Market review

• Asian markets were mixed as investors waited for a speech by Fed’s Chair Janet Yellen to seek more clarity on Fed rates outlook (particularly on how Trump’s election affects Fed’s growth and inflation forecasts) while oil prices extended declines after the EIA said crude inventory climbed more-than-expected last week.

• Tracking uncertain regional markets and ahead of the Bersih rally on 19 Nov, KLCI eased 0.9 pts in a quiet trade after traded within a range of 8.9 pts between an intra-day high of 1629.8 and a low of 1620.9. The listless performance was also bogged down by a depreciating RM (vs US$) despite recent BNM’s intervention and persistent selloff of MGS 10-year bonds as yield spiked 0.12% to 4.33%.

• Despite an overbought market, the Dow continued to march higher (+36 pts to 18904) as investors parsed through economic data and Yellen’s testimony. Meanwhile, US 10-year bond yield spiked 0.08% to 2.30% and USD index jumped 0.56% to 101 after Yellen signaled the central bank is close to raising interest rates as a wave of data that pointed to U.S. economic strength.

Technical view

No impetus to stage a meaningful rebound

• Despite rebounding from 1616 (14 Nov low) to a high of 1637 on 16 Nov, KLCI was unable to hold the gains as the index dropped for a 2nd day to end 0.9-pt lower to 1626.8. We reiterate our view that 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

• We reiterate our view that 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 BNM’s measures to stem FX market volatility, expectations of year-end window dressing activities and speculation of Malaysia’s general elections being held in 2017.

Source: Hong Leong Investment Bank Research - 18 Nov 2016