Market review

• Led by a 1.3% loss in Nikkei 225 amid a stronger Yen/USD (detrimental to exporters), weak oil prices and jitters about the health of the nation’s banks, the MSCI Asia Pacific Index declined 0.79% to 140.86, surrendering the 0.8% gain on 27 Sep, following Hillary Clinton (more popular amid higher degree of certainty from her market-friendlier policies) victory over Trump in the first U.S. presidential debate.

• Tracking lackluster regional markets and sluggish oil prices, KLCI ended only 0.24-pt higher after jumping as much as 6.6 pts intraday.

• The Dow extended its gains for a 2nd session amid a rally in energy stocks after WTI rallied 4.5% overnight due to an OPEC agreement to limit crude output, the first time in 8 years. Meanwhile, Yellen's testimony tonight will be keenly watched for clues on the timing of the next interest rate hike, a week after the central bank held rates steady but suggested that a move could come later this year.

Technical view

• Sideways with an upside bias

• Following a weak closing yesterday and trading below the 200-d SMA again, the underlying market tone has turned mildly negative. Nevertheless, we remain cautiously optimistic that any fall will be well-cushioned in anticipation of potential 3Q16 window dressing activities and pre-Budget rally coupled overnight strong rally in oil prices. Only a decisive fall below key support trendline of 1657 will trigger a pullback again towards 1645 levels. Upside targets remain at 1678-1684.

Market Strategy

• Given the extended rally in Dow and overnight strong rebound in oil prices, KLCI may witness a positive performance today, helped by potential 3Q16 window dressing activities and pre-Budget rally coupled with the readiness of BNM to support economic growth via easing.

• Stock on radar. We maintain our short to medium term positive view on JOHOTIN (trading idea) as the support trendline near RM0.785 is still in force. Moreover, JOHOTIN’s FY16 P/E of 10x remains undemanding, which is 44% below peers’ average of 17.9x. Key upside targets are RM0.89-1.00 while supports fall on RM0.785-0.815. Cut loss at RM0.78.

Source: Hong Leong Investment Bank Research - 29 Sep 2016