MARKET REVIEW

Most of the Asia’s stock markets ended on a positive tone following the release of China’s 1Q19 GDP, which stood at 6.4% YoY, beating consensus estimates of 6.3%. The Shanghai Composite Index and Nikkei 225 added 0.29% and 0.25%, respectively, but Hang Seng Index slipped marginally by 0.02%. Meanwhile, sentiment on the local front were negative as broader market (661 decliners vs. 208 advancers) went into another round of profit taking mode and the FBM KLCI declined 0.53% to 1,620.90 pts. Also, the negative news flow of Malaysia bonds that may drop out from FTSE World Government Bond Index has further dampened the market tone. Market traded volume stood at 3.10bn, worth RM1.85bn. Nevertheless, we noticed gloves stock such as Top Glove, Hartalega and Kossan traded higher amid the weaker ringgit throughout the session. Despite the better-than-expected China’s 1Q19 GDP, coupled with stronger earnings from Pepsi and Morgan Stanley, Wall Street ended on a softer note dragged by healthcare sector. The Dow and S&P500 0.01% and 0.23%, respectively, while Nasdaq dropped 0.05%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI continues to violate below the immediate support, marking a fresh two-year low. The MACD indicator has formed another negative cross and MACD Histogram has turned below zero. Meanwhile, both the RSI and Stochastic oscillators are hovering below zero. With slightly weaker technical readings, we believe KLCI’s upside will be limited and the support will be located around 1,600-1,614.

On the local front, we expect bargain hunting activities to emerge after few round of selling activities on the FBM KLCI; key index support will be located around 1,600. At the same time, we see opportunities within the export-related stocks within the gloves, technology and furniture sectors on the back of weakening bias ringgit.

TECHNICAL OUTLOOK: DOW JONES

The Dow trended sideways over the past three trading days after the gap-up formation last week. The MACD indicator has turned flattish, while the Stochastic oscillator is overbought; suggesting that the upside could be limited over the near term. The resistance will be envisaged around 26,500, while support will be located at 26000, followed by 25300 (SMA200).

In the US, we believe the ongoing US corporate earnings season would be one of the focuses this month as the US-China trade talks have been going under the radar and traders may trade cautiously over the near term. Nevertheless, firmer crude oil prices are likely to lift the trading interests within energy sector in the US.

Source: Hong Leong Investment Bank Research - 18 Apr 2019