Market Review

• Asian key regional indices ended on a strong tone with the help of China Caixin manufacturing PMI, coupled with buying support within energy stocks amid steadier crude oil prices (above US$60). The Nikkei 225 and Hang Seng Index rallied 1.86% and 1.23% respectively.

• On the local front, market sentiments continued to buck the regional trend and the FBM KLCI ended lower as Morgan Stanley downgraded Malaysia to equal -weight from over-weight. Market breadth was negative with decliners outpacing advancers by a ratio of 504-to-368. Overall market volumes stood at 3.07bn shares. Nevertheless, O&G stocks such as REACH, ARMADA and DAYANG managed to stay positive with the further recovery in Brent oil prices.

• Wall Street closed higher for the session after the Fed kept the interest rates unchanged and commented that the US growth pace is still healthy despite the mild interruptions by hurricane. Also, private US employers added 235k jobs in October. The Dow and S&P500 gained 0.25% and 0.16% respectively.

Technical View

Consolidation to stay around 1,740-1,750

• The FBM KLCI ended below the SMA200 as selling pressure emerged further after Morgan Stanley’s report. The key index may extend its consolidation sideways near the 1,740 level over the near term. However, the MACD Histogram, RSI and Stochastics indicators are turning positive. Hence, we opine that the downside is limited and may be due for a technical rebound.

Market Outlook

• With the firmer US earnings season, investors could maintain the bullish tone of investment over the near term. Also, the market may digest the potential pick of Jerome Powell by the White House to succeed the Fed chair and the next key event that investors may follow will be the corporate tax cut details that will be revealing soon by President Trump.

• On the local front, sentiments are expected to remain cautious moving into the reporting season. Also, with the violation of The KLCI below SMA200, selling pressure may continue throughout the week. Nevertheless, we think the O&G sector is likely to stay positive with the Brent crude oil prices steadied above the psychological level of US$60.

Source: Hong Leong Investment Bank Research - 2 Nov 2017