Market review

• The MSCI Asia Pacific Index (MXAP) ended flat by -0.06 pt (wow -1 pt or 0.7% to 138.72) as investors parsed a deluge of economic data and corporate earnings. Sentiment was cautious following spiking yields amid continuing the bonds sell-off sparked by better-than expected UK GDP data and comments from the BOJ Governor that it may not increase its QE program in spite of muted global economic outlook.

• Mirroring lackluster regional markets, KLCI broke its 3-day losing streak by inching up 1.2 pts to end the week 0.29-pt higher at 1670.3, after traded within a range of 4.8 pts between an intra-day high of 1671.7 and a low of 1667. Trading volume slipped to 1.48bn shares worth RM1.66bn as compared to Thursday’s 1.49bn shares worth RM1.61bn. Market breadth was negative with 335 gainers as compared to 428 losers.

• The Dow was traded within a volatile 18275 (+105 ots) and 18094 (-75 pts) levels before ending 8 pts lower at 18161 after the release of a strong US 3Q16 GDP and a surprise FBI’s reopening an investigation into Hillary Clinton’s use of an unauthorized e-mail server, adding a new dose of political uncertainty into the market. Sentiment was also dampened by ongoing 3Q16 US reporting season and extended downward consolidation in oil prices ahead of the OPEC meeting (30 Nov).

Technical view

Extended consolidation for a while

• We reiterate KLCI to trap in sideways consolidation mode for a while after falling below the support-turned resistance 1675 (19 July high) levels. Lower supports are now situated at 1666 (200-d SMA), 1657 (38.2% FR) and 1645 (20 Sep low). Only a sustainable close above 1675 will spur index to retest 1684 (61.8% FR), 1692 (8 Sep high) and 1700 psychological barriers.

Market outlook

• In the wake of extended oil price consolidation, KLCI may continue to engage in range bound pattern for a while as investors await more clarity from 1-2 Nov FOMC meeting, US Oct payroll data (4 Nov) and the crucial US presidential election (8 Nov). Having said that, any downside risk will be cushioned by positive expectations of PM’s visit to China this week to meet with President Xi and Premier Li as well as captains of the industry.

• Trading Buy idea (IKHMAS). The stock appears to be at the tail end of its LT downward consolidation pattern to launch a downtrend line breakout soon amid the formation of hammer candlestick as well as the emergence of new major shareholder, Lembaga Tabung Haji. A decisive breach above RM0.665 is likely to spur prices higher towards the RM0.70-0.77 levels. Key supports are RM0.61-0.62. Cut loss at RM0.595.

Source: Hong Leong Investment Bank Research - 31 Oct 2016