Market Review

• Asian stock markets ended on a negative note after investors digested the release of the tax overhaul plan from the Republicans, which would take place only in 2019. The Nikkei 225 plunged 0.82% to 22,681.42 pts on Friday, reversing earlier gains of 2% in the morning session. Meanwhile, Shanghai Composite Index and Hang Seng Index ended flattish.

• On the local front, KLCI was unable to regain the 1,750 territory as selling activities emerged on the heavyweights. Market breadth stayed negative with 479 decliners vs. 371 advancers, accompanied by 3.11bn shares traded worth RM2.14bn. However, technology and O&G sectors traded actively on the positive note following the Broadcom deal and the firmer crude oil prices.

• The delay in the tax reform plan did not bode well for the US equities and most of the major indexes fell as investors were disappointed in the postponement of the corporate tax cut. Also, US dollar index declined for the week. The Dow snapped the eight-week gains, falling 0.5% for the week.

Technical View

Downward bias after KLCI retreated near 1,750

• The FBM KLCI formed a bearish candle on Friday and the MACD Histogram, RSI and Stochastics oscillators turned weaker. Should there be a downward violation of the KLCI below 1,740, it could trigger further selling activities towards the support of 1,730. Meanwhile, resistance will be pegged around 1,750-1,755.

Market Outlook

• We think the current headlines on the tax overhaul would be a dampener to the overseas stock markets, curtailing the upside of the Dow near the 23,500 level, in tandem with the overbought signal. However, downside of the stocks would be supported by booming US economy and the upbeat earnings from most of the companies. The Dow's expected range would be hovering within 23,000- 23,500 levels over the near term.

• Market sentiments on the local bourse remain weak as the KLCI has not been able to regain territory above 1,750. Also, the ongoing November reporting season may send volatile trading movements on the stocks. Should there be a disappointment in earnings on technology and O&G sectors, it may trigger some selling activities after the run-up recently.

• Closed position: We had squared off our 4Q17 stockpick, DAYANG (8.6% loss) on 10 Nov after hitting the cut loss levels.

Source: Hong Leong Investment Bank Research - 13 Nov 2017