MARKET REVIEW

Following weaker-than-expected jobs data in the US, which contributed to an increase in expectations for the Fed to potentially cut interest rates in the upcoming monetary policy meeting, Asia’s key benchmark indices ended on a mixed note. Also, comments from White House economic advisor Larry Kudlow that trade negotiations between the US and China would start “soon” was not able to lift the market sentiment; Shanghai Composite Index and Hang Seng Index declined 0.33% and 0.21%, respectively, but Nikkei 225 rose 0.30%.

Meanwhile, the FBM KLCI traded within the negative territory throughout the session and ended lower by 0.15% to 1,687.48 pts. Market breadth, however was positive with 466 gainers vs. 368 losers. Market traded volumes stood at 2.84bn, worth RM1.79bn. On the active list, we noticed poultry stocks such as Teo Seng, Malayan Flour, CCK and Lay Hong traded higher for the session.

Wall Street was closed for Independence Day public holiday. Although Wall Street traded to its all-time-highs in the previous session, European stocks ended in a subdued tone after the US jobs data was softer-than-expected, which cause the market participants to anticipate that the Fed to be more dovish stance in the upcoming July FOMC meeting. The FSTE 100 slipped marginally by 0.08%, while DAX and CAC inched up 0.11% and 0.03%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has breached above the downward trend line and has been trading above the SMA200 over the past 3 trading days. Meanwhile, the MACD indicator is hovering positively above zero. Nevertheless, the momentum oscillators are overbought. Hence the immediate resistance is envisaged around 1,700-1,730. Support will be located around 1,666-1,680.

We believe sentiment on the local front may continue to stay sideways as the key index is overbought and the Brent oil prices have turned weaker, which is likely for market participants to take profit amongst O&G stocks that have rebounded recently. Nevertheless, traders may look into poultry-related and IT-related stocks as we noticed volumes have been picking up throughout the past week.

TECHNICAL OUTLOOK: DOW JONES

The Dow is hovering above the previous high of 26,952. The MACD Indicator is still positive at this juncture, but both the RSI and Stochastic oscillators are overbought; it could suggest that the Dow’s upside potential might be limited. Resistance is envisaged around 27,000-27,500, while the support is anchored around 26,500.

On Wall Street, we opine that the uptrend could sustain given the recent resumption of trade discussions between the US and China. Also, the recent increased expectations on a potential interest rate cut by the Fed could lift the market sentiment, at least for the near term. The Dow may range bound between 26,500-27,500.

TECHNICAL TRACKER: CLOSED POSITIONS

We Squared Off ARBB (9.9% Return), GFM (11% Return) and KRONO (11.8% Gains) Yesterday.

Source: Hong Leong Investment Bank Research - 5 Jul 2019