MARKET REVIEW

Key benchmark indices in the region closed mostly higher after October Caixin-IHS Markit PMI came in at 50.1 (vs. 49.9 by consensus), coupled with easing fears as Larry Kudlow commented that “nothing is set in stone” on whether further tariffs will be imposed on Chinese products. The Shanghai Composite Index and Hang Seng Index gained 0.13% and 1.75%, respectively, but Nikkei 225 fell 1.06%.

Meanwhile, on the local front, sentiment turned negative briefly after the opening bell and the FBM KLCI (-0.14%) ended in the negative territories. Market breadth, however was positive with 434 gainers vs. 364 losers, accompanied by market traded volumes of 2.18bn worth RM1.66bn. Nevertheless, we noticed stocks (MYEG, DSONIC, PRESBHD) which are related to ex-Home Minister managed to trade actively higher on the back of bargain hunting activities.

Wall Street extended the rebound as President Trump tweeted that he had talked to Chinese President Xi on trade front and was very productive and further discussion will be in the G20 meeting later this month. The Dow and S&P500 rose 1.06% each, while Nasdaq rallied 1.75%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI trended marginally lower yesterday, but managed to stay above the 1,700 psychological level. The MACD Line has crossed above the Signal Line; indicating that the trend is slightly positive. Meanwhile, the RSI and Stochastic oscillators are recovering towards 50. Hence, based on the recovering technical readings on the indicators, the FBM KLCI may revisit the resistance around 1,726-1,743. Support will be pegged at 1,691, followed by 1,670.

Despite the positive Wall Street sentiment, we believe the upside may be capped as profit taking activities could emerge further after the recent technical rebound on the KLCI as well as buying interest to stall ahead of the “belt-tightening mode” Budget 2019 in order to sail through the tough fiscal situation in Malaysia. KLCI’s trading range will be located within 1,692-1,726.

TECHNICAL OUTLOOK: DOW JONES

The Dow continues with the relief rally, surpassing the SMA200 level at 25,128; we view this as a positive signal, in tandem with the potential crossing of MACD Indicator as well as the recovering oscillators (RSI and Stochastic). Next resistance will be envisaged around 25,466, followed by 25,782. Support will be set around 25,128, followed by 25,000 and 24,316.

Despite the recent new developments on trade front, we believe Wall Street could stay muted ahead of US midterm election as profit taking activities may emerge after the recent rebound. Besides, investors will be focusing on the trade discussion between President Trump and President Xi later this month.

Source: Hong Leong Investment Bank Research - 2 Nov 2018