Market review

• The MSCI Asia Pacific Index (MXAP) tumbled 1.42 pts or 1.02% to 138.14 in a volatile trade amid political turmoil in South Korea and growing angst over U.S. presidential election on 8 Nov as some polls are putting Trump ahead of Clinton for the 1st time, given Trump's controversial and protectionism policy. Meanwhile, a stronger yen also weighed on Tokyo shares as traders piled into haven assets such as bonds, gold and the yen.

• Tracking sluggish regional markets, KLCI slid 11.3 pts to 1659.6 after traded within a range of 13.3 pts between an intra-day high of 1669.8 and a low of 1656.5, triggered by selldown in AXIATA (-13 sen to RM4.94), CIMB (-10 sen to RM4.88), GENM (-10 sen to RM4.70), PBBANK (-14 sen to RM19.86) and MAYBANK (-5 sen to RM7.51). Market breadth was bearish with 206 gainers vs 658 losers.

• The Dow ended lower (-77 pts to 17959) for a 5th straight session, as the Fed signaled it could hike interest rates on 13-14 Dec FOMC meeting and the uncertainty in the U.S. election coupled with sinking oil prices following soaring U.S. crude stockpiles. While markets boosted wagers on a Dec hike to 78% from 68% before the announcement, attention is shifted to the potential implications of next week’s vote as sentiment was roiled by tightening race between Clinton and Trump.

Technical view

Turning bearish after falling <200-d SMA

• Following the selldown below 200-d SMA (at 1667) yesterday, sentiment has turned increasingly bearish. Unless KLCI can swiftly reclaim convincingly above the support-turned-resistance at 1667 and 1675 (19 Jul high) levels, there is a tendency that the index could drift lower in the next few days. Lower supports are situated at 1650, 1645 (20 Sep low) and 1639 (23.6% FR).

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 drift lower towards 1639-1650 territory, ahead of the crucial US presidential election.

• Closed position. Yesterday, we closed our position on WCT (12.5% gain) at immediate upside target of R2 (RM1.89) after share prices hit intraday high at RM1.92

Source: Hong Leong Investment Bank Research - 3 Nov 2016