Market review

• After the recent FOMC meeting, which the Fed has concluded with an increase in interest rates by 0.25%, regional stock markets trended negatively and profit taking further intensified - MXAP ASIA Pac (MXAP) slipped 2.71 pts or 1.96% to 135.70 pts for the week. Also, on a wow basis, Shanghai Composite Index and Hang Seng Index have fallen by 3.40% and 3.25% to 3,122.98 pts and 22,020.75 pts respectively.

• The FBM KLCI traded narrowly mixed before inching higher by 0.80 pts to 1,637.79 pts on a last minute buying interest last Friday. Still, on a wow basis, the FBM KLCI declined 3.63 pts or 0.2%, in tandem with most of the regional stock markets after the rate-hike move by the Fed. Also, Ringgit was weaker by 1.28% against the greenback for the week.

• Meanwhile, buying support fizzled on Wall Street and the Dow was unable to surpass the 20,000 level as selling pressure emerged among financial stocks. However, the Dow remained intact above the 10-d SMA, closing higher by 86.56 pts or 0.44% to 19,843.41 pts on weekly basis. Also, the Dollar index (DXY) soared 1.38% wow, but gold price plummeted 2.35% wow after the rate-hike.

Technical view

Mild technical rebound if KLCI is well supported at 1,630

• Both the weekly and daily indicators (MACD and RSI) are pointing downwards, suggesting that the short-term momentum is still weakening. However, as the FBM KLCI is being supported around the 1,630 level, we may see some minor technical rebound towards the 1,640-1,644 levels. Nevertheless, if the key index closes below the 1,630 level, further support will be located around the 1,620 and 1,600 levels.

Market outlook

• With the Dollar index surging to 14-year high position, sentiments across the U.S. stock markets are likely to trend on a positive tone. Hence, the Dow may be expected to trade with a positive bias over the near term above the 10-d SMA, ranging between the 19,600-20,000 levels this week. Meanwhile, after last week’s knee-jerk reaction on the rate-hike move, we expect stocks on Bursa Malaysia to also stage a short term rebound as selldown last week could be overdone.

• Closed position. We had closed our position on KIMLUN on 16 Dec after hitting our upside target at R1.

Source: Hong Leong Investment Bank Research - 19 Dec 2016