Market review

• Last Friday, the MSCI Asia Pacific Index (MXAP) ended flat with a 0.02-pt drop to 140.6 (+0.62% wow), as investors were sidelined ahead of the key US jobs data and a brief plunge pounds (vs US$) to a 31-year low following an increasingly heated discussions over the “Brexit”. WoW, MXAP gained 0.62%, mainly driven by the recovery in energy stocks as oil prices rebounded coupled with optimism of US strengthening economy to offset the angst of a potential Fed rate hike in Dec.

• Tracking cautious regional markets, KLCI eased 1.4 pts after dropping as much as 5 pts as sentiment was lifted by firmer oil prices. WoW, the index jumped 12.8 pts (recouped mostly the 18.4 pts loss in the week ended 30 Sep) amid retreating fears of Deutsche Bank crisis and firming oil prices, offsetting fears of imminent US Fed rate hike due to better economic data and hawkish Fed officials remarks

• Ahead of the US 3Q16 reporting season this week, the Dow tumbled as much as 119 pts amid a slower-than expected US jobs data and profit taking in oil prices. Nevertheless, the losses were pared to 28 pts as the weak data and the imminent US presidential election have negated the possibility of a rate hike as early as Nov FOMC meeting. Sentiment was also helped by optimism of strengthening US economy will eventually allevi ate the angst of looming Fed rate hike in Dec.

Technical view

Must break above 1657-1671 zones decisively for a resumption of rally

• KLCI may trend sideways but with an upward bias this week as the index continue to trade above the support trendline from 1612 levels. However, we reiterate our view that KLCI must fend off the congested 1657 (38.2% FR) and 1671 (50% FR) levels decisively to gather the upward momentum.

• Weekly supports are situated at 1645-1657 while resistances are 1671-1684 (61.8% FR).

Market outlook

• In the wake of firm oil prices above US$50/barrel and potential rebound in RM (vs US$) following a softer-than expected US jobs, KLCI may continue to trend sideways with an upward bias this week, supported by positive expectations of Budget 2017 and the readiness of BNM to support economic growth via easing

Source: Hong Leong Investment Bank Research - 10 Oct 2016