MARKET REVIEW

With Wall Street taking a mild breather on Tuesday, Asia’s stock markets stalled for another session. In addition, markets were spooked by the ongoing protest in Hong Kong city over the China extradition law and sentiment was negative throughout the session. Hang Seng Index declined 1.73%, while Shanghai Composite Index and Nikkei 225 fell 0.56% and 0.35%, respectively.

Meanwhile, stocks on the local front traded on a lacklustre mood with the KLCI ending marginally lower by 0.03% to 1,650.74 pts and market breadth was negative with losers led gainers by a ratio of 4-to-3. In addition, market traded volumes were softer at 1.76bn (worth RM1.60bn) as compared to 2.24bn (worth RM2.03bn) in Tuesday. However, selected technology stocks such as Pentamaster and MPI were traded higher.

Wall Street closed lower for the second consecutive day as profit taking activities was observed amongst tech, energy and banking stocks on the back of unresolved trade war and investors were staying mildly cautious ahead of the FOMC meeting that will be held next week as well as a slump in overnight crude oil prices. The Dow and S&P500 slid 0.17% and 0.20%, respectively while Nasdaq down 0.38%.

TECHNICAL OUTLOOK: KLCI

Still, the FBM KLCI is hovering within the trading range of 1,642-1,658, trending sideways over the past 6 trading days. The MACD Histogram has turned flattish over the past few sessions, while the RSI and Stochastic oscillators are in the overbought region. Hence, with the softer momentum and overbought status on KLCI, the key index could be due for a slight retracement. Resistance will be set along 1,658-1,666, while support is located around 1,630. 

Taking cues from Wall Street, we expect sentiment to stay soft and profit taking activities may persist on the broader market on the back of the slump in Brent oil prices (trading below USD60). Furthermore, investors are likely to deploy a defensive approach ahead of the G20 summit and stay alert on any trade sensitive headlines in the near term.

TECHNICAL OUTLOOK: DOW JONES

The Dow closed lower yesterday and the MACD Line is hovering around the zero. Meanwhile, the Stochastic oscillator is overbought. Hence, we believe that the Dow may be due for further pullback over the near term. The support is envisaged around 25,432-25,500 and the resistance will be pegged around 26,500.

On Wall Street, we believe that the market participants will be taking a cautious view on markets direction on the back of the ongoing unresolved trade tensions between the US and China as President Trump and President Xi have not reach any trade agreement at this juncture, thus traders will be watching closely on any developments from now till G20 summit on the trade front.

TECHNICAL TRACKER: CLOSED POSITION

Took profit on DRBHCOM yesterday at RM2.14 (8.1% return).

Source: Hong Leong Investment Bank Research - 13 Jun 2019