Market Review

• Following the heavy selling on tech giants on the overnight Wall Street. Asian regional stock markets were mostly weaker amid profit taking activities after the long stretch of rally. The Nikkei 225 and Hang Seng Index declined 0.37% and 1.01% respectively. Shanghai Composite Index also fell 0.18% despite the China services PMI growing at a stronger pace.

• Market sentiments on the local bourse were still mildly positive as heavyweights were on the rise leading the FBM KLCI above the 1,720 level. Selected banking stocks such as Hong Leong Bank and Maybank noticed some buying support near the final hour of trading. However, small caps and lower liners took a beating and ended mostly lower, contributing towards a negative market breadth, i.e. 650 decliners vs. 289 advancers.

• Although the US stock markets opened slightly higher amid the rebound in technology stocks, market sentiments still succumbed to profit -taking activities as investors reassessed their portfolio in order to look for opportunities under the tax overhaul program, which has been passed last week. The Dow and S&P500 slipped 0.45% and 0.37% respectively.

Technical View

Technical rebound in place, KLCI may head towards 1,730

• The FBM KLCI managed to rebound and secure the territory above 1,720 forming a bullish engulfing bar and the MACD Indicator formed a 'buy' signal. The RSI and Stochastics oscillators are on a recovering mode. We opine that the upward rebound may persist, targeting the 1,730 level. Meanwhile, support will be anchored around 1,700-1,710.

Market Outlook

• In the US, we think the retracement may persist over the near term on the back of rotational play by the investors into stocks that are undervalued within the banking, telecoms and energy stocks.

• On the local front, investors are likely to continue its buying support into heavyweights after the rebound on KLCI yesterday. Investors may look for opportunities on the domestic front, consumer related on the back of the stronger ringgit, which hit near the RM4.05/US$ yesterday. Also, we think oil and gas stocks could see some revival in buying interest as Brent crude oil prices sustained above the US$60 level.

Source: Hong Leong Investment Bank Research - 6 Dec 2017