MARKET REVIEW

Following the sharp decline in Wall Street, key regional benchmark indices ended on a mixed note. Investors were still worried over the trade developments between the US and China, whereby President Trump and President Xi will be having a scheduled meeting in the upcoming G20 summit. The Hang Seng Index and Shanghai Composite Index gained 0.62% and 0.93%, respectively, but Nikkei 225 dived 2.06%.

Although the FBM KLCI traded towards an intra-day low of 1,680.08 pts, the key index managed to pare down partial losses to end at 1,687.57 pts (-0.51%), forming a Doji candle yesterday. Market breadth was still negative with broader market having 2 gainers for every 3 decliners, while overall traded volumes and values improved to 2.04bn and RM1.94bn, respectively vs. 1.63bn and RM1.32bn on Monday. With the weakening in ringgit against the USD, we noticed export-driven counters were traded actively higher.

Wall Street ended broadly lower for another session after the sharp fall on Monday led by tech stocks and energy shares on the back of declining crude oil prices. Des pite US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He had resumed trade discussions, the Dow and S&P500 fell 0.40% and 0.15%, respectively.

TECHNICAL OUTLOOK: KLCI

After declining for the third consecutive session, the FBM KLCI formed a Doji candle and may have found near term support around 1,680. The MACD Indicator remained flattish with the MACD Histogram continues on the weakening path. Meanwhile, RSI and Stochastic oscillators are hovering below 50. Support will be anchored around 1,658-1,670, while resistance will be located around 1,730-1,743.

We believe the falling Brent crude oil prices would affect trading sentiment on the local front, especially the O&G sector. Meanwhile, traders will be more focused on export-driven companies on the back of the weakening bias of ringgit against the USD. On the KLCI, the downside risk will be pegged around 1,658-1,673.

TECHNICAL OUTLOOK: DOW JONES

Another down day on the Dow and the key index traded near the immediate support around 25,114 level (SMA200). The MACD Indicators stayed below the zero level. Meanwhile, both the RSI and Stochastic oscillators are trending lower; indicating that the momentum is weakening. We believe with the negative technical readings on most of the indicators, the Dow may violate below SMA200, revisiting the support around 24,500 (lower band of the channel). The resistance will be set around 25,545 (SMA100).

On Wall Street, we expect the volatility to remain over the near term as investors will be monitoring the outcome in the upcoming G20 summit as President Trump and President Xi will be meeting up to discuss about trade. Besides, weaker crude oil prices may drag energy shares and sentiment on Wall Street.

Source: Hong Leong Investment Bank Research - 14 Nov 2018