Market review

• Despite a plunge in the Nikkei 225 index by 1.48% to 18,813.53 pts on the back of strengthening yen, Asian key indices were mostly firmer; the Hang Seng Index, Kospi Index and Shanghai Composite Index gained 0.54%, 0.37% and 0.17% respectively. Meanwhile, MSCI Asia PAC inched higher by 0.10%.

• On the local front, cautious tone was quickly absorbed with the emergence of buying support after the opening bell. The FBM KLCI trended gradually higher to end at 1,663.03 pts (+4.19 pts or 0.25%) led by a strong rebound in Maybank (12.0 sen), DiGi (+5.0 sen) and Maxis (+5.0 sen). Also, market breadth turned positive with 411 advancers, 366 decliners while 371 traded unchanged.

• Major indices on Wall Street trended lower as Donald Trump commented that the strong US dollar could hurt their company earnings and cautious tone was set in ahead of the inauguration of the US president this Friday; the Dow slid 58.96 pts (-0.30%) to 19,826.77 pts. Also, European markets reacted negatively after the Brexit speech - FTSE100 plunged 1.46%.

Technical view

FBM KLCI supported above 200-d SMA

• The FBM KLCI rebounded above the 200-d SMA level with buying support after a plunge below the moving average two days ago. However, the MACD indicator is still suggesting weak momentum on the key index. Meanwhile, the stochastics oscillator is above 70.

Market outlook

• Traders are likely to remain sideline amid the uncertain Trump's economic policies. Also, earnings results will be monitored closely by investors to trade accordingly. The Dow may trade rangebound within the 19,700-20,000 levels. However, if the key index drop below 19,700, next support in sight will be located around 19,300-19,400

• On the local front, buying interest has picked up as traders look for bargain hunting opportunities after the sell down two days ago. We anticipate the short term move will still be positive with the upside to FBM KLCI seen around the 1,680-1,690 levels. However, we still opine that market will be cautious prior to the Donald Trump’s inauguration on this coming Friday

Source: Hong Leong Investment Bank Research - 18 Jan 2017