Market review

• The MSCI Asia Pacific Index (MXAP) plunged 3.2% (the most since June’s Brexit vote) or 4.42 pts to 133.44 with short-term volatility spiking as Trump stunned traders by defeating Clinton to become the 45th president of the U.S. as investors dumped global risk securities. However, the early losses were narrowed in the evening after Trump delivered a slightly soothed victory speech.

• Tracking wild swings in regional markets, KLCI lost 16.2 pts after traded within a range of 25 pts between an intra day high of 1665.4 and a low of 1640.3, led by losses in AXIATA (-14 sen to RM4.70), MAYBANK (-8 sen to RM7.87), GENTING (-21 sen to RM7.80), SIME (-11sen to RM8.20) and IOICORP (-9 sen to RM4.36).

• The Dow surged 256 pts or 1.4% to 18590 after hitting intraday high of 18650 (a tad below all-time high of 18668) as speculation Trump will pursue business-friendly policies offset some of the broader uncertainty surrounding his ascent. Overall, Trump’s acceptance speech mentioning Keynesian-style spending and sounding more conciliatory than during his campaign appeared to retune investors’ expectations from an early knee-jerk selloff in stocks and a rally in haven assets.

Technical view

Poised to retest 1657-1667 levels in the near term

• Despite fierce selloff in the regional markets after Trump’s win in the early session, KLCI’s decline was well - cushioned at 1640 levels. Stronger supports are seen at 1612-1622 territory. Riding on from overnight Dow’s 1.4% rally, KLCI should stage a relief rally to test 1657-1667 levels. Only a decisive breakout above downtrend line (1670) will lift KLCI from ongoing range bound pattern to gain further ground at 1684-1700 zones.

Market outlook

• Taking cue from overnight Dow’s 1.4% rally, KLCI is likely to advance further to test immediate upside targets at 1657-1667 territory, followed by stiffer resistance near 1684 levels. While calmness has returned in the overnight markets following a more conciliatory speech by Trump, KLCI is likely to undergo a period of volatility while monitoring the seriousness of Trump to follow through his extreme policies.

• Trading Buy (MISC). We see limited downside following the recent selldown from a weak 3Q16 results as current P/B of 0.92x is close to its 10-year trough of 0.88x, supported by oversold slow stochastic indicator and tapering selling pressures. A decisive breakout above RM7.27 will spur prices higher to revisit RM 7.37-7.58 levels before testing LT objective at RM7.75. Key supports are RM7.00-7.10 levels. Cut loss at RM6.99

Source: Hong Leong Investment Bank Research - 10 Nov 2016