MARKET REVIEW

Regional stock markets ended mixed with most of the oil and gas companies traded lower following the decline in crude oil prices after Saudi Arabia commented that its damaged processing facilities may resume to normal output in the near term. Also, investors traded cautiously ahead of the FOMC meeting. The Shanghai Composite Index rose 0.25%, but Nikkei 225 and Hang Seng Index fell 0.18% and 0.13%, respectively.

Meanwhile, stocks on the local front ended marginally lower as Genting related heavyweights were traded lower; the KLCI fell 0.30% to 1,599.49 pts. Market breadth was negative with 480 decliners as compared to 339 gainers. Market traded volume stood at 1.98bn shares, valued at RM1.60bn. Most of the O&G stocks in the broader market traded lower following the decline in crude oil prices.

Wall Street trended mixed following the conclusion of FOMC meeting, where the Fed has reduced the interest rate by 0.25%, in tandem with general market participants’ view, but investors were unsure on the interest rate outlook moving forward. In addition, energy stocks were traded softer after the crude oil rally has taken a pause over the last two trading days. The Dow and S&P500 inched up 0.13% and 0.03%, respectively, but Nasdaq slid 0.11%.

TECHNICAL OUTLOOK: KLCI

Still, the FBM KLCI is ranging between the 1,580-1,620 levels. The MACD indicator is hovering below zero, while both RSI (below 50) and Stochastic (above 50) oscillators are having mixed signals. With the mixed technical readings, we believe the KLCI may trade sideways to downward bias tone. The support will be set around 1,572-1,580, while the resistance is pegged at 1,620.

On the local front, we opine broader sentiment to remain tepid, tracking the mixed sentiment from the Wall Street overnight as well as the softer crude oil prices following Saudi Arabia’s oil facilities restoration progress, which may fully resume its production capabilities by end November. The FBM KLCI could extend its sideways consolidation phase between the 1,580- 1,620 levels.

TECHNICAL OUTLOOK: DOW JONES

The Dow has rebounded yesterday and could potentially form a flag formation breakout over the near term. The MACD indicator is positive trending above the zero level. However, the Stochastic oscillator is overbought. Hence, the uptrend move on the Dow could be limited around 27,400. Meanwhile, support is anchored around 26,800.

Following the interest rate cut of 25 basis points by the Fed, investors were digesting the mixed views on the next course of actions by the Fed later this year. Hence, we believe traders will be shifting their attention towards the progress on the trade developments between the US and China (as next trade talks will be held in October) for further actions in the markets. The Dow trading range will be located around 26,800-27,400.

Source: Hong Leong Investment Bank Research - 19 Sept 2019