Market review

• After falling 1% last week, the MSCI Asia Pacific Index (MXAP) rebounded for a 2nd straight session (+0.62% or 0.83-pt to 135.23), taking cue from all-time high close in Dow and a recovery in oil prices. Meanwhile, the NIKKEI 225 inched up 0.3% after losing 0.31% in the early trades as the damage from a magnitude 7.4 earthquake off the coast of Fukushima appeared moderate.

• Tracking higher regional markets, KLCI found some stability above 3M low of 1614 (14 Nov low) as the index gained for a 2nd straight session (+2 pts to 1629.3), supported by recovery in oil prices and declining 10-year MGS yield coupled with bargain hunting in GENTING (+21 sen to RM8.16), RHBBANK (+12 sen to RM4.70), BAT (+106 sen to RM45.00), YTL (+3 sen to RM1.53) and PETGAS (+30 sen to RM21.50). Despite higher close, market breadth was negative with 344 gainers against 410 losers as sentiment was dampened by sliding RM (vs US$).

• Overnight, the Dow (+67 pts to 19024) ended at a record high for a 2nd straight day. To recap, the Dow had rallied 690 pts since Trump’s unexpected victory on 8 Nov presidential election as investors’ optimism strengthened as Trump’s stimulative and business friendly policies are seen as supportive for economic growth.

Technical view

Sideways with an upward bias

• KLCI’s selling spree has tapered off and the index is attempting to build a base above recent 3M low of 1614 (14 Nov low) despite easing Ringgit (vs US$), as technical are gradually on the mend. However, we reiterate that only a strong close above 1631 (10-d SMA) 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

• We see upside bias for KLCI in anticipation of year-end window dressing activities. That said, near term sentiment will remain cautious as investors focus on the ongoing challenging 3Q16 reporting season, short and long term implications of a Trump presidency and Ringgit volatility (- 3% YTD mainly driven by unwinding of US$ carry-trades).

• Closed position: We had squared off our position on AJIYA (8.4% loss) after hitting stop loss levels yesterday

Source: Hong Leong Investment Bank Research - 23 Nov 2016