MARKET  REVIEW

Asia’s stock markets traded mostly lower as investors focused on falling oil prices and sentiment was cautious ahead of the trade discussions between Trump-Xi in the upcoming G20 summit. The Shanghai Composite Index and Hang Seng Index declined 0.85% and 0.54%, respectively, but Nikkei 225 rose 0.16%.

Despite the sell down in oil and gas sector on the back of weaker Brent oil prices, the FBM KLCI managed to eke our marginal gains to end higher at 1,689.41 pts (+0.05%). Market breadth was still bearish with decliners led advancers by a ratio of 5-to-3. Market traded volumes stood at 2.21bn, worth RM1.92bn. Under this negative trading environment, we noticed consumer stocks such as Nestle, Panasonic, QL and F&N were traded higher.

US equities were mostly negative led by technology and financial sectors; the latter was traded in the negative territory amid rising concerns that regulation over the banking industry would tighten once the Democratic Party takes control of the US House of Representatives. The Dow and S&P500 dropped 0.81% and 0.76%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI ended marginally higher, snapping the 3-day losing streak. Also, the key index has formed a hammer candle, forming a tweezer bottom pattern. The MACD Indicator stayed flattish as the MACD Histogram continues to weaken further. Both the RSI and Stochastic oscillators are suggesting mixed readings on the key index, hence the key index could trend sideways with the support located around 1,673, followed by 1,658. Resistance will be envisaged around 1,700, followed by 1,726.

Tracking the negative performance on Wall Street, we opine that the selling pressure would surface amongst technology stocks. Meanwhile, oil and gas stocks could be due for mild buying support on the back of a technical rebound on Brent oil prices. Nevertheless, as we are heading into the peak of the reporting season, market volatility may increase on the broader market; the KLCI’s trading range will be located within 1,673-1,726.

TECHNICAL OUTLOOK: DOW JONES

The Dow has violated briefly below the SMA200 after falling for 5 consecutive trading days. The MACD Indicator has turned negative, while both the RSI and Stochastic oscillators are in a declining mode. We believe the negative technical signals may suggest that the trend is still on a consolidation mode. The upside will be capped around 25,500, while support will be located around 24,500.

We believe the current uncertain trade developments will definitely cap the market upside potential over the near term. Should there be any negative surprises in the upcoming G20 summit upon the conclusion of President Trump and President Xi’s discussion, we may expect downside risk on Wall Street.

Source: Hong Leong Investment Bank Research - 15 Nov 2018