Market review

• Most Asian markets ended marginally higher after Democrat Hillary Clinton (viewed as market friendlier) was widely seen as the winner of the 2nd presidential debate. Meanwhile, the SHCOMP soared after a weeklong holiday, on hopes that Beijing’s latest move to cool an overheated housing sector could renew appetite for a lackluster stock market.

• After a 12.8-pt weekly gain, KLCI ended flat yesterday in a listless trade after traded within a range of 6.2 pts between an intra-day high of 1669.5 and a low of 1663.3. Trading volume decreased to 1.29bn shares worth RM1.37bn as compared to last Friday’s 1.35bn shares worth RM1.57bn. Market breadth was negative with 324 gainers as compared to 460 losers.

• After chalking up a 68-pt weekly loss, the Dow jumped as much as 159 pts intraday following a rally in energy and raw-materials producers amid surging oil prices after President Vladimir Putin said his country is willing to consider freezing or even cutting oil output in cooperation with OPEC. Sentiment was also boosted by higher probability that Hillary Clinton will emerge as the winnner on 8 Nov election after the 2nd presidential debate. However, the early gains were reduced to 89 pts as investors braced for the start of 3Q16 results season tonight.

Technical view

Must break above 1671 zones decisively for a sustainable rally

• KLCI may trend sideways but with an upward bias this week to test our weekly envisaged 1671-1675 resistances as the index continue to trade above the support trendline from 1612 levels. However, we reiterate that the index must stage a strong breakout above these levels for a resumption of uptrend toward 1700 levels. Failure to do so will continue to witness KLCI to trap in range bound consolidation within 1645-1675 territory.

Market outlook

• In the wake of overnight rally in Dow and oil prices, KLCI may continue to trend sideways with an upward bias today, supported by positive expectations of Budget 2017 and the readiness of BNM to support economic growth via easing.

• Trading idea. We recommend TEKSENG today as severe downside risks are ebbing, implying potential rebound amid undemanding FY17 P/E of 8.2x, steeply oversold levels, tapering selling pressures and with the uptick of the MACD histogram. A decisive breakout above RM1.00 will lift prices towards RM1.06-1.13 zones. Supports are RM0.895-0.95. Cut loss at RM0.89

Source: Hong Leong Investment Bank Research - 11 Oct 2016