Market review

• Taking cue from a 0.7% profit taking in Dow last Friday, the MSCI Asia Pacific Index (MXAP) recorded its 2nd straight decline (-0.8% to 140.86), triggered by uncertainties over OPEC meeting, emerging-market equities and currencies selloff after Turkey’s credit rating was cut to junk by Moody coupled with the first U.S. presidential debate today.

• Tracking lower regional markets, KLCI dropped as much as 5.6 pts intraday but pared the losses to only 1.5 pts at 1669.5, cushioned by expectations of potential 3Q16 window dressing activities this week and pre-Budget rally.

• Despite a 2.6% rally in WTI oil prices as Saudi Arabia’s offer to cut output opened the door to a future OPEC deal, the Dow continued its slump (-168 pts to 18094) for a 2nd consecutive session. Sentiment was negative amid selloff in financial shares following Deutsche Bank woes on speculation Germany’s largest lender will need to raise capital, and Clinton-Trump debate election after a Bloomberg poll showing Donald Trump and Hillary Clinton were deadlocked. Concern over selloff in the emerging-markets after Moody cut Turkey’s credit rating to junk also dampened sentiment.

Technical view

• Turning cautious

• Following a four straight wins of 20 pts, KLCI eased 1.5 pts in tandem with sluggish regional markets. Given a formation of Doji candle yesterday and external volatility, near term outlook has turned slightly cautious. However, any sharp fall will be well-cushioned in anticipation of potential 3Q16 window dressing activities and pre-Budget rally. Only a decisive break below key support of 1664 will trigger a pullback again towards 1645 levels. Upside resistances remain at 1678-1684.

Market Strategy

• Tracking overnight fall in Dow and uncertainty in emerging markets equities and currencies, Bursa Malaysia may encounter volatility ahead. However, any pullback will be cushioned by potential 3Q16 window dressing activities and pre-Budget rally coupled with ultra-low/negative interest rates environment and extended accommodative monetary policies from key global central banks.

• Stock on radar. We believe recent massive rally in ANNJOO (Take profit) price has triggered concern about price sustainability, compounded by the steeply overbought (hourly/daily/weekly) indicators. In addition, the gravestone doji star patterns in daily and weekly charts are bearish reversal signals. Major supports are near RM1.86-2.00 zones while resistance levels are RM2.18-2.40.

Source: Hong Leong Investment Bank Research - 27 Sep 2016