MARKET REVIEW

Asia markets ended mixed as investors grappled with surging oil prices after US announced it will no longer grant sanctions waivers to any country that is importing Iranian oil. Sentiment was also dampened by a 2nd straight fall on SHCOMP, recording a 0.5% decline to 3198 as market anticipate that Beijing could refocus on structural reforms instead of offering stimulus measure amid signs of stabilisation in the economy.

Bucking negative regional markets trend, KLCI rose 5.4 pts at 1627.4, lifted by bargain hunting activities on HARTA, TOPGLOV, AIRPORT, PMETAL and TENAGA. However, trading volume decreased to 3.73bn shares worth RM2.48bn as compared to Monday’s 4.77bn shares worth RM3.11bn. Market breadth was also negative with 406 gainers as compared to 443 losers due to profit taking pullback on most of the construction and building material stocks following recent news flows of the reinstatement of ECRL and Bandar Malaysia projects.

The Dow soared 145 pts to 26656, while the S&P added 25 pts to 2933, above its previous closing high of 2,931. The Nasdaq also gained 105 pts to 8121, above its previous record close of 8110. The strong performance was mainly driven by better-than-expected earnings bonanza from Twitter, United Technology, Coke, Verizon and Lockheed, offset a fall in P&G share prices amid a soft outlook forecast.

TECHNICAL OUTLOOK: KLCI

Following the hammer candlestick pattern last Thursday, KLCI staged a relief rally from a 52W low of 1609 to end at 1627.4 yesterday. Taking cue from buoyant Wall St overnight and improving indicators, KLCI is poised to test the downtrend line resistance near 1633 (or 20D SMA) soon. A decisive breakout above this level will spur higher rebound towards 1646-1650 zones. Meanwhile, as technical indicators are grossly oversold, we see good supports at 1616 (low Bollinger band), 1609 and 1600 levels.

Tracking positive Dow’s closing overnight and rising oil prices, KLCI’s technical rebound from 1609 is likely to continue to recapture downtrend line barrier near 1633. As the worst could be over for the construction and building materials industries following news of the revival of a few key mega projects recently, any further profit taking pullback on EKOVEST, IWCITY, KIMLUN, ADVCON, ANNJOO, LAFMSIA should attract investors looking for short term rebound gains. Meanwhile, stronger USD index overnight could also witness some bargain hunting activities on the resilient gloves stocks such as TOPGLOVE, HARTA and SUPERMX.

TECHNICAL OUTLOOK: DOW JONES

Following the successful base building above the 10D (26387) & 20D (26230) SMAs since early April coupled with the breakout above 26487 (5 Apr high) neckline resistance yesterday, we expect Dow to retest all-time high of 26952 (3 Oct 2018) soon, followed by 27000-27150 territory. Meanwhile, downside supports can be found at 26230-26387.

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 to retest all-time high of 26952, given that the majority of corporate earnings reports have topped expectations. Overall, 1Q19 profits of S&P 500 companies are now expected to decline 1.3% against 4.2% drop at the start of the April’s earnings season. Sentiment was also boosted by a dovish Federal Reserve and hopes of a US-China trade resolution by end 2Q.

Source: Hong Leong Investment Bank Research - 24 Apr 2019