Market review

• Selling pressures moderated after Trump’s surprise victory selloff amid speculation that Trump’s promise to bolster U.S. infrastructure spending will fuel growth and spur inflation in the world’s biggest economy, sparking a faster pace of U.S. interest rates hike and a stronger dollar coupled with accelerating capital flight from emerging markets.

• Tracking steadier RM and mild recovery in oil prices, KLCI staged a 13.9 pts relief rally after tumbling 36 pts since Trump’s unexpected election win, led by bargain hunting on SIME (+24 sen to RM8.09), ASTRO (+7 sen to RM2.70), AXIATA (+9 sen to RM4.63), AMMB (+7 sen to RM3.97) and GENM (+8 sen to RM4.57). However, trading volume remained thin with 1.34bn shares transacted as compared to 1.7bn shares last week. Meanwhile, tracking global rout in bond markets, Malaysia 10-yr MGS yield spiked 0.10% to 4.23%, rallying 0.61% in the last six sessions.

• The Dow rose for the 7th straight sessions as it climbed 54 pts higher to another record close of 18923 amid expectations that President-elect Trump will increase government spending to boost economic growth. However, sentiment is turning cautious as markets attempt to second-guess the policies that might eventually come out when Trump will be sworn in as US president on 20 Jan 2017.

Technical view

A timely rebound but volatility prevails

• We are relieved after KLCI staged a timely technical rebound from 14 Nov low of 1616 to close at 1630 yesterday. However, for a resumption of uptrend, KLCI must swiftly reclaim above the downtrend channel support near 1640 zones. Should the aforesaid fail to materialize, KLCI is likely to resume its downtrend towards 1600-1612 levels.

Market outlook

• Despite yesterday’s timely rebound, KLCI’s near term outlook remains challenging on the back of uncertainties in the equities, bonds and currencies markets coupled with the ongoing 3Q16 reporting season and the upcoming Bersih 5 rally (scheduled on 19 Nov). That said, the market should gradually recover towards the year end, buoyed by window dressing and expectations of Malaysia’s general elections being held in 2017.

• Trading Buy-TNLOGIS (HLIB Institutional TP at RM2.07 or 24.7% upside). After slipping 5.7% from 10- year high at RM1.74, we expect share price to gain buying momentum in the near term after a brief consolidation to march toward RM1.76-1.96 zones in the mid to long term. Key supports are RM1.60-1.62. Cut loss at RM1.56

Source: Hong Leong Investment Bank Research - 16 Nov 2016