Asia’s stocks traded mixed prior to the US midterm election as the result may cause heavy swings towards the markets, coupled with the sell down amongst major Apple suppliers following the statement from Apple that production of its iPhone XR may slow down moving forward. The Nikkei 225 and Hang Seng Index rose 1.14% and 0.72%, respectively, but Shanghai Composite Index fell 0.23%.

Post-Budget 2019, the FBM KLCI dropped 0.30% led by Genting Malaysia and Genting Berhad after the increase in gaming tax, which may lead to softer profit in the future. Market breadth was negative with 537 decliners vs. 334 gainers, accompanied by market volumes of 2.23bn, worth RM3.28bn. Meanwhile, we noticed insurance and healthcare related stocks traded higher.

Major indexes on Wall Street closed higher and all the 11 major sectors ended positively, reflecting a positive market sentiment ahead of the midterm election results. Also, sentiment was also lifted by Chinese Vice President Wang Qishan’s statements about Beijing being ready to hold discussions and work with the US to resolve the trade disputes.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has traded lower post Budget 2019 after hitting the 1,720 immediate resistance last week. The MACD Line, however continued to trend higher. However, the momentum oscillators (RSI and Stochastic) are suggesting that the momentum is slightly negative. With the mixed indicator readings, we believe the rebound could sustain after a mild retracement.

On the local front, we believe there could be further trading interest after Malaysia stock exchange was closed for Deepavali public holiday as market participants digested further on Budget 2019. We opine that healthcare and insurance related stocks may continue trade higher as they are one of the beneficiaries in Budget 2019.

TECHNICAL OUTLOOK: DOW JONES

The Dow continues to rally higher following the surge of the key index above the 200D SMA last week. The MACD Indicator and both the momentum oscillators are turning positive above 50. Hence, we believe the rebound could sustain over the near term. Next resistance will be pegged around 25,846, while the support will be located around 25,155.

As investors were awaiting the poll results, the sentiment were slightly positive throughout the end of the session. However, should there be any negative surprises on the midterm election, we may anticipate heighten volatility in the stock markets, as divided government may lead the Congress to pursue different policy agendas. Besides, market participants will be focusing on the Fed’s monetary policy decision, which is scheduled on Thursday.

Source: Hong Leong Investment Bank Research - 7 Nov 2018