Market Review

• Asian equities closed lower on profit taking after recent fresh record closings on the back of a lackluster session on Wall Street amid uncertainty over the tax reform plan and the release of a slew of Chinese economic data that came in slightly below forecasts.

• Copying weaker regional markets, KLCI eased 3.9 pts to 1733.6, recording its 3rd straight losses, led by major decliners such as GENTING (-27 sen to RM9.08), PETGAS (-46 sen to RM16.98), GENM (-11 sen to RM4.94), TM (-11 sen to RM6.01) and PCHEM (-5 sen to RM7.40). The uninspiring local performance was mainly due to muted 3Q17 reporting season and worried about the election uncertainty from the GE14 (widely speculated to be held in March-May 2018).

• The Dow plunged as much as 168 pts to 23271 before narrowing the losses to 30 pts at 23409, led by a slump in GE shares (lost over 12% in two days) after the company unveiled a dissappointing restructuring plan and lowered its dividend by 50%. Sentiment was also dragged down by the signs of a commodities glut triggered by energy and materials producers selldown coupled with uncertain prospects for US tax cuts.

Technical View

Downside bias with lower supports at 1707-1729

• Bearish technical indicators following a three straight loss of 13 pts point to a challenge of the lower support at 1729 (17 Apr low). A decisive breakdown may grease correction towards 1707 (50% FR) and 1700 psychological levels. Immediate overhead resistance stays at 1742 (20-d SMA) and 1751 (200-d SMA).

Market Outlook

• Despite near term worries about the delay of US tax cuts to 2019, any downside in Dow is likely to be well supported for the time being amid upbeat economy and corporate earnings outlook coupled with gradual interest rates hikes. Hence, the Dow may be trapped in range bound consolidation within 22.8k to 24k over the near term until more clarity of the tax overhaul details.

• On Bursa Malaysia, downside of the KLCI could extend further after the key index violated below multiple major SMA supports. Also, market sentiments may remain cautious amid ongoing 3Q17 reporting season and ahead of the GE14

Source: Hong Leong Investment Bank Research - 15 Nov 2017