Market Review

• Asian stock markets ended on a mixed note after a slightly more hawkish statement from Janet Yellen pointing to a higher probability of an interest rates hike in December. The Nikkei 225 fell 0.31%, while Hang Seng Index and Shanghai Composite Index gained 0.47% and 0.06% respectively.

• Meanwhile, stocks on our local front went into a sideways trading mode as investors turned cautious after an overheated trading activity in the previous day. The FBM KLCI ended marginally lower at 1,764.24 pts. However, the market breadth turned positive with advancers ahead of decliners by a ratio of 401-to-376. Overall market volumes were lower at 2.21bn shares traded for the day. Most of the oil and gas stocks underwent profit taking activities after a rebound early this week.

• Following the subsiding geopolitical events between US North Korea, US stock markets ended on a stronger note led by financials on the back of the higher possibilities of an interest rates hike in December, which may potentially boost the earnings for banking stocks. Meanwhile, technology giants rebounded, contributing to a strong surge of 1.15% in Nasdaq.

Technical View

Buying interest may emerge after retesting 1,760

• The FBM KLCI trended sideways and ended lower for the seventh straight days. The MACD Line has crossed below the zero level, while both the RSI and Stochastics oscillators are trending towards the oversold region. We may anticipate the FBM KLCI to further consolidate between the zone of 1,760-1,770 over the near term. Nevertheless, should there be a breakout above 1,770, next resistance will be located around 1,780.

Market Outlook

• With the revival of buying interest in the US stocks, we believe the investors are pricing in the next policy by President Trump, where the on-going discussion on the corporate tax reform may push through over the near term. We think the policy should be able to enhance the earnings generally among the companies.

• Meanwhile, the overdue rebound could be seen today on our local front after a series of losing streak on the KLCI and the buying support could spillover from the stronger performance on the overnight Wall Street. The FBM KLCI may revisit 1,770-1,780.

Source: Hong Leong Investment Bank Research - 28 Sept 2017