Market review

• Following a 1.4% plunge last week, the MSCI Asia Pacific Index (MXAP) rebounded 0.65-pt or 0.48% to 137.37 after the FBI reaffirmed its view that Hillary Clinton’s handling of her e-mails as secretary of state was not a crime. Riskier assets climbed before the U.S. election as Clinton is seen by investors as the more predictable candidate compared to Trump‘s more controversial and protectionism policy.

• Tracking recovery in regional markets, KLCI staged a 2.4- pt technical rebound after diving 22 pts last week. Despite the gains, sentiment remained cautious as trading volume was thin with 1.48bn shares transacted as compared to last Friday’s 1.32bn shares. Market breadth was negative with 366 gainers against 388 losers.

• The Dow staged a superb 371 pts or 2.1% rally to 18260, offsetting a 273-pt loss last week after the FBI cleared presidential candidate Clinton of potential criminal charges in its private email server probe. Meanwhile, WTI also staged a 1.9% relief rally after tumbling 9.5% wow after OPEC said Russia (the world’s biggest producer), is “on board” with an agreement to limit crude production.

Technical view

Upside bias following a bullish engulfing candle yesterday and overnight Dow’s 2% rally

• The bullish engulfing pattern could signal further relief rally today towards 1657 (38.2% FR) and 1667 (200-d SMA) levels, following Dow’s overnight 2% rebound. For now, there is upside bias for the index unless KLCI falls below 1643 (7 Nov low) again.

Market outlook

• The overnight 2.1% surge in Dow is likely to boost Bursa Malaysia today as Clinton widened her lead ahead of the crucial US presidential election tonight (preliminary results to be known after 12pm on 9 Nov). Should the outcome favour Clinton, we may see KLCI to stage further relief rally to retest 1684-1700 territory. On the contrary, a Trump’s upset may witness frenzy selloff towards 1600- 1622 zones in the near term.

• That said, we caution investors for an overzealous optimism of Clinton’s victory as a similar pre-Brexit rally turned out to be a disastrous outing for global equities in the aftermath of an unexpected decision in favor of Brexit.

• Trading buy: We recommend DRBHCOM today amid undemanding P/B of 0.37x (35% lower than its 10-year historical average 0.57x) and positive newsflow on Proton’s strategic partner coupled with bottoming up technical. Key resistances are RM1.27-1.44 while supports fall on RM1.16-1.19. Cut loss at RM1.15.

Source: Hong Leong Investment Bank Research - 8 Nov 2016