Market review

• Asian markets ended lower in a lackluster mode as markets in China, Hong Kong, South Korea Singapore and Malaysia were among those closed for the CNY holidays. Overall, sentiment was cautious, driven mainly by profit-taking after last week’s rally and President Donald Trump’s late-Friday executive order on immigration.

• Bursa Malaysia was closed yesterday due to CNY holiday. After a 4-day winning streak, KLCI fell 5.9 pts last Friday on profit taking ahead of long weekend holidays. WoW, KLCI rallied 1.3% in tandem with regional markets after Trump’s inauguration on 20 Jan and Dow’s record breaking sessions above 20k as investors anticipate business friendlier policies, tax cuts, deregulations and increased public spending will spur stronger US growth.

• After hitting all-time high of 20,126 on 26 Jan, the Dow recorded a 2nd straight decline to end 123 pts (from as much as -222 pts intraday) lower at 19,971. Sentiment was dampened by uncertainties driven by a culmination of Trump’s confrontational actions during his first full week in office such as building a wall across Mexico and immigration initiatives, combined with the ongoing US 4Q16 reporting season and 31 Jan-1 Feb FOMC meeting.

Technical view

Short term consolidation to neutralize overbought positions

• After hitting a 5-month high of 1695 on 27 Jan, overbought profit-taking saw the KLCI retreating 5.9 pts last Friday. This week, we expect continuous profit taking to cap further strong rally ahead, supported by weakening indicators to neutralize current overbought positions. Weekly key resistances are 1700-1710 while supports fall on 1670-1680.

Market outlook

• Ongoing US 4Q16 reporting season and 31 Jan-1 Feb FOMC meeting coupled with uncertainty driven by a culmination of Trump’s confrontational policies during his first full week in office may witness the Dow to trade sideways in the near term.

• Shares on Bursa Malaysia will likely trade in a muted session today due to overnight fall on Dow and Federal Territory (1 Feb) holiday. Although blue chips are likely to witness a pullback following recent rallies, trading momentum may switch to lower liners and small caps after their recent retracements.

Source: Hong Leong Investment Bank Research - 31 Jan 2017