MARKET REVIEW

Following the positive rebound on Wall Street, key regional benchmark indices ended on a mixed note as profit taking activities emerged ahead of the crucial meeting between President Trump and President Xi in the upcoming G20 summit. The Nikkei 225 rose 0.39%, while Hang Seng Index and Shanghai Composite Index declined 0.87% and 1.32%, respectively.

Meanwhile, on the local front, the FBM KLCI (+0.58%) traded on a positive tone led by selected banking and telco heavyweights, but Genting-related companies were still being traded into the negative territory. Market breadth was weaker as decliners led advancers by a ratio of nearly 2-to-1, accompanied by overall traded volumes of 2.16bn, worth RM2.45bn. With the weaker crude oil prices, oil and gas stocks such as Bumi Armada, Hibiscus, Sapura Energy and KNM succumbed to selling pressure.

Wall Street pulled back for the first time after three positive trading days as investors took profit ahead of the G20 summit, where President Trump and President Xi will be having a scheduled meeting to discuss on trade issues. The Dow and S&P500 slid 0.11% and 0.22%, respectively, while Nasdaq fell 0.25%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI managed to gap up yesterday, but ended below the 1,700 psychological level. Despite the recovering MACD Indicator, both the RSI and Stochastic oscillators are hovering below 50; indicating that the strength of the key index is still weak. Hence, we believe the KLCI’s upside will be limited around 1,700-1,730. Meanwhile, support will be pegged around 1,673-1,680.

Tracking the softer tone on Wall Street, coupled with weak sentiment following the Genting Disney dispute, we opine that the overall trading tone would remain subdued. Meanwhile, oil and gas stocks will still be under traders’ radar as Brent oil price is hovering below USD60 mark. Hence, the KLCI’s upside is likely to be capped along the 1,700-1,730 level.

TECHNICAL OUTLOOK: DOW JONES

The Dow took a mild breather after the 3-day winning streak. However, the MACD Line has crossed above the Signal Line. The RSI (above 50) and Stochastic (hovering above the oversold region) oscillators are in the recovery mode. With the positive technical readings, we opine that the Dow could trade higher towards 25,500-25,840 after a short consolidation. Meanwhile, the support will be located around 24,880, followed by the lower band of the upward channel (24,500).

We expect market to turn slightly cautious ahead of the Trump-Xi discussions in the upcoming G20 summit. Also, we believe the oil market will be slightly volatile prior to the OPEC meeting next week, which may affect the trading interest on energy shares. Meanwhile, investors will be watching closely on FOMC meeting next month to understand the outlook of interest rates.

Source: Hong Leong Investment Bank Research - 30 Nov 2018