MARKET REVIEW

Asia markets ended mixed, tracking a 1.7% slide on SHCOMP as comments from top policymaking bodies raised investor fears that Beijing will decelerate policy easing amid signs of stabilisation in the economy after recording a better-than-expected 1Q19 GDP last week. Also, sentiment was affected by rally in oil prices as the Trump administration announced it will no longer grant sanctions waivers to any country that is currently importing Iranian oil.

The KLCI start the week and closed flat at 1622.1 after rising as much as 8.8 pts, as sentiment was boosted by the news of reinstatement of ECRL and Bandar Malaysia mega projects, coupled with rising oil prices. Trading volume increased to 4.77bn shares worth RM3.11bn as compared to Friday’s 2.52bn shares worth RM1.69bn. Market breadth was positive with 621 gainers as compared to 323 losers, driven by rallies in FBMSCAP and construction indices.

After closing last Friday in observance of Good Friday, the Dow opened the week in a cautious tone, falling 48 pts at 26511, as the busiest week of the corporate earnings season kicked off. Investors were also monitoring a jump in crude oil prices as the US said it would end waivers for countries that import Iranian crude. So far, the majority of corporate earnings reports have topped expectations, as analysts came into the season with low expectations, forecasting a 4.2% drop in profits.

TECHNICAL OUTLOOK: KLCI

Following the hammer candlestick pattern last Thursday, KLCI staged a relief rally from a 52W low at 1609 to a high of 1631 yesterday. However, the technical bounce could take a breather with key resistance near 1635 (20D SMA) following the Gravestone Doji formation yesterday. Only a decisive breakout above this level will spur higher rebound towards 1650 zones. As technical indicators are grossly oversold, we see steady floor near 1600-1609 levels.

Today, KLCI is likely to engage in sideways consolidation mode while small cap and lower would see profit taking pullback from grossly overbought levels following recent strong rallies (with high volumes) on construction and related sectors such as building materials segment following news of the revival of ECRL and Bandar Malaysia projects. Sentiment could also be dampened by IWCITY, EKOVEST and GADANG statements last night that they are not involved in reinstated Bandar Malaysia project.Today, KLCI is likely to engage in sideways consolidation mode while small cap and lower would see profit taking pullback from grossly overbought levels following recent strong rallies (with high volumes) on construction and related sectors such as building materials segment following news of the revival of ECRL and Bandar Malaysia projects. Sentiment could also be dampened by IWCITY, EKOVEST and GADANG statements last night that they are not involved in reinstated Bandar Malaysia project.

TECHNICAL OUTLOOK: DOW JONES

In the last 7 trading sessions, the Dow is building base above immediate support of 26356 (or 10D SMA). We expect continuous sideways pattern to neutralise overbought position triggered by stochastic indicator. A fall below 26356 will witness more sell down towards 26174 (20D SMA) and 26000 psychological levels. Key resistances are all-time high of 26952-27000

On Dow Jones, we believe the recent better-than-expected US corporate earnings would be able to sustain the momentum at least for the near term, given that amongst the 15% of S&P 500 firms that had reported, 78% of those released better-than-expected earnings. Overall, sideways pattern would prevail as investors face a big week for corporate quarterly results with some 150 companies are due to report quarterly earnings, with high-profile companies such as Coca-Cola, Twitter, P&G, Facebook, Amazon, Microsoft, Starbucks, Tesla and Ford Motor.

Source: Hong Leong Investment Bank Research - 23 Apr 2019