Market review

• Last Friday, the MSCI Asia Pacific Index (MXAP) eased 0.22% to 142 on profit taking after a 5-day gain as investors grew uncertain about the efficacy of central bank stimulus amid mixed economic data. Sentiment was also dampened by a pullback in oil prices ahead of an informal OPEC meeting on 26-28 Sep. Despite the mild retreat, MXAP rallied 3.57% wow as measures by the Fed to scale back its tightening plans and the BOJ’s decision to overhaul its stimulus helped ease concerns that central banks might taper efforts to stimulate global growth.
• KLCI inched up 1.3 pts last Friday after traded within a range of 9.5 points between an intra-day high of 1672.3 and a low of 1662.8 as mild profit taking emerged after hitting near 2-month low of 1645 on 20 Sep. WoW, KLCI managed to recoup 18 pts or 1.1% after tumbling 2% in the previous week ended 16 Sep.

• After a 3-day rally of 272 pts, the Dow surrendered 131 pts last Friday following sliding oil prices that triggered selloff in energy shares. Sentiment was also cautious as investors grew more skeptical about the efficacy of central bank stimulus amid mixed economic data ahead of the presidential debates tonight before the 8 Nov’s election. Despite the fall, the Dow managed to click on a 138-pt or 0.76% gain wow.

Technical view

• Positive technicals to drive index higher

• Given the 4th straight wins of 20 pts, technical indicators are turning more positive and further gains may be in stored ahead of the potential pre-Budget rally and 3Q16 window dressing activities this week. Weekly upside targets are situated at 1678 (30-d SMA) and 1684 (61.8% FR) levels. On the flip side, unfavourable OPEC meeting outcome and further retracements in Dow could trigger mild pullback in KLCI towards 1664 and 1656 zones.

Market Strategy

• Tracking last Friday fall in Dow and sliding oil prices ahead of the OPEC meeting this week, Bursa Malaysia may encounter volatility in the beginning of the week. However, any pullback will be cushioned by expectations of 3Q16 window dressing activities and pre-Budget rally (to be unveiled on 21 Oct) coupled with ultra-low/negative interest rates environment and extended accommodative monetary policies from key global central banks.

• Portfolio (FIG4). We had closed our position on TNLOGIS (+13.9% gain), FIAMMA (7% gain) and FLBHD (3.1% return) last Friday as share prices hit R1/R2 targets.

Source: Hong Leong Investment Bank Research - 26 Sep 2016