MARKET REVIEW

Following the easing tensions on US-China trade developments, concerns surfaced over Libya's (one of the major oil producers) fresh violence, which contributed towards firmer crude oil prices (hovering above USD70). Asia's stock markets traded mixed, the Shanghai Composite Index slipped 0.16%, while Hang Seng Index and Nikkei 225 rose 0.27% and 0.19%.

Meanwhile, sentiment was rather weak on the local front as the FBM KLCI slipped 0.15% to 1,641.94 pts. Market breadth was negative with 430 decliners vs 390 advancers, accompanied by 3.47bn shares traded for the session, valued at RM2.36bn. Most of the construction counters as well as the steel-related companies traded actively higher in the anticipation of potential revival of ECRL mega project.

Wall Street ended lower ahead of the US corporate earnings season that will be starting this week with the banking heavyweights such as JP Morgan, Wells Fargo and Bank of America. Besides, the sentiment was dragged further by the increased trade tensions between the US and EU, where the EU warned that they are ready to retaliate should the US move ahead with tariffs imposition on USD11.2bn worth of EU goods. The Dow and S&P500 declined 0.72% and 0.61%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has turned sideways above the 1,640 level over the past 5 trading days. The MACD Indicator, however has issued a positive crossover signal (MACD Line above Signal Line). Nevertheless, the RSI and Stochastic oscillators are hovering below 50; indicating that the momentum is still weak at this juncture. Should the KLCI breakout above 1,648, it may trend higher towards 1,650-1,666. Support will be located around 1,626-1,630.

We believe the FBM KLCI could continue on a consolidation mode over the near term without any fresh leads on the heavyweights. However, the sentiment on the small caps and lower liners may still persist within construction and O&G stocks on the back of potential revival of ECRL and firmer recovery in crude oil prices. The key index could rangebound between 1,635- 1,648 zones.

TECHNICAL OUTLOOK: DOW JONES

The Dow has retreated from the recent high of 26,500, and the MACD indicator is weakening over the past few sessions. Also, the RSI is trending lower (but above 50), while the Stochastic oscillator is trending lower after suggesting that the key index is overbought last week. The Dow’s upside will be capped along 26,500-26,951. Support will be anchored around 26,239 (SMA200), followed by 25,000.

Market participants could be staying cautious ahead of the corporate earnings season, while fresh concerns over the US-EU trade tensions as well as the latest IMF’s downgrade of global economic growth could further dampen the sentiment on stock markets, capping the upside move after a decent rebound in the previous weeks on the back of fading worries on US-China trade disputes. The Dow’s resistance will be set along 26,500-26,951.

Source: Hong Leong Investment Bank Research - 10 Apr 2019