% and 0.14%, respectively, while Hong Kong and China markets were closed for public holiday.

Meanwhile, stocks on the local front ended slightly lower as profit taking activities emerged after a three-day rebound; the FBM KLCI slipped 0.20% to 1,641.81 pts. Market breadth was slightly negative with 381 advancers vs. 388 decliners for the session, accompanied by 2.65bn (worth RM1.57bn). Still, the construction sub-index traded higher last week amid the potential revival news on ECRL.

Wall Street posted its second consecutive week of gains on the back of trade optimism following positive statement from both the US and Chinese officials. In addition, the sentiment was boosted by the better-than-expected jobs data that was released on Friday (US economy added 196k jobs in March). The Dow and S&P500 increased 0.15% and 0.46%, respectively, while Nasdaq rose 0.59%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI ended slightly lower after a three-day rebound and the MACD Indicator remains on a recovering tone (MACD Line and MACD Histogram trended higher over the past sessions. Meanwhile, both the Stochastic oscillator is oversold; suggesting that the key index could be due for a rebound. Should the FBM KLCI breakout above 1,647, next target will be pegged around 1,666. Support will be located around 1,626-1630.

Tracking the healthy performance on Wall Street, we believe market sentiment should turn positive in tandem with the slight optimistic on the trade front with both the US and China officials stating positive comments on the trade discussions last week. Also, with the anticipation of the potential revival of ECRL in the near term, we expect construction stocks to trade actively moving forward. Also, O&G is likely to be focused as Brent oil prices surged above USD70 last week.

TECHNICAL OUTLOOK: DOW JONES

The Dow continues to surge higher under the positive developments on the trade front and the MACD Indicator expanded positively after forming a golden cross two weeks ago. The RSI is trending higher above 50, while the Stochastic oscillator is overbought. With the overbought technical readings, we believe the upward move may take a breather over the near term with the support located around 26,000-26,343. Meanwhile, the resistance is envisaged around 26,951.

On Wall Street, we believe market participants will be trading on a cautious tone awating the conclusion on the trade deal as President Trump has given a timeline of around 4 weeks before any trade deal or agreement is being released. Also, should there be any summit date (between President Trump and President Xi) being announced in the near term, that may provide a boost to the stock markets. The Dow could be ranging between the 26,000-26,500 this week.

Source: Hong Leong Investment Bank Research - 7 Apr 2019