MARKET REVIEW

Following the conclusion of the FOMC meeting, where the Federal Reserve kept the interest rate unchanged, Asia’s stock markets ended mostly lower as investors refocus on the trade tensions between the US and China. Nikkei 225 fell 1.05%, while Hang Seng Index and Shanghai Composite Index declined 2.39% and 1.39%, respectively.

On the local front, the FBM KLCI (-0.77%) ended lower, tracking the regional performances amid profit taking activities. Market breadth was negative with 567 decliners vs. 244 gainers. Meanwhile, market traded volumes was below the 100-day average volumes of 2.28bn at 1.65bn, worth RM1.81bn. Nevertheless, selected technology stocks such as MPI and DUFU were traded actively higher.

Wall Street was mostly lower on the back of weaker oil prices, which sparked fears of a potential global economic slowdown. After the Brent oil prices traded near the USD86, it has plunged over the past 5 weeks, settling in the bear market territory. The Dow and S&P500 fell 0.77% and 0.92%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI could be forming a bear flag formation at this current juncture as the key index has reversed near the 1,726 level. The MACD Line is hovering below zero, while the Histogram has turned weaker last Friday. Also, the RSI and Stochastic oscillators are hovering below 50 and turning flattish, respectively. We believe the upside could be capped around 1,726-1,740, while supports will be set along 1,700, followed by 1,673.

Externally, investors will continue to focus on the upcoming G20 summit, where President Trump and Chinese President Xi Jinping have scheduled a meeting for trade discussions. Meanwhile, traders will also monitor the ongoing reporting season to assess the business environment outlook in order to decide on further actions on the stock market.

TECHNICAL OUTLOOK: DOW JONES

The Dow has pulled back after the strong surge early last week and the mild pullback on the Dow could be indicating further retracement phase over the near term. Despite the MACD Line crossing above zero, the Stochastic oscillator is suggesting that the key index could be overbought. With the mixed technical readings, we may expect the Dow’s upside to be limited around 26,552-27,000. Meanwhile, support will be set around 25,433, followed by 25,117.

On Wall Street, sentiment is likely to stay weak on the back of declining in oil prices, coupled with the rising uncertainties between Trump and Chinese President Xi Jinping in the upcoming G20 summit. Should there be any negative surprises from the discussion, we may anticipate heightened volatility moving forward. Hence, the Dow’s upside will be capped around 26,552- 27,000.

Source: Hong Leong Investment Bank Research - 12 Nov 2018