Market review

• After a 6th straight loss, the MSCI Asia Pac index gained 0.45% (but still ended -2.3% wow) to 137.1 after weaker-than-anticipated U.S. industrial production and retail sales data triggered a delay in investor expectations over the timing of next Fed rate hike. Overall, sentiment was muted as investors await BOJ (21 Sep) and Fed (22 Sep) policy review.

• Ahead of the extended holiday weekend, KLCI slid 8.4 pts as sentiment was bogged down by sliding oil prices, weakening RM and uncertainty over FOMC meeting this week. WoW, KLCI slipped back into correction mode as the index plunged 33.4 pts or 1.98% to 1653, the biggest % loss since 29 Apr.

• The Dow continued its whipsawed pattern with a 88-pt decline to 18124 (+39 pts wow) as sliding oil prices pressured energy shares, while concerns ahead of this week’s FOMC meeting weighed on sentiment following mixed economic data last Friday from higher-than-expected Aug CPI and a weak Sep consumer confidence index. Although the probability of a hike this week appears low, investors are more worried about a hawkish statement slated for a potential rate hike in Dec.

Technical view

• Extended downward consolidation

• Following last week’s rout, KLCI outlook has turned decisively bearish following the breakdown below multiples key supports. We expect the downward consolidation mode to prevail this week with crucial support at 1640 levels (23.6% FR). A fall below 1640 will witness KLCI to correct further towards 1600-1611 zones. Immediate resistances are 1664-1670.

Market Strategy

• Mirroring last week’s pattern, we expect selling pressures on Bursa Malaysia to prevail as investors await further clues from key central banks review. Meanwhile, sentiment will remain cautious amid sliding oil prices, weakening RM and uncertainty ahead of the 8 Nov US presidential election following recent polls showed that Donald Trump (perceived as less market friendly) has led Hillary Clinton.

• Stock on radar. We recommend GPACKET (Trading Buy) as after the closure of P1, the group is expected to begin a new chapter moving forward, supported by 4 new synergistic business pillars. YTD, the stock is consolidating nicely above RM0.23 and it is likely to stage a triangle breakout in the short to medium term. A decisive breach above resistance of RM0.26 could take the next leg up towards RM0.27-0.305 levels. Key supports are RM0.23-0.235. Cut loss at RM0.225.

Source: Hong Leong Investment Bank Research - 19 Sep 2016