MARKET REVIEW

Asia’s stock markets ended mixed as investors digested better-than-expected jobs data in the US and reports of progress in trade negotiations between Washington and Beijing. Chinese official broadcaster CCTV reported that there was new progress in trade talks on contentious issues such as technology transfer, protection of intellectual property rights, and the bilateral trade balance, among others while Trump said monumental agreement could come in the next four weeks.

Tracking moderately higher regional markets and the anticipation of the potential revival of ECRL in the near term, coupled with higher crude oil prices, KLCI inched up 2.5 pts at 1644.35 pts. Trading volume increased to 3.84bn shares worth RM2.4bn as compared to last Friday’s 2.65bn shares worth RM1.57bn. Market breadth was positive with 500 gainers as compared to 386 losers.

As investors geared up for a 1Q19 earnings season this week, US stocks finished mostly higher Monday, with the S&P 500 rose 3 pts to 2895.77, recording its 8th gains in a row, on the back of trade optimism and last Friday’s strong jobs. However, the Dow dropped 84 pts to 26341, dragged down by Boeing (-4.7% which was the Dow’s biggest loser) after the company said it would cut production of its 737 MAX aircraft in response to a worldwide grounding of the jets after the fatal Ethiopian Airlines crash on 10 Mar.

TECHNICAL OUTLOOK: KLCI

After correcting 47 pts in 1Q19 and 1.8 pts WoW, KLCI staged a long-awaited 2.5 pts technical rebound at 1644.3 yesterday. Given that the formation of Homing Pigeon candlestick last week and bottoming up indicators, KLCI is slated for further rebound in the near term towards 1652- 1666 levels. A decisive breakout above these levels will spur greater upside at 1680-1692 zones. Supports will be located around 1,626-1630.

Following a sharp selloff in 1Q19, KLCI could rebound higher in April as investors anticipate a win-win deal between the US and China and green lights from the government for the ECRL, Penang Transport Master Plan and other big ticket items such as HSR (as Mahathir and Hsien Loong meet at Putrajaya this week). Overall, laggard construction related stocks suc h as ADVCON and KIMLUN should attract buyers again on hopes for revival in news flow on major infrastructure projects, while oil & gas counters like Hibiscus and Sapura Energy stay buoyant given the sustained rise in global oil prices.

TECHNICAL OUTLOOK: DOW JONES

Following a 497 pts surge last week, the Dow is expected to engage in a mild pullback to neutralise the overbought momentum this week. As long as the near term 25800-26000 supports are not broken, the Dow is expected to resume its uptrend to retest all-time high of 26952 (Oct 2018) in the short term. Meanwhile, a decisive breakdown below 25800 will trigger further sell down towards key supports at 25200-25400 zones.

On Wall Street, we believe market participants will be trading on a cautious tone awaiting the conclusion on the trade deal as Trump said monumental agreement could come in the next four weeks. Also, investors will be eagerly watching the start of 1Q19 reporting season this week as consensus are expecting a 2.3% YoY drop, the first since 2016. Hence, we expect the Dow to trend range bound between the 25900-26450 levels this week.

Source: Hong Leong Investment Bank Research - 9 Apr 2019