MARKET REVIEW

Despite S&P500 and Nasdaq marking all-time-high territory, Asia’s stock markets ended mixed on the back of concerns over the possibility that Chinese government may scale back stimulus on deleveraging amid better-than-expected economic growth in first quarter. The Shanghai Composite Index ended slightly lower by 0.09%, while Hang Seng Index and Nikkei 225 fell 0.53% and 0.27%, respectively.

Meanwhile, the FBM KLCI bucked the regional trend and closed higher by 0.65% at 1,638.01 pts on the back of buying interest into selected banking and gloves heavyweights. Market breadth was positive with advancers led decliners by a ratio of nearly 2-to-1, accompanied by 4.39bn shares traded for the session, worth RM2.85bn. Also, O&G stocks (on the back of firmer crude oil prices) such as ARMADA, BARAKAH and SAPNRG and building material stocks like Lafarge Malaysia and Hume Industries traded higher for the day.

After hitting record highs on S&P500 and Nasdaq, Wall Street reversed into the negative territories led by mixed bags of earnings led by energy and communications sectors. Also, without any fresh catalysts on the trade front, the Dow and S&P500 lost 0.22% each.

TECHNICAL OUTLOOK: KLCI

We believe the technical rebound on the FBM KLCI may sustain at least over the near term on the back of recovering technicals on MACD indicator. In addition, both the RSI and Stochastic oscillators are improving above 50; suggesting that the positive momentum is intact. Resistance is envisaged around 1,658-1,666, support will be set along 1,600-1,610.

On the local front, construction stocks have been traded actively over the past few days on the back of reinstatement of few mega projects such as ECRL and Bandar Malaysia and we believe building material such as steel and cement segments will be seen as first beneficiary of the construction works and may trade higher over the near term. Also, with the firmer crude oil prices around USD74-75, we see sustain trading interest amongst O&G counters. The KLCI may extend its technical rebound towards 1,650-1,666.

TECHNICAL OUTLOOK: DOW JONES

Despite marginal decline on the Dow, it remains positive as it is hovering above most of the key SMAs (20, 50, 200). At the same time, the MACD indicator has expanded positively over the past few sessions, indicating that the uptrend move is intact. However, on the Stochastic oscillators, it is suggesting that the Dow is overbought and the key index may consolidate sideways near the 26,700 zone before revisiting the all-time-high around 26,952. Support will be set around 26,500, followed by 26,000.

In the US, it will be mostly driven by the ongoing corporate earnings season over the near term and is likely to be driven by tech giants as both Facebook and Microsoft have released better than-expected quarterly results. On the trade front, US officials will be heading to Beijing on 30th Apr for another round of discussion. Investors are still putting high hopes to see a trade resolution by 2Q19.

TECHNICAL TRACKER: CLOSED POSITIONS

Yesterday, we had squared off our positions in two technical trackers i.e. NAIM (10.3% gain) and PHARMA (+14.4% gain) as well as two 2Q19 stock picks i.e. TRC (+6.4% gain) and SUPERMX (8% gain).

Source: Hong Leong Investment Bank Research - 25 Apr 2019