Market review

• Taking cue from record breaking Dow, Asian shares traded in positive territory, driven by continuing post election exuberance by Trump. While traders initially reacted badly to the prospect of a Trump’s populist policy but the market views have altered by expectations that the proposed massive fiscal stimulus in US would eventually contribute positively to global economic growth.

• Tracking higher regional markets, KLCI extended its gain for a 3rd session, inching up 1.1 pts to 1630.4 after falling as much as 6.8 pts intraday, despite weakening RM (+0.53% to RM4.4445/US$) after BNM maintained OPR at 3%. Despite headline gain, market breadth was negative with 238 gainers as compared to 547 losers.

• Ahead of the Thanksgiving holiday (24 Nov), the Dow (+59 pts to 19084) ended at a record high for a 3rd straight day, following strong economic data from consumer sentiment, durable goods orders and Markit manufacturing index. Meanwhile, the release of Nov FOMC minutes that supported the consensus view of a Dec rate hike failed to dampen sentiment amid positive optimism by the prospect of a unified U.S. government pursuing a pro-growth agenda through deregulation, tax reform, and fiscal stimulus.

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 1635 (lower downtrend channel) 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 a weakening Ringgit.

• Technical view: Dow mini (separate report): The continuous positive optimism of Trump-led rally following his business friendly and fiscal stimulus policies are expected to support the bullish undertone in the near term despite an overbought market. Key resistances are 19200-19456 whilst supports fall on 18800-18932 zones

Source: Hong Leong Investment Bank Research - 24 Nov 2016