MARKET REVIEW

Asian markets ended mixed ahead of the widely anticipated President Trump-Xi meeting at the 28-29 June G20 summit for any signs of de-escalation in a trade war that is damaging the global economy and souring business confidence. Sentiment was also dampened by the heightened Middle East geopolitical tensions as US is planning to impose further sanctions against Iran after Tehran claimed it downed an American drone that violated its airspace.

After rallying 43.6 pts last week to a three-month high of 1682.2, KLCI lost 6.1 pts at 1676.1on profit taking, led by major decliners such as SIMEPLT, GENTING, AXIATA, IOICORP and MAXIS. Trading volume decreased to 1.81bn shares worth RM1.68bn as compared to Friday’s 2.22bn shares worth RM3.05bn. Market breadth was negative with 294 gainers as compared to 518 losers.

In a listless trade, the Dow inched up 8 pts at 26728 as investors looked ahead to President Trump-Xi meeting during G20 summit and tracking heightened geopolitical tensions in the Gulf. Meanwhile, rising geopolitical tensions in Middle East and the prospects of lower Fed rates saw safe havens such as gold spiked 1.7% to USD1423 and the 10Y Treasury yields slipped 0.048% to 2.018% while WTI oil jumped 0.6% to USD57.8.

TECHNICAL OUTLOOK: KLCI

Following a 7% relief rally from 1572 (14 May) to 1682 (21 June) and a 2.7% surge WoW, KLCI slipped 6.1 pts yesterday at 1676.1, recording its 1st decline after a 4-day winning streak. Ahead of the G20 summit and prevailing geopolitical uncertainties in Iran, KLCI is expected to engage in a profit taking consolidation amid weakening technical indicators. Resistance is pegged around 1682, 1690 (200D SMA) and 1700 psychological barrier while supports are near 1657 (100D SMA), 1650 and 1645 (20D SMA) levels.

Given that nothing significant is expected from the US-China trade talk at G20 meeting, except for willingness to return to negotiating table, as well as surging geopolitical tensions in Middle East, KLCI is expected to continue its profit taking mode after rallying 6.6% from 1572. However, any retracement is likely to be cushioned by potential 1H19 window dressing activities. For big cap proxies to window dressing, we like MAYBANK, CIMB and RHBBANK.

TECHNICAL OUTLOOK: DOW JONES

Following a 9% relief rally from a low of 24680 (3 June) to a high of 26907 (21 June) and a 2.4% surge WoW, the Dow gained 8 pts after hovering within a tight 26723-26806 range. On the back of the formation of a shooting star and toppish indicators, we expect the Dow to consolidate in the near term, with formidable resistances at 26900-27000 while supports fall on 26300-26500 territory.

In the US, sentiment may cautious after recent 8.3% rally from YTD low of 24680 to 26728, mainly driven by the dovish Fed and US-China trade war optimism. Consensus are expecting a more conciliatory tone when President Trump and Xi meet during the G20 summit, with a possible agreement to refrain from further tariff hikes or other punitive actions. Overall, we expect the Dow to trend in tight range bound within 26400-27000 levels this week.

TECHNICAL TRACKER: CLOSED POSITIONS

Yesterday, we had squared off our positions in PECCA (+8.3% gains), SUPERMX (0.0% gain) and NADIBHD (0.0% gain).

Source: Hong Leong Investment Bank Research - 25 Jun 2019