Market review

• The MSCI ASIA Pac (MXAP) index rose for the 3rd session to end 1.5 pts higher at 138.59, thanks to the overnight Dow’s fresh record close and expectations of the ECB continuing QE for another 6 months coupled with a better than-expected China’s Nov trade data.

• Tracking bullish regional markets and RM gradual appreciation, KLCI rallied 11.3 pts to 1643.75, led by last minutes window dressing supports on AMMB (+27 sen to RM4.45), AXIATA (+22 sen to RM4.64), ASTRO (+13 sen to RM2.78), SKPETRO (+7 sen to RM1.55) and YTL (+5 sen to RM1.58).

• The Dow closed at fresh new record as the index advanced 65 pts to 19615, after setting an all-time high of 19,665, following ECB’s extension on its asset-purchase program from April-Dec (ie total €540 for 9 months @ €60bn/month) against market expectations of six months (ie total €480 for 6 months@ €80bn/month) and pledged to leave the door open for an extension of its economic stimulus program “if necessary.”

Technical view

Upside bias to retest 1650-1665 levels after breaking 1640 hurdle

• Riding on Dow’s multi-sessions rally, stabilizing Ringgit, tapering MGS selloff (10-year MGS yield tumbled to 4.09% yesterday from a high of 4.46% on 29 Nov) and potential year-end window dressing activities, KLCI has finally broken the immediate hurdle of 1640. Fueled by golden cross in 10-d/20-d SMA and strengthening technical indicators, the index is likely to retest the next upside targets of 1650 (61.8% FR) and 1665 levels (downtrend line and 200-d SMA). Key supports are now situated at 1638 (30-d SMA), 1628 (10-d SMA) and 1612 (24 June low) levels.

Market outlook

• While investors will likely stay risk-off (reflected by the thin volume) until further clarity emerges, local market is expected to be boosted by the overnight Dow’s rally and longer-than-expected ECB’s QE extensions.

• Overall, investors may attempt to walk past the recent 3Q16 weak earnings cycle and Trump policy jitters, and focus on positives arising from improving oil prices post OPEC decision (i.e. fiscal position & current account). We expect KLCI to trend higher towards 1640-1666 by end Dec, reinforced by strong tendency of a year-end window dressing rally, tapering MGS bond selloff and stabilizing RM/US$ following recent BNM’s curbs against NDFs.

• Closed position. We had closed our position on TDM (2.2% gain) yesterday amid expiry.

Source: Hong Leong Investment Bank Research - 9 Dec 2016