MARKET REVIEW

Trading tone on the regional benchmark indices was sluggish prior to the US midterm election as investors were uncertain on the poll results, which could affect future policies in the US. The Nikkei 225 and Shanghai Composite Index fell 0.28% and 0.68%, respectively, but Hang Seng Index inched marginally higher by 0.10%.

On the local bourse, equities traded mixed as the FBM KLCI fluctuated between the positive and negative territories before ending slightly higher by 0.36% to 1,714.88 pts. Market breadth was positive with gainers led losers by a ratio of 4-to-3. Meanwhile, market volumes stood at 2.32bn worth RM2.50bn. Selected insurance and healthcare stocks such as MNRB and KPJ traded higher.

Wall Street gained positively following the widely expected US midterm election results (Democrats gained control of the House of Representatives while Republicans retained their hold on the Senate, as the midterm's outcome split Congress) and sentiment was boosted further after Donald Trump commented that he is willing to work along with Democrats on policy initiatives that could help the US economic growth moving forward.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI continued to trend sideways over the past 4 trading days as market is still digesting the trading activities on Genting and Genting Malaysia. However, the buying activities are likely to return following the positive overnight Wall Street and most of the technical indicators have turned mildly positive. We may anticipate the FBM KLCI to perform a flag formation breakout, targeting 1,730. Meanwhile, support will be pegged around 1,690- 1,700.

Tracking the positive overnight Wall Street performance, we anticipate that the buying support could spillover towards stocks on the local front, refocusing on those bashed down and oversold stocks earlier on. Meanwhile, budget beneficiaries such as insurance and healthcare related may sustain its move over the near term.

TECHNICAL OUTLOOK: DOW JONES

The Dow performed a relief rally following the US midterm election yesterday. The upward move was healthy, surpassing most of the moving averages. The MACD Line is trending higher approaching zero, while the RSI is hovering above 50. However, the Stochastic oscillator is slightly overbought; we may anticipate a mild retracement on the Dow. Dow’s resistance will be envisaged around 26,552-27,000. Support will be located around 25,433, followed by 25,117.

With the positive technicals returning on the Dow and steadied market sentiment on Wall Street following the US midterm election results, we believe the rebound could sustain over the near term as investors welcome the split Congress situation. The uptrend of the Dow may revisit the previous all-time-high zone around the 26,552-27,000 levels.

Source: Hong Leong Investment Bank Research - 8 Nov 2018