MARKET REVIEW

Investors were monitoring on the trade developments between the US and China and Asia’s stock markets traded mostly in the positive region following a news article mentioning that China and the US could be rolling back tariffs in several phases. The Hang Seng Index and Nikkei 225 advanced 0.57% and 0.11%, respectively, while Shanghai Composite Index closed flat. Stocks on the local front were lifted by sentiment following China and the US agreeing to roll back tariffs on each other in phases; the FBM KLCI rose 0.38% to 1,609.33 pts. Market breadth was positive with 456 gainers vs. 382 decliners, accompanied by 2.62bn shares traded worth RM1.89bn. We also noticed that poultry stocks such as CCK and Teoseng Capital traded actively higher.

Wall Street surged to record high after fresh developments on US and China trade front, with both agreeing to remove on existing trade tariffs by stages and investors fled safe haven assets for equities at this juncture. Sentiment was also lifted as Chinese spokesperson commented that both side were approaching a “phase-one” trade deals after constructive negotiations in the past two weeks. The Dow and S&P500 advanced 0.66% and 0.27%, respectively while Nasdaq added 0.28%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI extended its rebound move since the breakout above the 1,600 psychological level, the MACD Indicator is positive above zero, while both the RSI and Stochastic are slightly overbought. Although momentum oscillators are overbought, should there be any breakout above the immediate resistance of 1,610, next target will be at 1,620-1,640. Support will be located around 1,580, followed by 1,550.

On the local front, we expect the buying interest to spill over, eventually lifting the KLCI higher towards 1,620. Also, we think traders could also position themselves on the index heavyweights on the back of potential window dressing activities in December should there be any weakness in the near term. The KLCI’s trading range will be seen around 1,580-1,620.

TECHNICAL OUTLOOK: DOW JONES

The Dow trended positively marking fresh record high and the MACD indicator expanded positively above zero. Meanwhile, both the RSI and Stochastic oscillators are hovering within the overbought region. Despite the overbought signals, the trend is still upward biased until the Dow violates below the support at 27,100. Resistance is pegged around 28,000.

With the rise in optimism over trade developments as both the US and China agree on the removal or roll back of trade tariffs in phases, we anticipate market participants to deploy a risk-on strategy and more exposure may be seen in equities, translating to further record highs on Wall Street. At this juncture, the positive catalysts are more encouraging and we opine the Dow may extend its upward move to 28,000.

Source: Hong Leong Investment Bank Research - 8 Nov 2019