Market review

• After the Dow failed to break the 20,000 psychological level, regional key indices trended lower, accompanied by thinner trading volumes across the region. The Hang Seng Index and Nikkei 225 declined 0.8% and 0.1% respectively, while the Shanghai Composite Index traded flat at 3,139.56 pts (+0.07%). Meanwhile, MXAP Asia Pac declined 0.50 pts or 0.37% to 134.78 pts.

• As the negative sentiments picked up within the regional stock markets, the FBM KLCI slipped further led by Maybank (-11.0 sen), MISC (-17.0 sen) and Genting (- 14.0 sen) after violating the 1,630 level two trading days ago. Again, market traded volumes was slightly over a billion at 1.05bn. Meanwhile, profit taking activities emerged on O&G stocks after the recent short term rally.

• Despite the Dow marked an all-time-high position this week near 20,000, profit taking activities set in for the second consecutive day on the back of light trading ahead of Christmas holiday weekend. Dollar index was marginally higher at 103.09 pts (+0.07 pts), while Brent crude oil rose 1.08% to US$55.05.

Technical view

Weaker indicators as KLCI breached 1,630

• The MACD Line is hovering below zero, while the MACD Histogram extended another red bar. Also, the momentum indicators like RSI and Stochastics oscillators turned weaker, indicating that the negative momentum is picking up. As the FBM KLCI violated 1,630, next support will be set around 1,620.

Market outlook

• Market trading activities were seen softer as shown in the overseas trading volumes. With investors watching the 20,000 psychological level closely with an overbought status indicated by the Stochastics oscillator, we may expect short term pullback below the 10-d SMA. Next support zone will be pegged around the 19,600-19,700 levels.

• With global market appearing on the defensive side, most investors will stay on the sidelines in the absence of strong positive leads. Hence, with fewer market catalysts, we may expect the FBM KLCI to drift lower on thinner trade towards the 1,620 level. However, selective O&G stocks could be due for a rebound today on the back of higher crude oil prices.

Source: Hong Leong Investment Bank Research - 23 Dec 2016