Market review

• After a 2-day rout of 1%, the MSCI Asia Pacific Index (MXAP) gained 0.8% to 141.98 as market viewed Hillary Clinton (more popular amid higher degree of certainty from her market-friendlier policies) having gotten the upper hand in the first U.S. presidential debate against Donald Trump. The positive news erased early losses due to pullback in oil prices as hopes of a deal to reduce production receded as well as uncertainties due to the Deutsche Bank woes and Turkey’s credit rating downgrade to junk status.

• Bucking a rebound in regional markets, KLCI lost 4.8 pts to record its 2nd straight decline, led by selldown in IHH (-12 sen to RM6.31), RHBBANK (-8 sen to RM4.70), GENTING (-12 sen to RM7.99), SIME (-11 sen to RM7.67) and MAYBANK (-10 sen to RM7.59). Market breadth was negative with 338 gainers as compared to 426 losers.

• After a 2-day loss of 298 pts, the Dow staged a 133-pt rebound to 18228, as US consumer confidence climbed to the highest since 2007 and bolstered optimism around the world’s largest economy, shrugging off a slide in oil prices as Iran said it’s unwilling to freeze output at current levels. Sentiment was also boosted by the perception that Hillary Clinton beat Donald Trump in their first debate (the 2nd of three debates will be held on 9 Oct).

Technical view

• Will turn negative if the 1664 support is violated decisively

• Following a 2-day loss and a close below the 200-d SMA again coupled with sliding oil prices, the underlying market tone has turned mildly negative. Nevertheless, we remain cautiously optimistic that any sharp fall will be well-cushioned in anticipation of potential 3Q16 window dressing activities and pre-Budget rally. Only a decisive fall below key support of 1664 will trigger a pullback again towards 1645 levels. Upside targets remain at 1678-1684.

Market Strategy

• Despite Dow staging a technical rebound overnight, Bursa Malaysia may encounter volatility ahead amid weakening oil prices. However, any pullback will be cushioned by potential 3Q16 window dressing activities and pre-Budget rally coupled with the readiness of BNM to support economic growth via easing.

• Portfolio (FIG4). We had closed our positon on ARMADA (1.4% loss) yesterday amid weakening technicals.

Source: Hong Leong Investment Bank Research - 28 Sep 2016