MARKET REVIEW

Despite some Chinese officials were expressing fresh doubts on the likelihood of a “phase one” mini deal will be signed over the near term, Asia’s stock markets ended mostly higher. The Shanghai Composite Index and Hang Seng Index rose 0.99% and 0.72%, res pectively, but Nikkei 225 slipped 0.33%. Meanwhile, KLCI snapped a 3-day winning streak as profit taking activities were noted in banking heavyweights. Market breadth was negative with decliners led advancers by a ratio of 4-to-3. Market traded volumes stood at 2.79bn, worth RM1.64bn. Nevertheless, we noticed selected construction (MRCB and AZRB) stocks trading actively.

Wall Street advanced significantly as it digested stronger-than-expected US jobs data; according to the US Labour Department, the US economy added 128k jobs in October (vs. consensus of 75k) despite a decline of 42k jobs due to General Motors strike that has now been settled. The Dow and S&P500 rose 1.11% and 0.97%, respectively, while Nasdaq added 1.13%.

TECHNICAL OUTLOOK: KLCI

Although the FBM KLCI has snapped the recent winning streak, the MACD Line has crossed above zero and the MACD Histogram has turned positive. The RSI is trending above 50, while the Stochastic is in the overbought region. Should the key index surge above 1,600, next resistance is envisaged 1,620. Support will be located around 1,580.

On the local front, buying support may spillover, tracking the bullish tone on Wall Street, coupled with the slowdown in easing bias tone on the interest rate outlook by the Fed; the technical rebound may persist towards the resistance of 1,620. However, should there be any negative surprises from the November reporting month, we expect that profit taking activities may quickly emerge.

TECHNICAL OUTLOOK: DOW JONES

Following the breakout of the short term sideways consolidation phase and the mid-term triangle breakout, the MACD Indicator has expanded positively above zero. Both the RSI and Stochastic (albeit in the overbought region) has hooked upwards. Hence, the Dow is likely to surge above the all-time-high at 27,399 level, with the next resistance located around 27,700. Support is anchored around 26,950.

Despite the uncertain developments on the trade front as market participants will be awaiting for the “phase one” mini deal to be signed over the near term, we believe the recent stronger than expected economic data will be able to lift the market sentiment for now, translating to further upside potential on the Dow towards the next resistance of 27,700 (if 27,400 immediate resistance is taken out).

Source: Hong Leong Investment Bank Research - 7 Nov 2019