MARKET REVIEW

Despite factories in selected regions in China remain closed for extended period amid the quarantine efforts on the recent novel coronavirus outbreak, regional stocks markets managed to rebound higher. This could be due to slower growth rate on the confirmed cases on the virus; the Hang Seng Index and Shanghai Composite Index rose 1.26% and 0.39%, respectively.

Meanwhile, trading tone on the local front was fairly positive with bargain hunting activities seen amongst index heavyweights such as Genting-related stocks and HARTA. Market breadth was positive with 462 gainers as compared to 372 decliners. Market traded volume stood at 2.77bn, worth RM2.26bn. Also, e-government services counters such as HTPADU and MYEG were traded actively higher for the session.

Wall Street was mostly higher following Federal Reserve Chairman Jerome Powell’s testimony in front of the House Financial Services Committee, stating that the central bank is “closely monitoring” the impact of the coronavirus towards China and the global economy. The Nasdaq and S&P500 inched up 0.11% and 0.17%, respectively, but the Dow ended flat for the session.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has formed a harami candle after a bearish engulfing candle. The MACD Indicator has been recovering over the past 6 trading days. Meanwhile, both the RSI and Stochastic oscillators are recovering (but still below 50). The resistance is envisaged around 1,570, while the support is set around 1,530.

Although buying interest was noted throughout the session at this juncture as market participants could be looking beyond the novel coronavirus outbreak and trading higher prior to the full blown February reporting season. Nevertheless, given selected factories in China are being shut on an extended mode, it may be a disruption to global value chain and traders are advised to look out for selling into strength strategy in the short- to mid-term. Trading range of FBM KLCI is set around 1,530-1,570.

TECHNICAL OUTLOOK: DOW JONES

The Dow has trended sideways for the session near the all -time-high region. The MACD Indicator is hovering above zero, while the RSI and Stochastic oscillators are still pointing upward. The resistance is envisaged around 29,500, while support is located around 28,500.

From the way that market is trading, it is likely that market participants are looking beyond the coronavirus outbreak episode. However, the real impact of the coronavirus outbreak is still uncertain especially with the extended period of shutdown in factories of selected regions in China; hence it may affect the economy in the near term, limiting the upside potential on Wall Street moving forward. The Dow’s trading range will be located 28,500-29,500.

Source: Hong Leong Investment Bank Research - 12 Feb 2020