MARKET REVIEW

Despite the selldown on Wall Street last Friday, most of the key regional benchmark key indices ended higher following the positive endorsement from the EU leaders on UK Prime Minister Theresa May’s Brexit withdrawal over the weekend. Also, the mild recovery on oil prices lifted the sentiment. The Nikkei 225 and Hang Seng Index gained 0.76% and1.73%, respectively, but Shanghai Composite Index slipped 0.14%.

Meanwhile, on the local front, bargain hunting activities lifted the FBM KLCI (+0.36%) and managed to eke out marginal gains at the eleventh-hour. Market breadth was however negative with 452 decliners vs. 353 advancers. Meanwhile, market traded volumes were slightly higher at 1.74bn worth RM1.41bn, compared to 1.58bn worth RM1.10bn last Friday. We noted selected export-oriented stocks were traded actively higher amid weaker ringgit.

Wall Street rebounded strongly after several negative trading sessions last week led by Amazon as investors speculated that the Cyber Monday sales would register strong gains for retailers via online sales. The recovery in crude oil also helped lifting the sentiment; the Dow and S&P500 gained 1.46% and 1.55%, respectively, while Nasdaq rose 2.06%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI rebounded mildly after trading within a tight range over the past three trading days. The MACD Histogram has recovered yesterday, however both RSI and Stochastic oscillators are still trending below 50. Hence, with the mixed signals on most of the indicators, we opine that the KLCI’s upside will be capped along 1,730, while support will be pegged along 1,689, followed by 1,673.

Tracking the Wall Street positive performance overnight, we believe buying support may emerge on the local front. However, Asia’s sentiment may be affected by Trump’s comment that he is expecting to move on with raising tariffs on the USD200bn Chinese imports to 25% (from 10%). Meanwhile, traders are likely to focus on O&G stocks amid rising crude oil.

TECHNICAL OUTLOOK: DOW JONES

Although Dow rebounded off the lower band of the upward channel in the recent session, it is still hovering below SMA200. Also, MACD indicator is still negative. However, both the RSI and Stochastic oscillators are trending slightly higher above the oversold region. Hence we think the rebound would be short-lived with the upside capped around 25,000, with the support pegged around 24,000.

In the US, with the healthy rebound along the lower band of the upward channel, coupled with positive rebound on crude oil prices as well as technology giants, we anticipate further recovery would be seen. Nevertheless, traders will be watching the upcoming major events such as the Trump-Xi discussions in The G20 summit, FOMC and OPEC meetings for further clues on stock markets.

Source: Hong Leong Investment Bank Research - 27 Nov 2018