Market review

• Trading tones in the Asian regional benchmark indices turned negative as soon as investors digested the mixed China economic data. The Shanghai Composite Index fell 0.35%, while Hang Seng Index plummeted nearly 2.0% also tracking the cautious tone from the Catalonia crisis.
• Despite the bullish performance on Wall Street, stocks on Bursa Malaysia bucked the trend and closed mostly lower; the FBM KLCI continued to slide 0.29%. Market breadth was negative with decliners ahead of advancers by a ratio of 3-to-2 stocks, accompanied by market traded volumes of 3.16bn.

• US stock markets noted heavy selling pressures after the opening bell and traded much lower on the intraday basis as the sentiments were dragged by selected technology related stocks as investors weighed on disappointed iPhone 8 sales. Nevertheless, last minute buying interest emerged after Politico reports Federal Reserve Governor Jerome Powell could be the leading candidate to become the chair of the US central bank.

Technical view

FBM KLCI may consolidate near SMA200

• With the recent sell down on KLCI below 1,750, the key index has arrived at the SMA200 level. Despite MACD Indicator is trending lower, both the RSI and Stochastics oscillators are grossly oversold and we expect the KLCI to be supported near the 1,740 level. Meanwhile, the resistance will be envisaged around 1,750-1,760.

Market outlook

• Wall Street has been fuelled by market-friendly monetary policy over the years, should the next Fed chair would to stay dovish, we think the US equities may extend its upward move. Also, investors will continue to digest the ongoing financial reporting season in the US to reassess their investment decisions.

• Meanwhile, on the local front, overall sentiment should stay on a weaker tone following the downward violation of 1,750 on the FBM KLCI. Besides, trading activities may remain soft until the Budget 2018 is being tabled in the parliament to get a full picture of Malaysia's future policy direction. Another catalyst that investor should be focusing is the November reporting month to gauge the growth of the companies and economic activities.

• Closed position: We had squared off our position in GENM yesterday at RM5.30 (S1) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 20 Oct 2017