MARKET REVIEW

Asia’s stock markets closed mostly lower amid concerns lingering on Beijing may pull back on stimulus measures following the recent release of better-than-expected economic data in China. Meanwhile, South Korean economy unexpectedly decline in the 1Q19, marking its worst performance since global financial crisis and BoJ kept its monetary policy steady and intends to keep interest rates “extremely low” until at least 2020.

Meanwhile, stocks on the local front went into a profit taking mode and the KLCI fell 0.14% to 1,635.68 pts. Market breadth was negative with 464 decliners vs. 407 advancers. Overall traded volume stood at 3.77bn, worth RM2.54bn. Nevertheless, we noticed e-government services stocks such as SCICOM and HTPADU managed to trade higher for the session.

Wall Street ended mostly lower dragged by 3M falling 12.9% after releasing weaker-than expected results, and slashing its full-year outlook with a potential cut in 2,000 jobs globally. The Dow and S&P500 declined 0.51% and 0.04%, respectively. Nevertheless, selected tech giants such as Facebook trended higher, which managed to lift the tech-heavy Nasdaq higher by 0.21%.

TECHNICAL OUTLOOK: KLCI

Despite the KLCI closed lower for the session, we opine that the short term technical rebound formation may persist over the near term, as the MACD indicator is recovering below the zero level. Meanwhile, both the RSI and Stochastic oscillators are trending higher above 50. The resistance is envisaged around 1,640-1,659, while the support will be set along 1,610, followed by 1,600.

As investors are closely watching for further catalysts from the PM visit to China, profit taking activities have emerged and could see sideways consolidation on the KLCI (resistance located around 1,640-1,658). Nevertheless, with the news on China would buy additional 1.9m tonnes of palm oil from Malaysia over the next 5 years, we may anticipate CPO futures to be traded actively over the near term. On the broader market, traders may still focus on construction and building material stocks on the back of the ECRL and Bandar Malaysia reinstatement news.

TECHNICAL OUTLOOK: DOW JONES

The Dow has retraced mildly after hitting the recent peak of 26,696, the MACD indicator has shown slight decline, while the Stochastic oscillator remains in the overbought region. Hence, with the mildly negative technical readings, the upside of the Dow could be capped near the 26,700-26,952 (all-time-high) zones. Support will be located around 26,000, followed by the SMA200 at 25,354.

With the ongoing US corporate earnings going into a halfway mark, we believe the near term upward momentum is fading as better-than-expected results from the tech stocks were unable to inspire the Dow to trend higher. At the same time, market participants are awaiting for more catalysts from next week’s trade discussion between the US and China, should any negative surprises emerge on the trade front, the Dow may retrace lower.

Source: Hong Leong Investment Bank Research - 26 Apr 2019