Market review

• Tracking the negative performance on the overnight Dow, selected Asian stock markets reacted on a weaker tone; Shanghai Composite Index fell 0.2% and Nikkei 225 plunged 1.32% to 19,145.14 pts – the latter ended lower led by selloffs in export-oriented stocks on the back of stronger yen vs. the greenback.

• Meanwhile, shares on Bursa Malaysia bucked the trend, with the FBM KLCI advancing 7.63 pts to 1,637.93 pts as buying momentum sustained throughout the second half of the trading session amid window dressing activities led by TENAGA (+30.0 sen) and PCHEM (+12.0 sen). Market breadth, however was neutral as losers just ahead of gainers by 371-to-370 stocks. Market trading volumes stood at 1.77bn, which was higher than the three-month average volumes of 1.44bn. Also, O&G stocks like HIBISCS (+1.0 sen) and KNM (+1.5 sen) were traded actively higher.

• Again, on thinner trading activities during the year-end period, U.S. equities were marginally lower and the Dow declined 13.90 pts to 19,918.78 pts as Dollar index pulled back for the first time in five trading days at 102.63 pts (-0.65%).

Technical view

Momentum indicators suggesting positive ST trend

• The daily MACD Line has crossed above the daily Signal Line, indicating that the momentum is picking up. Also, both the RSI and Stochastics oscillator extended another day of an upward move. KLCI’s resistance will be pegged around 1,640-1,650 and the support is set around 1,625.

Market outlook

• U.S. stock markets are likely to consolidate after having traded positively after the U.S. election in early November. As the Dow is trading below the 10-d SMA, the key index may further pullback towards the 19,600-19,700 levels.

• On the local front, after trending higher for three straight days, we think that profit taking could set in among shares on FBM KLCI on the last day of 2016 after it has retested the resistance of 1,640. Also, from the statistical point of view, the FBM KLCI has closed six times in the negative territory on the final day of the year out of the past ten years. Hence, traders may look for opportunities to take short term profits after the recent run-up

Source: Hong Leong Investment Bank Research - 30 Dec 2016