MARKET REVIEW

Key regional benchmark indices managed to rebound higher as traders monitored closely on the developments on the trade front prior to the high-level talks between the US and China in Washington. The Shanghai Composite Index rose 0.78%, while Hang Seng Index and Nikkei 225 added 0.10% and 0.45%, respectively. Meanwhile, the FBM KLCI managed to recover from earlier sell down and ended flat at 1,551.87 pts (+0.04%) prior to the Budget 2020. Market breadth was negative with 384 decliners vs. 339 gainers, accompanied by 2.18bn shares traded for the day (worth RM1.52bn). Nevertheless, oil and gas stocks such as Dayang, Perdana and KNM were traded actively throughout the session.

Wall Street closed higher as optimism on the trade front returned as President Trum p said he will meet Chinese Vice Premier Liu He on Friday. President Trump’s tweet was the latest development after a few conflicting reports overnight that sent investors in a rough trading tone on Dow futures during Asian hours. The Dow and S&P500 rose 0.57% and 0.64%, respectively, while Nasdaq added 0.60%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI ended marginally higher by 0.04%, supported around the 1,550 level, but the MACD indicator is still hovering in the negative region. However, both the RSI and Stochastic oscillators have been hovering in the oversold region over the past few sessions; the key index could be due for a technical rebound. Upside resistance is pegged around 1,580, support will be anchored around 1,530.

With the increasing optimism on trade front, we expect the buying interest may spill over towards stocks on Bursa exchange. However, traders may trade cautiously awaiting fresh leads from Budget 2020. Hence, KLCI’s upside will be limited for now around 1,580. Nevertheless, we believe selected O&G stocks will remain attractive following the surge in volumes recently.

TECHNICAL OUTLOOK: DOW JONES

The Dow has regained its upward trending mode again following the rebound along the SMA200 zone last week. The MACD Line is below zero, but both the RSI and Stochastic are improving just below of 50. Based on the technical readings, we anticipate that the Dow could trend higher towards the resistance along 26,800, while support is set around 25,941.

In the US, we believe the buying support will remain intact with the statements from President Trump conforming the meeting with Chinese Premier Liu He later today. Should there be any new developments from the trade front, such as a mini-deal (which some of the market participants are anticipating it) on selected issues, Wall Street could charge higher for the session.

Source: Hong Leong Investment Bank Research - 11 Oct 2019