MARKET REVIEW

Following the softer-than-expected China exports data on Monday, Asia’s key regional benchmark indices ended mixed as traders were digesting China’s weaker producer price index (a key barometer of corporate profitability), which fell 0.8% YoY in August (worst contraction in 3 years). The Nikkei added 0.35%, while Shanghai Composite Index fell 0.12% and Hang Seng Index (+0.01%) ended flat.

Meanwhile, sentiment on the local front was damaged by the Axiata-Telenor merger call off and the FBM KLCI declined 0.54% to 1,595.85 pts, traded below the 1,600 psychological level throughout the session. Market breadth was negative with decliners leading advancers by a ratio of 4-to-3, while market traded volume stood at 2.19bn, worth RM1.93. With the recovering crude oil prices, we noticed selected O&G stocks such as ARMADA, SAPNRG and HIBISCS were traded actively higher for the day.

Wall Street ended mixed as led by technology stocks with Facebook and Amazon declining 1.4% and 0.6%, respectively. Meanwhile, Netflix shares were lower by 2.2% after Apple unveiled a TV service for USD4.99 per month. Besides, Ford was pressured by a downgrade to its credit rating. The Dow gained 0.28%, while S&P 500 (+0.03%) and Nasdaq (-0.04%) trended flat for the session.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI gapped down below the 1,600 psychological level, but still hovering within the range of 1,580-1,620 consolidation phase. The MACD Line is still hovering below zero, while MACD Histogram weakened yesterday. Both the RSI and Stochastic oscillators are hovering slightly below 50; suggesting that the momentum is mildly negative at this juncture. Hence, we believe that the upside could be limited for the time being. Resistance is set around 1,620, support will be anchored around 1,572-1,580.

Given the telco sector is slightly gloomy at this juncture, sentiment on the FBM KLCI may still stay negative and trading within the range bound mode (between the 1,580-1,620 levels). Nevertheless, should there be any positive progress related to the trade talks between the US and China, we expect healthy trading interest to emerge on technology stocks. For the near term, traders may focus on O&G and gloves stocks for trading opportunities.

TECHNICAL OUTLOOK: DOW JONES

The Dow continues to trend higher for another session, extending the rebound move from the SMA200 level last month. The MACD indicator is trending higher above zero; suggesting that the uptrend is intact. Meanwhile, the Stochastic is overbought. With the mixed technical readings, we believe the Dow could be having limited upside on the recent rebound move. Resistance is located around 27,000, while support is anchored around 26,400.

In the US, we think it will be trending slightly positive for now with the optimism on the trade front, where both the US and China will be meeting in Washington in October for another round of trade discussions. Meanwhile, investors and traders will be watching out for the upcoming ECB and Federal Reserve meetings which will be held this week and next week, respectively.

TECHNICAL OUTLOOK: CLOSED POSITION

We Took Profit on PENERGY (15.9% Return) Yesterday After Hitting R1 Upside Target.

Source: Hong Leong Investment Bank Research - 11 Sept 2019