Market Review

• As the global risk-off mode eased, major bourses in Asia such as NIKKEI 225 (+1.5%), SENSEX (+1.1%) and HSI (+0.6%) spurred the MSCI Asia Pac Index (MXAP) to gain 1.6 pts at 169.4, shrugging off the softer leads from Dow (-0.6%) and SHCOMP (-0.1%) as O&G shares recovered with crude oil prices.

• Disconnecting from regional markets rebound, KLCI fell 4.9 pts to 1718.1, continuing its 5 th losing streak with a cumulative 28.7 pts decline. Trading volume increased to 2.44bn shares worth RM2.48bn as compared to Wednesday’s 2.34bn shares worth RM2.28bn, focusing on ACE and penny stocks as blue chips consolidated ahead of the FBMKLCI rebalancing exercise on 30 Nov. Market breadth was negative as losers swarmed gainers 693 to 254.

• U.S markets rallied amid earnings-inspired gains by Cisco and Wal-Mart coupled with the House passed a Republican sponsored tax cut plan. Following a 138-pt fall in the previous session, Dow surged 187 pts or 0.8% at 23458 overnight after rising as much as 221 pts in the earlier session.

Technical View

Getting oversold with lower supports at 1700-1706 levels

• We reiterate that the extended breakdown below 200-d SMA (since mid Oct) as well as multiple short term SMAs are negative to KLCI and may accelerate further retracements towards 1706 (50% FR) and 1700 psychological levels before prices stabilize. On the flip side, should the index stage a swift and successful breakout above 1740 (20-d SMA), more upside is anticipated at 1752 (or 200-d SMA) and 1762 (100-d SMA) levels.

Market Outlook

• In spite of the near term worries about the delay of US tax cuts and a healthy pullback in crude oil prices, Dow’s downside risks are likely to be well cushioned for the time being amid positive economy and corporate earnings outlook coupled with supportive monetary policies. 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, we may anticipate a technical rebound today amid overnight Dow’s 0.8% rally. However, any rebound may be capped near 1728 zones as market sentiment is likely to retain a cautious mode amid ongoing 3Q17 reporting season and FBMKLCI index rebalancing exercise on 30 Nov coupled with political uncertainty ahead of the upcoming GE14. Key supports are 1700-1706 while resistances fall on 1728-1751.

Source: Hong Leong Investment Bank Research - 17 Nov 2017