Market review

• After falling 1% last week, the MSCI Asia Pacific Index (MXAP) rebounded 0.4-pt or 0.3% to 134.4, driven by a recovery in oil prices as the Dollar index took a breather. The market seems to have fully priced-in the 'Trump effect' and an impending December rate hike.

• Despite easing RM (vs US$), KLCI found some stability above 3M low of 1614 (14 Nov low) as the index gained 3.5 pts to 1627.3, supported by bargain hunting in HLFG (+40 sen to RM15.36), GENM (+10 sen to RM4.68), ASTRO (+5 sen to RM2.71), GENTING (+11 sen to RM7.95) and MAYBANK (+10 sen to RM7.78).

• Renewed optimism of Trump’s stimulative and business friendly policy and a strong rebound in WTI oil prices saw the Dow jumped 88 pts to 18956, surpassing previous closing and intraday records of 18,923.06 and 18,934.05, respectively.

Technical view

Building base at 1600-1612 zones

• After hitting a 3M low of 1614 (14 Nov low), KLCI is attempting to build a base near 1600-1612 territory despite easing Ringgit (vs US$). We reiterate that only a strong close above 1630 and 1640 zones will open up further gains toward 1650-1667 levels.

• On the flip side, a breach below 1614 will witness potential selldown to 1600 psychological support.

Market outlook

• On top of assessing ongoing challenging 3Q16 reporting season, KLCI’s near term outlook remains choppy as investors will continue to grapple with the short and long term implications of a Trump presidency and Ringgit volatility.

• 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.

• Technical view: WTI futures (separate report): Following the recent 14.5% relief rally from US$42.2 to close at $48.3 overnight, WTI is expected to trend higher ahead of the OPEC meeting amid continued speculation that a supply-cut deal can be reached among OPEC members, supported by bullish indicators. Key supports are $44.5- 47.6 whilst resistances are situated at $50-52.

Source: Hong Leong Investment Bank Research - 22 Nov 2016