Market review

• Most Asian markets fell as sentiment was dampened by accelerating ascent in the greenback in response to US strong economic data, raising the odds for an imminent Fed rate hike in Dec and triggered more capital flight from Asia. On the contrary, NIKKEI jumped 0.94%, as a weaker yen bolstered shares in export-oriented stocks.

• Tracking lower regional markets, KLCI snapped its 3-day winning streak with a 6.2 pts decline to 1624.2, as sentiment was dampened by falling RM (-0.35% d-d and -7% m-m to RM4.46/US$) and selloff in 10-year MGS bonds (+0.04% d-d and +0.75% m-m to 4.34%) despite BNM’s intervention. Market breadth was negative with 302 gainers as compared to 452 losers.

• Ahead of the Thanksgiving holiday yesterday, the Dow (+59 pts to 19084) ended at a record high for a 3rd straight day on 23 Nov, following strong economic data and positive optimism by the prospect of a unified U.S. government pursuing a pro-growth agenda through deregulation, tax reform, and fiscal stimulus. To recap, the Dow had surged 4.2% since Trump’s victory and 9.5% gain YTD.

Technical view

ST range bound within 1610-1640 levels

• On the back of renewed downward pressures in bonds and RM, KLCI again failed to surpass the immediate 1635 (lower downtrend channel) resistance yesterday. We reiterate that only a decisive breakout above 1635 will open up further gains toward 1650-1667 levels. On the flip side, a breach below 3M low of 1614 (14 Nov) will witness potential selldown to 1600 psychological support.

Market outlook

• 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. That said, we expect the traditional year-end window dressing activities to cushion severe fall below 1600 psychological support.

• Trading Buy-RHBBANK: Currently, the stock is trading at undemanding valuation of 8.2x FY17 P/E (20% lower than its peers 10.3x) and 0.87x P/B (26% discount against its peers’ 1.17x), respectively, supported by 2016-2018 earnings CAGR of 16%. We see imminent downtrend resistance breakout of RM4.75 soon to spearhead further rally towards RM4.87-5.18 levels. Key supports fall on RM4.50-4.58. Cut loss below RM4.48.

Source: Hong Leong Investment Bank Research - 25 Nov 2016