MARKET REVIEW

Led by major selloff in banking and telco stocks, KLCI slid 20.3 pts or 1.2% to 1641.6 (-3.0% YTD and -13.4% from 52W high of 1896) amid build-up in the headwinds and risks to global and domestic growth. Trading volume decreased to 1.47bn shares worth RM1.18bn as compared to Friday’s 1.50bn shares worth RM1.38bn. Market breadth was negative with 179 gainers as compared to 690 losers.

Ahead of the widely anticipated Fed meeting, the Dow dived 507 pts or 2.1% to 23593 (-2.1% YTD and -12.5% from all-time high of 26952) amid market expectations that the Fed is likely to hike again for the 4th time this year to protect its image of independence despite calls from the president to stop raising rates. President Trump tweeted that it was “incredible” the central bank was considering a rate hike, given low inflation and a strong dollar. Overall, sentiment was bearish as investors weighed the impact of the Fed policy on growth in an economy already anxious over trade, geopolitical tensions and a possible government shutdown.

TECHNICAL OUTLOOK: KLCI

On the back of further breakdown below 1652 (11 Dec low) to end at 1641.6 yesterday and another 2.1% selloffs from Dow overnight, KLCI is slated for another rough sailing today, accompanied by bearish technical momentum and trend indicators. Immediate support is near 1631 (weekly lower Bollinger band), followed by a crucial 1614 (14 Nov 2016) levels, which could attract bargain hunting activities during the window dressing period. A fall below 1614 will witness further slide towards 1590 zones. Conversely, a strong breakout above 1670 (10D SMA) will spur further recovery towards 1682 (20D SMA) and 1700 psychological barrier.

On the local front, we anticipate bearish undertone to prevail in view of external headwinds (e.g. trade tensions and political uncertainty, intensifying worries of global economic outlook, and monetary policy normalisation by central banks) and internal clouds surrounding the slowing corporate earnings, compounded by weak crude oil and FCPO prices. Major supports are set at 1614-1631 whilst resistances are near 1670-1682.

TECHNICAL OUTLOOK: DOW JONES

After hitting a 7M low at 23881 on 10 Dec, the Dow’s technical rebound fizzled off near 24828 on 12 Dec, as the index nosedived 1235pts to end at 23593 yesterday. Given the bearish technical readings and the firm closing below key SMAs, the Dow is likely to retest 23345 (52W low) over the near term, before staging a meaningful rebound. Key resistances are situated near 24000-24500.

In the US, market skittishness is likely to persist heading into the Fed meeting. Overall, investors remain unhinged by the major macro headwinds that have buffeted markets in recent months: rising interest rates, slowing global growth and US-China trade tensions. All eyes are on the upcoming FOMC meeting as the outcome of the events will be affecting markets’ tone significantly, with the Fed widely expected to raise rates by 25 bps and reduce the quantum of previously scheduled 3 hikes in 2019.

TECHNICAL OUTLOOK: CLOSED POSITIONS

We had squared off all of our remaining technical tracker recommendations yesterday i.e. (GENM: 0.0% return; PTRANS: 0.0% return; FRONTKN: -7.3% loss) amid deteriorating sentiment.

Source: Hong Leong Investment Bank Research - 18 Dec 2018