Market review

• The MSCI Asia Pacific Index (MXAP) ended 0.8-pt lower to 139.76 as Samsung Electronics Co. dragged down technology shares, overshadowing an oil-driven rally in energy companies. Samsung tumbled 8% in Seoul after the company asked retail partners to stop sales and exchanges of its Galaxy Note 7 smartphones, the latest blow for South Korea’s largest company in the midst of a crisis over exploding batteries.

• Bucking weak regional markets, KLCI was up 3.4 pts as sentiment was boosted by soaring oil prices. Trading and value increased 21% and 37% to 1.56bn shares valued at RM1.89bn while market breadth was positive with 440 gainers as compared to 324 losers.

• The Dow slid 200 pts overnight to 18129 amid sluggish earnings report by Alcoa and rising expectations of a Dec Fed rate hike as he odds are now around 68% against 59% a week ago. As a result, treasuries sank and yield rallied 0.04% to 1.76% as investors demanded the highest yields since June to compensate for signs that consumer prices may be on the rise.

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 continues to trade above the 100-d and 200- d SMAs as well as 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 witness KLCI to trap in range bound consolidation within 1645-1675 territory.

Market outlook

• On the back of an overnight sharp decline in Dow and oil prices coupled with strengthening US$, KLCI may witness some selling pressure today. However, any panic selldown will still be cushioned by positive expectations of Budget 2017 and the readiness of BNM to support economic growth via easing.

Source: Hong Leong Investment Bank Research - 12 Oct 2016