Market review

• Most Asian markets fell as the MSCI Asia Pacific Index (MXAP) slipped 0.83-pt or 0.61% to 134 (-1.35 pts or 1% wow) after Janet Yellen signaled the Fed is close to raising interest rates. On the contrary, the Nikkei grew 0.59% to 11-month high at 17967 (+3.4% wow) on the back of a relatively weaker yen/US$ (tumbled 4% wow).

• Tracking lower regional markets and ahead of the Bersih 5 rally on 19 Nov, KLCI eased 3 pts to 1623.8 (-10.4 pts wow). The subdued performance was also dampened by the double whammy of depreciating RM against US$ (weakened 1.8% wow) and MGS 10-year yield (spiked 0.46% wow), despite recent BNM’s intervention and higher oil prices (+4.7% wow to US$46.75).

• The Dow shed 36 pts to 18868 as investors took profits on Trump’s election rally (+572 pts since 8 Nov presidential election) and waited for clarity on the next administration's policies on 20 Jan 17. Despite facing profit taking pressures, the Dow still inched up 0.1% wow amid speculation that Donald Trump’s stimulative and business friendly policies will spark brisker economic growth, inflation and higher interest rates. Meanwhile, the US 10-year bond yield spiked 0.05% to 2.35% (+0.20% wow) and the USD index the dollar index gained 0.32% to 13-year high at 101.21 (+2.2% wow) 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 respite yet

• Despite rebounding from 1614 (14 Nov low) to a high of 1637 on 16 Nov, KLCI was unable to hold the gains as the index dropped for a 3rd session to 1623.8. Given the fading daily technical indicators, it could suggest the local bourse will probably be under pressure again this week, leaning towards lower support at 1600-1612 levels. On the flip side, only a swift climb above the downtrend channel support near 1640 zones will open up further gains toward 1650-1667 zones.

Market outlook

• On top of assessing ongoing challenging 3Q16 reporting season, KLCI’s near term outlook remains rocky as investors grapple with the short and long term implications of a Trump presidency, triggering a spike in volatility across asset markets (ie. equities, bonds, currencies etc). That said, the market should gradually recover towards the year end, buoyed by BNM’s measures to stem FX market volatility and expectations of year-end window dressing activities.

• Closed position: Last Friday, we took profit on JTIASA (+5.1% gain) amid expiry and cut loss on DESTINI (-6% loss).

Source: Hong Leong Investment Bank Research - 21 Nov 2016