Market review

• The MSCI Asia Pacific Index (MXAP) ended 0.52-pt higher to 139.56, boosted by stronger-than-expected twin PMI surveys in China and the BOJ maintaining its record stimulus program after its monetary policy meeting. However, overall sentiment remained muted amid 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 saga.

• In a quiet trade, KLCI eased 1.5 pts to 1670.9 after traded within a tight range of 3 pts between an intra-day high of 1673.9 and a low of 1672.6. Trading volume slipped 10% to 1.36bn shares valued at RM1.67bn while market breadth was bearish negative with 332 gainers against 432 losers.

• The Dow tumbled as much as was 202 pts before paring its losses to 105 pts as confidence was jolted by weak results from Pfizer and falling Apple share prices due to poorer-than-expected demand in China. Sentiment was also dampened by tightening race between Clinton and Trump ahead of the US presidential election on 8 Nov.

Technical view

Rangebound consolidation to prevail

• We reiterate our view that KLCI will 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 boost 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

• In the wake of Nov reporting season and extended oil price consolidation ahead of the OPEC meeting (30 Nov), KLCI may continue to be trapped in range bound pattern as investors await more clarity from the 2 Nov FOMC meeting, US Oct payroll data (4 Nov) and the crucial US presidential election (8 Nov).

• Having said that, we expect any drop will be cushioned by positive conclusions 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 positions on VS (5.9% gain), TRC (3.5%) and MNRB (2.6% gain) due to expiry. We also cut our position on DNEX (1.8% loss) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 2 Nov 2016