MARKET REVIEW

Despite setback by Dow’s overnight 206 pts fall, most Asian markets recovered to end mildly higher, led by 1.75% and 1.35% rallies in Hong Kong and Shanghai markets following Bloomberg news that Chinese officials have outlined a series of potential concessions to the Trump administration to de-escalate trade turmoil.

Tracking improving regional markets undertone and mild recovery in the crude oil prices, KLCI rose 5.8 pts at 1694.2 to record its 2nd straight gains. Trading volume decreased to 1.98bn shares worth RM1.88bn as compared to Wednesday’s 2.21bn shares worth RM1.92bn. Market breadth was positive with 563 gainers as compared to 285 losers.

After slumping 1111 pts in 4-day and experiencing another topsy-turvy session (fluctuated within +293 pts and -274 pts), the Dow finally staged a 208-pt rebound to 25289 overnight, led by gains in previously beaten down stocks such as Apple, Caterpillar, Microsoft and JP Morgan. Overall, sentiment was boosted by news that China reportedly responded to Washington's requests to deal with a range of American grievances, and the possibility of concessions was reviewed.

TECHNICAL OUTLOOK: KLCI

Despite recent global markets rout, KLCI remains largely resilient with strong floors above the 1658 (post GE14 low) and 1670 (Oct low) territory. We expect current range bound consolidation to prevail with supports at 1658-1670 whilst resistances are pegged at 1704 (10-d SMA) and 1726 (8 Nov high). Only a successful reclaim above 1726 will spur further advance towards 1750 (100d SMA) levels.

The overnight 0.83% rebound in Dow should push KLCI to record its 3rd straight gains today but we believe any rebound will be short-lived and capped near 1726, ahead of the crucial Trump-Xi meeting expected at the G-20 summit (30 Nov-1 Dec). Meanwhile, sentiment would remain cautious amid ongoing Bursa Malaysia’s 3Q18 corporate earnings.

TECHNICAL OUTLOOK: DOW JONES

The Dow is likely to find a temporary bottom near 24122, supported by the hammer-liked pattern on 29 Oct. yesterday’s close above 200d SMA near 25094 should boost further sentiment to appreciate further towards 25500-25800 territory, supported by the hammer pattern overnight. Only a decisive breakout above 26278 (8 Nov high) would spur a retest to all-time high of 26952 (3 Oct).

Following the conclusion of 3Q18 results season, all eyes are on the upcoming Trump-Xi meeting during G20 summit and the FOMC meeting on 17-18 Dec. We expect volatility to remain as investors’ sentiment is likely to be highly driven by headlines.

Source: Hong Leong Investment Bank Research - 16 Nov 2018