Investors remain cautious on the global growth outlook following the decline in oil prices, coupled with uncertain trade developments between the US and China and key regional benchmark indices were mostly mixed. The Nikkei 225 (+0.09%) and Hang Seng Index (+0.12%) ended flat, while Shanghai Composite Index gained 1.22%.

Meanwhile, stocks on the local front further succumbed to profit taking activities, following the softer Brent oil prices; the FBM KLCI fell 0.70% to 1,696.14 pts, below the 1,700 psychological level. Market breadth was bearish with 452 decliners vs. 294 gainers. Market traded volumes remained soft at 1.63bn (100-day average volumes at 2.28bn), worth RM1.32bn. Hard disk manufacturer DUFU surged towards all-time-high, lifting the peers such as JCY and NOTION.

Wall Street closed sharply lower as selling pressure resumed on FANG stocks; Apple and Facebook down 5.04% and 2.35%, respectively. Investors were also worried that the strengthening in USD may impact overseas sales for multinationals moving forward. The Dow and S&P500 plunged 2.32% and 1.97%, respectively, while Nasdaq dived 2.78%, closing in the bear market territory.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI declined for another session violating below the 1,700 psychological level. The MACD Histogram continues to weaken further, while the MACD Line trended below the zero level. Meanwhile, both the RSI and Stochastic oscillators are turning lower; indicating that the near term momentum is negative and the KLCI is likely to stay within the retracement phase towards the support of 1,673, followed by 1,658, while the upside will be capped along 1,730.

Tracking the heavy selling pressure on global markets, stocks on the local bourse could be having similar fate and the FBM KLCI may extend its retracement phase towards the recent support of 1,673. We could also expect selling pressure on the O&G sector to emerge amid weaker overnight oil prices.

TECHNICAL OUTLOOK: DOW JONES

The Dow ended significantly lower for another session after hitting the resistance along 26,300 and the MACD Line has crossed below zero. Meanwhile, both the RSI and Stochastic oscillators have turned lower. With the weaker technical readings on most of the indicators, we believe the Dow could further retrace towards the SMA200 around 25,114. Resistance will be pegged around 26,300-26,552.

We believe investors will be singing the cautious tune over the near term with the rising concerns over global growth outlook amid the uncertain trade disputes between the US and China as Washington may increase the current tariffs of 10% to 25% on USD200bn by Jan 2019. Hence, the upside could be capped around the 26,300-26,552.

Source: Hong Leong Investment Bank Research - 13 Nov 2018