Market review

• The MSCI Asia Pac index fell 0.45% (its 5th straight decline) to 136.6 following an extended slump in oil prices and uncertainty over the trajectory of central bank stimulus globally. Sentiment was also dampened by event risk of the upcoming U.S. election (8 Nov) after Hillary was diagnosed with pneumonia, whose polling edge over Donald Trump has soothed investors who fear ruptures to U.S. policy and see virtue in political gridlock.

• Tracking bearish sentiment in regional markets, KLCI plunged 15.8 pts (its 3rd straight loss), led by AXIATA (-18 sen to RM5.31), HLFG (-36 sen to RM15.56), PBBANK (-34 sen to RM19.46), HLBANK (-22 sen to RM12.86) and SIME (-13 sen to RM7.66).

• After rising 96 pts on technical rebound, the Dow continued its southbound journey to end 32 pts lower at 18035 amid extended fall in oil prices and uncertainty over FOMC meeting next week. Meanwhile, anxiety over Hillary’s (percei ved as a more market -friendly nominee) health also dampened sentiment as recent polls showed Hillary's lead over Trump has narrowed considerably.

Technical view

• Extended downward consolidation

• Following y esterday’s rout, KLCI outlook has turned decisively bearish following the breakdown below 1664- 1675 supports. We expect the downward consolidation mode to prevail with near term supports at 1640-1656 levels. Immediate resistances are 1670-1684 (FIG2).

Market Strategy

• In the wake of the long weekend holiday (Bursa will close on 16 Sep for Malaysia Day), sliding oil prices, weakening RM and ahead of 20-21 Sep FOMC meeting, KLCI is expected to undergo an extended consolidation.

• Stock on radar. We recommend SENDAI (Trading Buy) as fundamentally, a better 2H16 is expected as Management guided that its entire stake of RM130m in Technics had been fully impaired, as well as supported by huge orderbook of RM2.4bn, providing earnings visibility for the next 1.5 years.

• Technically, we believe after a 3M range bound pattern, share prices are ripe for a breakout soon. A decisive breach above immediate resistance of RM0.475 could take the next leg up towards RM0.515-RM0.585 levels. Key supports are RM0.405-0.435. Cut loss at RM0.40.

Source: Hong Leong Investment Bank Research - 15 Sep 2016