MARKET REVIEW

As traders digested further on the negative trade developments following the statements from both the President Trump and US trade representative Robert Lighthizer, regarding the imposition of higher tariffs of 25% (vs. 10% earlier) by Friday, Asia stock markets ended mostly lower. The Shanghai Composite Index and Hang Seng Index declined 1.12% and 1.28%, respectively, while Nikkei 225 fell 1.48%.

Meanwhile, stocks on the local front traded in negative tone, in tandem with global stock markets; the FBM KLCI slipped 0.36% to 1,633.55 pts. Market breadth was negative with decliners leading advancers by a ratio of 2-to-1, accompanied by overall market volumes of 2.47bn (worth RM2.06bn). Nevertheless, selected construction stocks such as ECONBHD and GADANG traded actively higher.

Wall Street continued to suffer another session of losses following President Trump’s tweets over the weekend commenting on the higher imposition of tariffs from 10% to 25% on USD200bn Chinese goods. Although President Trump tweeted yesterday that “China is coming to Washington this week to strike a deal” has lifted Dow marginally by 0.01%, but S&P500 and Nasdaq have declined by 0.16% and 0.26%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI trended sideways between the 1,623-1,644 regions over the past 10 trading days and the MACD Line is hovering flattish below zero. However, both the RSI and Stochastic oscillators are trending above 50; indicating that the near term momentum is positive. Hence, the FBM KLCI could trend slightly higher towards 1,644. Next resistance will be pegged around 1,658-1,666, while support will be located around 1,623, followed by 1,610.

Despite Wall Street trending lower for another session (smaller decline as compared to previous two trading days), we believe bargain hunting activities may emerge on the KLCI, given the formation of a few bullish candlesticks (3 hammers and 1 bullish engulfing) over the past four trading days. Nevertheless, upside may be limited awaiting for more clarity from the US-China trade discussions by Friday. The FBM KLCI’s support located around 1,610-1,623.

TECHNICAL OUTLOOK: DOW JONES

The Dow continued its retracement phase towards the trendline support around 25,800. Meanwhile, the MACD Indicator is trending lower, approaching zero level and both the RSI and Stochastic oscillators have hooked below 50; suggesting that that momentum is turning weaker at this juncture. Hence, the Dow’s upside will be limited around 26,300, followed by 26,952. Support will be located around 25,800, followed by SMA200 near the 25,400 level.

In the US, we expect the market sentiment to stay on the sidelines, trending in the sideways consolidation phase ahead of the conclusion of the upcoming US-China trade talks, led by Vice Premier Liu He. Should there be any negative surprises from the discussion, we opine further volatile moves could be seen on major indexes on Wall Street over the near term. The Dow’s resistance is envisaged around 26,300-26,952.

Source: Hong Leong Investment Bank Research - 9 May 2019