Market review

• The MSCI Asia Pacific Index (MXAP) ended flat by +0.3-pt to 139.0 (-0.48% mom) as sentiment was dampened by sliding oil prices (due to increased doubts that major oil producing nations will cut production) and uncertainty ahead of the U.S. presidential election following FBI’s new probe related to Clinton’s email use. Meanwhile, a better than-expected US 3Q16 GDP data enhanced prospects of a Fed rate hike. Investors are also weighing the finer points of the Bank of Japan’s new policy framework as a two-day meeting comes to an end today.

• In a muted trade, KLCI extended its 2nd consecutive gain by inching up 2.2 pts to 1672.5 (ending Oct with a 20-pt or 1.2% rally) after traded within a range of 12.1 pts between an intra-day high of 1676.8 and a low of 1664.7. Trading volume slipped to 1.45bn shares as compared to last Friday’s 1.48bn shares while market breadth was bearish negative with 290 gainers against 521 losers.

• The Dow was traded within a tight range within 18193 (+32 pts) and 18130 (-31 pts) levels before ending 19 pts lower at 18142 (-166 pts or -0.9% mom). Overall, stronger-than-expected consumer spending data underlined the strength of US economy, while sliding oil prices and election uncertainty (following FBI’s reopened its probe into Clinton’s email saga) weighed on the minds of investors.

Technical view

Rangebound consolidation to prevail

• We reiterate KLCI to be trapped in range bound consolidation mode for a while in the absence of major catalyst unless staging a decisive breakout above the support-turned-resistance 1675 (19 July high) levels. Only a sustainable close above 1675 will spur index to retest 1684 (61.8% FR), 1692 (8 Sep high) and 1700 psychological barriers. Lower supports are now situated at 1666 (200-d SMA), 1657 (38.2% FR) and 1645 (20 Sep low).

Market outlook

• Entering into the Nov reporting season and extended oil price consolidation ahead of the OPEC meeting (30 Nov), KLCI may continue to engage in range bound pattern in the short term 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, we expect KLCI 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.

• Closed positions. Yesterday, we had closed our position on PRESBHD (5.5% gain), SENDAI (8.1% gain) and KUB (6% loss).

Source: Hong Leong Investment Bank Research - 1 Nov 2016