Market review

• After recording a 5-year high on 20 Sep at 164.5, the MSCI Asia Pacific Index (MXAP) ended 0.07 lower at 162.8 on profit taking, with investors struggling for direction as Chinese, Hong Kong and South Korean bourses were closed for holidays. Markets were also treading water ahead of U.S. nonfarm payrolls tonight.

• Tracking lower regional markets, KLCI lost 2.8 pts at 1759.1 after rising two straight sessions, dragged down persistent foreign liquidations on index-linked stocks such as KLCC (-17 sen to RM7.84), GENM (-11 sen to RM5.39), DIGI (-4 sen to RM4.91), PETGAS (-14 sen to RM18.10) and YTL (-1 sen to RM1.37). Trading volume increased to 3.15bn shares worth RM2.06bn as compared to Wednesday’s 2.25bn shares valued at RM1.83bn while market breadth was positive with 487 gainers as compared to 360 losers, driven by mainly by active trading interests on lower liners and ACE counters.

• Ahead of the widely watched US Sep non-farm report, the Dow extended records with a 6 th straight gain (+114 to 22775), underpinned a batch of U.S. strong economic data (narrowing Aug trade deficit, falling weekly jobless claims and soaring Aug new orders goods) and hawkish Fed speakers strengthened the case for higher rates. Sentiment was also boosted by increased prospects for a tax overhaul with Congress moving closer to agreement on a budget resolution.

Technical view

Sideways consolidation amid lack of fresh local catalysts

• Persistent foreign liquidations checked KLCI to extend its 3 rd consecutive gains, following recent 10 th straight losses. Unless KLCI can break immediate resistance near 1662 (10- d SMA) decisively, the index is likely to engage in consolidation mode. Key supports are 1738-1750 while resistances are pegged at 1762-1772.

Market outlook

• On the back of recent better-than-expected economic data and expectation of a positive Sep payroll report tonight, coupled with the optimism of Trump's tax reforms and the 3Q17 results season next week, the Dow may trade higher towards 23000-23500 zones in near term before profit taking emerges.

• On the local front, we think the market may stay on a consolidation phase amid persistent foreign outflows, tracking weaker Ringgit, dragged by the recent hawkish Fed undertone and optimism on US tax overhaul.

Source: Hong Leong Investment Bank Research - 6 Oct 2017