Market review

• Trading sentiments were weak within the Asian stock markets as buying interest waned throughout the week; Hang Seng Index and Shanghai Index were lower at 21,574.76 pts (-2.03% wow) and 3,110.15 pts (-0.41% wow) respectively. Also, MSCI Asia Pac declined 1.18 pts or 0.87% to 134.28 pts on the weekly basis and traded to the lowest over the past month.

• Similarly, after the FBM KLCI traded below the 1,630 level, selling pressure intensified and the key index declined 6.05 pts at 1,617.15 pts (-20.64 pts or -1.3% wow) led by selected heavyweights like. Lackluster trading activities were noted ahead of the long weekend as overall market volumes stood at 0.97bn, which is below the three-month average volumes of 1.46bn. There were nearly 9 decliners for every 5 advancers across the board.

• Wall Street traded within a narrow range, accompanied by muted trading volumes prior to the Christmas holiday weekend. The Dow rose marginally by 14.93 pts to 19,933.81 pts led by healthcare shares, recording the seventh consecutive week of gains after the U.S. election. Dollar index was flattish around 103.01 pts (-0.07 pts), while Brent crude oil rose 0.20% to US$55.16.

Technical view

KLCI violated another support at 1,620

• The daily MACD Line has crossed below the daily Signal Line, while the weekly MACD Histogram has turned red after a series of green bars – suggesting that the momentum is negative. As the FBM KLCI has violated another support of 1,620, forming a bearish flag formation on the weekly chart, further supports might be located around the 1,600-1,610 levels.

Market outlook

• Although softer trading activities were noted on Wall Street last week, the Dow is still trending upwards above the 10-d SMA. We may expect the trading range to be located around the 19,800-20,000 levels this week on the back of mild window dressing activities.

• However, with the indicators suggesting that the KLCI’s trend is turning downwards, coupled with lesser positive leads and softer market participations in the stock markets, investors may lock-in profits for the year by deploying selling-into-strength strategy over the near term. Hence, we might see KLCI’s upside to be limited around the 1,630-1,640 levels.

Source: Hong Leong Investment Bank Research - 27 Dec 2016