Market Review

• Despite Alibaba brought in a record US$25bn in sales on the Singles’ Day, Asian regional key indices ended on a mixed tone led by a plunge of 1.32% in Nikkei 225, but Hang Seng Index and Shanghai Composite Index added 0.21% and 0.47% respectively.

• On the local bourse, buying interest wasn’t able to sustain throughout the session as selling pressure kicked in as KLCI traded near 1,747 level; Petronas Gas and IOI Corp fell 36 sen and 8 sen respectively. On the broader market, market breadth was negative as decliners led advancers with a 2-to-1 ratio, selling pressure further expanded on the lower liners after PALETTE and MUIIND dived 17% and 19% respectively following the statement from Wong Thean Soon.

• US stocks closed higher after a two-day losing streak as higher dividend paying sectors such as utilities and consumer staples were being focused after General Electric slashed its dividend by half and cut its full year adjusted earnings estimates for 2018.

Technical View

Another violation below 1,740

• The KLCI has tripped below 1,740 after being resisted around the 1,750 level over the past two weeks. The MACD Indicator has turned lower, while the RSI and Stochastics are hooking down. We think the key index may trend downwards to the support of 1,729-1,734. On the flip side, should the key index breaches above 1,750, next resistance will be envisaged near 1,760.

Market Outlook

• Although investors are concerned about the delay of corporate tax cuts to 2019, the stock markets are likely to be well supported for the time being amid upbeat earnings and well continued economic growth. Nevertheless, upside might be capped with the potential December interest rates hike. Hence, the Dow may hover sideways between 23,000-23,500 over the near term.

• Meanwhile, on the local front, downside of the KLCI could extend further after the key index violated below 1,740 and hovered below SMA200 for almost a month. Also, market sentiments may remain negative following the selldown of lower liners and small caps yesterday on selected ACE market stocks. Also, volatility in the market may heighten in the midst of the reporting season month.

• Closed position: Yesterday, we took profit on MASTEEL (13.7% gain) after hitting above R2 upside target and squared off our 4Q17, RHBBANK (3.0% loss) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 14 Nov 2017