MARKET REVIEW

Asia’s stock markets ended on a mixed tone despite better-than-expected China export data, coupled with positive performance on Wall Street on the back of stronger-than-expected banking corporate earnings. The Nikkei 225 increased 1.37%, while both Shanghai Composite Index and Hang Seng Index slid 0.34% and 0.33%, respectively.

Meanwhile, the FBM KLCI trended higher, tracking the higher closing on Wall Street; the key index added marginally by 0.07% to 1,631.33 pts. However, on the broader market, the market breadth turned negative, with nearly 2 decliners for every stock that move higher for the session. Market traded volumes stood at 3.13bn (worth RM1.75bn). Construction related stocks went into profit taking mode following the revival of ECRL as traders were selling on facts.

Wall Street ended marginally lower following softer-than-expected earnings from Goldman Sachs and Citigroup. Also, the lack of details on the US-China trade developments could have dragged the sentiment for the session; the Dow and S&P slid 0.10% and 0.06%, respectively while Nasdaq fell 0.10%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI traded higher towards the intra-day high of 1,638 level, before closing at 1,631.33 pts for the session. The MACD Line remains flattish and the MACD Histogram is hovering below zero. Both the RSI and Stochastic oscillators are mildly higher for the session but threading below 50. With the weaker technical readings on most of the indicators, we believe KLCI’s upside will be limited around 1,640-1,650, while support will be pegged around 1,626, followed by 1,600.

Tracking the performances on the overnight Dow we expect the cautious sentiment may spill over to local equities. Moreover, the construction stocks are likely to face with further profit taking activities as the earnings contribution from ECRL may not reflect so soon in their financial results. Nevertheless, trading activities are likely to remain healthy amongst construction and building material (cement and steel). The FBM KLCI’s resistance is located around 1,650.

TECHNICAL OUTLOOK: DOW JONES

The Dow has turned sideways after forming a flag breakout last week. The MACD Line is above zero, while both the RSI and Stochastic oscillators are hovering above 50. Hence, we opine that the uptrend is still intact. The resistance is envisaged at 25,500-26,951, while support will be set around 26,000.

With the profit taking activities emerged on Wall Street on the back of slightly weaker earnings and further delay on trade summit between President Trump and President Xi, we think the on going season may provide a volatile trading tone on Wall Street. Nevertheless, should there be any positive surprises from trade front, we expect Dow to revisit the previous high along 26,951.

TECHNICAL TRACKER: CLOSED POSITIONS

We had squared off our technical trackers positions on QES (0% return) and ADVCON (7% return) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 16 Apr 2019