Market review

• Asia markets were mixed as a positive leads from Wall Street amid encouraging economic data was offset by investor concerns that key oil-producing nations won’t be able to seal a deal to cut global production. The MSCI Asia Pacific Index eased 0.5-pt or 0.35% to 135.67, paring a 2.4% drop (from as much as -4%) in Nov following a surprise Trump’s victory in the US election on 8 Nov. Sentiment was cautious ahead of the key events from U.S. jobs report (2 Dec) and Italy’s referendum (4 Dec).

• Tracking cautious regional markets and the final 15 minutes sell-off in selected index-linked stocks, KLCI slid 7.8 or 0.48% to 1619.1, recording a 53-pt or 3.2% slump in Nov. Market breadth was bearish with losers swarmed gainers 526 to 276, as investors remained cautious over the upcoming OPEC decision and continuous selldown in lower liners and penny stocks amid RM weakening bias and the ongoing lackluster 3Q16 reporting season.

• The Dow jumped as much as 104 pts to 19225 in the early session following strong ADP jobs report and rallies by energy shares after OPEC members reached an agreement to cut petroleum production. However, persistent profit taking pressures pared down the gains to a fractional 2 pts at 19123 to finish the month of Nov with a solid 5.4% surge.

Technical view

ST range bound within 1610-1640 levels

• Despite falling 7.8 pts yesterday, we remain cautiously optimistic of potential year-end window dressing activities to lift KLCI above immediate 1635 (lower downtrend channel) resistance in the near term. A decisive breakout above 1635 will open up further gains toward 1650-1667 levels. On the flip side, failure to recapture the 1635 target will witness potential renewed fall to 1600-1611 levels.

Market outlook

• KLCI may stage a technical rebound in the short term following the positive OPEC deal, which bodes well for oil exporting countries like Malaysia (oil-related revenue contributed ~15% to government revenue). Meanwhile, the traditional year-end window dressing activities are also likley to provide an interim supports at 1600-1611 levels despite concerns of RM weakness and the conclusion of a lackluter 3Q16 results season.

• Closed position. Yesterday, we had squared off our positions on RHBBANK (+4.7% gain) and PENTA (- 5.3% loss) after hitting our upside targets and downside supports.

Source: Hong Leong Investment Bank Research - 1 Dec 2016