Market Review

• Following the tech selloffs on Wall Street, Asian key regional benchmark indices suffered another round of selling pressure, coupled with profit taking activities within the mining sector; the Hang Seng Index and Nikkei 225 plunged 2.14% and 1.97% respectively, while Shanghai Composite Index slipped 0.29%.

• Meanwhile, stocks on the local front traded on a lackluster mode as the FBM KLCI slid below the 1,720 level, in tandem with the regional negative mood. Market breadth stayed negative with 454 decliners vs 380 advancers. Market volumes also dwindled to 1.58bn shares traded for the day. Technology index dived 2.2% following the tech selloffs in the US.

• Despite the rebound in technology stocks led by Facebook, Wall Street ended on a mixed note on the back of some profit taking activities among banking stocks; the Dow slipped 0.16%, but Nasdaq gained 0.21%, snapping the 3-day losing streak. Meanwhile, on the economic front, private sector added 190k (vs. analyst expectations of 185k) jobs in November.

Technical View

KLCI revisit 1,730 amid recovering technicals

• Although KLCI took a beating yesterday amid selling pressure on heavyweights, the short term momentum oscillators such as RSI and Stochastics are recovering. We believe the downside of the FBM KLCI is limited over the near term with a support pegged around 1,700-1,710. The upside of the technical rebound will be located around 1,730. Should there be a breakout above 1,730, the next resistance will be envisaged around 1,740.

Market Outlook

• In the US, the recent retracement phase could have stabilized after several rounds of rebalancing activities by the funds after the passing of the tax bill last week and most of the technology giants that have succumbed to selling activities may regain strength, forming a technical rebound pattern over the near term. Also, some key commodities such as copper and crude oil will be monitored to gauge the global demand for the economic recovery indicator.

• Meanwhile, stocks on the local bourse are likely to see some upward bias move after the recovery in tech stocks on Wall Street, coupled with the positive inflow of foreign funds over the last seven days. Buying support may emerge within the defensive and domestic related sectors such as consumer and construction as investors look beyond 2017 on the back of the strengthening in ringgit and infrastructure boom in 2018.

Source: Hong Leong Investment Bank Research - 7 Dec 2017