Asia’s stock markets ended higher led by the feel-good sentiment following the trade deal struck between US and Mexico, avoiding the tariffs for Mexican products. In addition, Beijing signalled an infrastructure boost, which has contributed towards the positive momentum in regional markets; the Shanghai Composite Index and Hang Seng Index rose 2.58% and 0.76%, respectively.

Despite the gains on Wall Street and regional stock markets, FBM KLCI ended lower by 0.27% to 1,651.20 pts. Market breadth, however was positive with gainers led losers by a ratio of 4-to- 3, accompanied by 2.24bn shares traded, valued at RM2.03bn for the session. Meanwhile, Bandar Malaysia thematic stocks such as IWCITY and EKOVEST and SKIN immigration project-related stocks like SCICOM, HTPADU and IRIS were traded actively.

After surging strongly at the opening bell following the special-purpose bond issuance by the China government to spur infrastructure activities, profit taking emerged and Wall Street snapped a 6-day winning streak without any fresh catalyst and market participants were staying cautious ahead of the FOMC meeting next week and G20 meeting later this month. The Dow and S&P500 slipped marginally by 0.05% and 0.03%, respectively.

TECHNICAL OUTLOOK: KLCI

The KLCI trended lower yesterday and it has been hovering within a narrow range of 1,644- 1,658 over the past 5 trading days. The MACD Histogram has turned flat, while both the RSI and Stochastic oscillators are trending along the overbought region; suggesting that the upside move for the KLCI may be limited around 1,658-1,666. Support will be pegged around 1,630, followed by 1,600.

Taking cues from Wall Street and the unresolved trade tensions between the US and China, we opine that the stocks on the local bourse may take a breather as some of the stocks have rebounded fairly decent over the past few days. Nevertheless, we believe some trading activities will be noticed amongst construction and e-government services stocks, while O&G stocks may rebound higher as Brent crude oil prices managed to stabilise near the USD60 level.

Source: Hong Leong Investment Bank Research - 12 Jun 2019