Market review

• Most Asian bourses rose after Wall Street closed at record levels in anticipation of positive US 3Q17 results season and the Sep Fed minutes signaled its confidence that the U.S. economy was strong enough to support further gradual rate increases, which bodes well for global growth.

• Bucking regional markets, KLCI lost 3.2 pts to record its 3rd losing streak after fluctuated within a range of 9.1 pts between an intra-day high of 1760.3 and a low of 1751.2, led by persistent selling spree in blue chips. However, market breadth was positive with 455 gainers as compared to 438 losers, as trading volume and value jumped 36% and 3.5% to 4.33bn shares worth RM2.39bn, respectively, with ACE Market (recorded its 8 th gains in the last 10 sessions) stocks continued to hog the limelight among retailers, ahead of the Budget 2018 on 27 Oct and the 3Q17 reporting season in November.

• The Dow eased 32 pts at 22841 after hitting another record high of 22885 intraday despite better-than-expected earnings from JP Morgan and Citigroup coupled with strong labor market and wholesale inflation data. Besides weighing the ongoing 3Q17 results season, investors are focusing the prospects for tax reform as well as clues as to who will be nominated as the next Fed chairman.

Technical view

Choppy trend ahead

• Following the recent breakdown below 10d SMA in the last two sessions, KLCI immediate outlook has turned murkier with lower key supports at 1750 and 1741 (200d SMA). On the contrary, the 20d/50d/high Bollinger band at 1766/1771/1783 would act as resistances in the short term.

Market outlook

• On the back of toppish techncials, we expect limited upside for Dow in the short term amid a mild consensus S&P 500 3Q17 earnings growth of 4.4% against double-digit profit gains in both the 1Q & 2Q. Should there be any negative surprises in the ongoing results season, it may trigger a sharp pullback towards 22000 zones while upside may be capped near the 23000 level.

• Over in our local bourse, trading activities amongst the ACE and penny stocks should remain active as blue chips continue to attract selling pressures. Investors will weigh on the prospects of upcoming Budget 2018 and the 3Q17 reporting season in November coupled with the GE14 election uncertainty.

Source: Hong Leong Investment Bank Research - 13 Oct 2017