Market review

• Shares in Asian stock markets were largely mixed led by a sharp fall of 1.29% in the Nikkei 225 index at 22,900.96 pts amid stronger yen, after US Dollar lost ground post Trump’s inauguration. Hang Seng Index and Kospi were flattish at 22,896.36 pts (+0.05%) and 2,065.99 (+0.02%), while Shanghai Composite Index added 0.43% at 3,136.64 pts.

• The FBM KLCI, however managed to reverse Friday’s losses and increased 0.39% to 1,671.31 pts. However, on the broader market, market breadth was negative with decliners outpaced advancers by a ratio of 4-to-3 stocks. Overall market traded volumes, however was below the three months average volumes of 1.56bn.

• Nevertheless, buying interest stalled on Wall Street and the Dow dipped marginally as Donald Trump officially remove TTPA and may renegotiate NAFTA with leaders from Canada and Mexico. The key index slid 0.14% to 19,799.85 pts. Meanwhile, the Dollar index violated below an important support of 100 at 99.95 pts (-0.82%) as stronger Dollar may dampened the corporate earnings in the U.S.

Technical view

KLCI surged above the immediate resistance of 1,670

• The MACD Line is hovering above the zero level and the MACD Histogram turned green. The RSI and stochastics oscillator trending positively above 50. The FBM KLCI’s upside will be capped around the 1,680-1,690 levels. Support will be located around the 1,660 level.

Market outlook

• For the US market, investors may re-assess the post election rally, taking into account the plan of imposing a "major border tax", coupled with cutting taxes and regaining manufacturing jobs in the U.S. by president Trump. The Dow’s upside could be capped along the 20,000 level. If the key index falls below the 19,700 level, next support will be anchored around 19,300-19,400.

• Share prices on the FBM KLCI may trend higher, potentially forming the pre-CNY rally amid increasing buying interest within the index heavyweights. However, retailers may remain cautious and lock in near term gains among the small cap and lower liners.

• Closed position: We cut loss on BAHVEST (8.7% loss) yesterday after hitting our stop loss point at RM0.94. We also closed our position on OPENSYS at RM0.355 (4.1% loss) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 24 Jan 2017