MARKET REVIEW

Stocks on the regional markets ended on a mixed note as market participants continued to watch out for the developments on the on-going coronavirus outbreak as it has surpassed the death toll of SARS within a shorter period. Some factories in China were set to resume, but many are expected to remain shut for a longer period. Meanwhile, China’s PPI gained 0.1% in January 2020. The Shanghai Composite Index added 0.51%, while Nikkei 225 and Hang Seng Index declined 0.60% and 0.59%, respectively.

On the local front, the FBM KLCI declined for the first time after 4 days of rebound last week amid ongoing worries on ongoing coronavirus outbreak. Market breadth was negative with 597 decliners vs. 285 advancers, accompanied by 2.42bn (worth RM1.92bn) shares traded for the day. Also, we noticed gloves stocks such as RUBBEREX and COMFORT traded actively higher for the session.

Wall Street ended on a positive note led by tech giants such as Amazon, Netflix, Facebook and Alphabet. The Dow quickly reversed from the negative territory (more than 100 points decline) after buying support was noted in Boei ng to close higher by 0.60% to 29,276.82 pts. Meanwhile, S&P500 and Nasdaq gained 0.73% and 1.13%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has snapped a four-day winning streak forming a bearish engulfing candle. The MACD Indicator is still hovering below zero and RSI has hooked lower. Meanwhile, the stochastic oscillator has trended out of the oversold region. Resistance is set around 1,570, while support is anchored at 1,530.

Given the prolonged coronavirus outbreak situation, coupled with some of the factories which are expected to close for a longer period in China, we anticipate market sentiment to stay choppy accompanied by a profit taking tone in the near term after a good stretch of rebound last week. However, with the increased trading interest within gloves-related the trading range of the FBM KLCI will be located around 1,530-1,570.

TECHNICAL OUTLOOK: DOW JONES

The Dow has rebounded overnight and formed a bullish engulfing candle despite the virus outbreak situation. The MACD Indicator is trending higher above zero after a positive cross was observed last week, while the RSI is above 50. However, the stochastic oscillator is approaching the overbought region. We believe the Dow could retest the all-time-high region with resistance envisaged around 29,500, while support will be located around 28,500.

In the US, we expect uptrend to stay intact as better-than-expected economic data continues to outweighed the prolong coronavirus outbreak situation (confirmed cases: above 42k and death toll: above 1k) for now. Meanwhile, stronger-than-expected reporting season in the US has lifted the sentiment overall. Hence, we think the Dow could revisit the all-time high, targeting 29,500 in the near term.

Source: Hong Leong Investment Bank Research - 11 Feb 2020