Market review

• The MSCI Asia Pacific Index (MXAP) eased 0.2-pt to 137.95 as Fed has reinforced its confidence of a Dec rate hike against a loose monetary policy by global central banks. Meanwhile, sentiment was also jolted by mounting concern over the tightening U.S. presidential race (8 Nov) that is too close to call after Clinton has seen her odds of a victory falter amid FBI’s probe into an unauthorized e mail server.

• Tracking lower regional markets, KLCI slipped 11.5 pts to finish at day low of 1648.1 after traded as high as 1661.7 in the early session. To recap, KLCI had recorded a 3-day consecutive loss of 24.3 pts and tumbled 31 pts since hitting a monthly high of 1679.1 on 24 Oct.

• The Dow ended lower (-29 pts to 17930) for a 6th straight session, as profits from AIA and Facebook disappointed market. Besides, Fed rate hike jitters and the US election angst coupled with falling oil prices continued to cloud investors’ attention, ignoring consensus view that earnings recession will end in 3Q16 (after recording a 5th straight decline) as earnings is likely to grow 1.6% yoy.

Technical view

Increasingly bearish after falling multiple key SMAs and Fibonacci retracement (FR) supports

• Following the multiple breakdowns below key SMAs and FR supports, we are turning increasingly bearish on KLCI in the near term. Unless KLCI can swiftly reclaim convincingly above the support-turned-resistance now at 1657 (38.2% FR) and 1667 (200-d SMA) levels, there is a tendency that the index could drift lower in the next few days. A fall below 1645 (20 Sep low) will witness further selldown towards 1639 (23.6% FR) and 1622 (1 June low) levels.

Market outlook

• On the back of Nov reporting season and extended oil price consolidation ahead of the OPEC meeting (30 Nov), KLCI may continue to drift lower towards 1639-1645 today, ahead of the tightening US election as investors worldwide are boosting hedges against the possibility of a Donald Trump upset, given Trump's controversial and protectionism policy.

• Trading idea. Today, we recommend DESTINI, one of the leading maintenance, repair, overhaul (MRO) service providers in Malaysia focusing primarily on aviation, marine, oil & gas and land transport sectors. Following its recent bullish flag breakout, share price is expected to test RM0.86-0.95 next before heading our LT objective at RM0.995. Cut loss at RM0.79

Source: Hong Leong Investment Bank Research - 4 Nov 2016