Market Review

• Generally, the Asian stock markets finished lower after the interest rate hike by the Federal Reserves and investors taking the opportunity to take profit following the widely anticipated decision. The Nikkei 225 fell 0.28%, while Hang Seng Index and Shanghai Composite Index declined 0.19% and 0.29%, respectively.

• Buying support within the banking heavyweights and Genting related stocks led to a positive closing on the local bourse; the FBM KLCI rallied 1.23% to 1,759.00 pts. Market breadth was bullish as gainers led losers with a ratio of 2-to-1. Meanwhile, market traded volumes stood at 2.43bn, which was higher than the 100-day average volumes of 2.30bn.

• Despite the fall in weekly jobless claims and better-than expected November retail sales data, Wall Street headed for a pullback on the back of profit taking activities as investors worried about some potential resistances from selected lawmakers pertaining to the tax bill after Congressional Republicans have passed it on Wednesday. The Dow and S&P500 slipped 0.31% & 0.41%, respectively.

Technical View

Steady rebound, but momentum oscillator overbought

• Strong trading interest flocked in throughout the day and led the FBM KLCI higher towards 1,759, crossing the 200-day moving average. The MACD line is hovering around the zero level. However, the stochastics oscillator is suggesting that the key index is overbought. We think that the traders may lookout for profit taking opportunities near the immediate resistance of 1,760. Support will be pegged around 1,740.

Market Outlook

• Following the mild hurdle from the tax reform progress, stock markets in the US could be due for a mild retracement towards the 24,000 level after a long stretch of rally since the breakout of 23,600 last month. However, the Dow and S&P500 are still within the uptrend channel. Hence, any pullback will be deemed as healthy for short term accumulation decision.

• Similarly, after the steep rally over the past few trading days, stocks on the local front may take a breather over the near term as the KLCI is slightly overbought. Also, tracking the negative performance on the overnight Wall Street, we think profit taking activities may emerge on selected heavyweights. Nevertheless, traders may turn to small caps and lower liner laggards with oversold signal for short term rebound trading opportunities.

Source: Hong Leong Investment Bank Research - 15 Dec 2017