Market Review

• MSCI Asia Pacific Index (MXAP) gained 0.46-pt to 180.87 (+0.9% wow), spearheaded by Dow’s record-breaking rally as financials (following better-than-expected earnings) and energy stocks (as oil prices surged to 2-year high) gained coupled with positive optimism on US economy and mild inflationary pressures. Meanwhile, the ongoing strength in the yen kept the Nikkei 225 0.24% lower amid selldown in exports stocks as the Yen rallied for a 3rd straight day after the BOJ cut the size of ongoing purchases of government bonds.

• Tracking bullish Dow and higher regional peers, KLCI posted a 5.8-pts technical rebound to 1822.7 (+4.7 pts wow) after registered a 65-pt loss in three consecutive sessions. Sentiment was visibly better as selling pressures tapering off, with gainers thrashed losers 643 to 389 on reduced turnover totaling 3.93bn shares worth RM3.29bn.

• The Dow surged 228 pts or 0.9% to another record close at 25803, soaring 1.6% wow as the 4Q17 earnings season kicked off with solid results from banks and robust retail sales drove investor optimism about economic growth. Sentiment was also boosted by energy stocks as WTI oil rose 50 cents to settle at US$64.3/barrel, recording its 5th straight winning streak after Russia's oil minister said global crude supplies were "not balanced yet," alleviating market concerns about a wind-down of the OPEC-led deal to reduce production.

Technical View

Anticipate more technical rebound

• In wake of bottoming up hourly chart indicators, KLCI may continue to stage an extended technical rebound this week, thanks to bullish Dow and crude oil prices coupled with the RM strength. As long as the index can maintain its posture above 10d SMA near 1811, we remain cautiously optimistic KLCI to re-challenge 1830-1840 hurdles in the near term. Conversely, a close below 1811 would send prices down to test 1790-1800 next.

Market Outlook

• In the near term, Dow’s uptrend may sustain on the back of positive tax reform and bullish outlook of synchronized growth in global economy coupled with stellar corporate earnings growth. Key technical indicators are mostly favourable, suggesting that the index is likely to continue its primary uptrend towards 26.0-26.3k. Any pullback is likely limited with support levels at 25.0-25.2k.

• On the back of the Ringgit strength and surging oil prices, sentiment on the local bourse could stay positive, despite interim consolidations, tracking the bullish performance on the regional and Dow markets.

Source: Hong Leong Investment Bank Research - 15 Jan 2018