MARKET REVIEW

Asia’s stock markets traded lower as a result of escalating violence from the ongoing protest in Hong Kong. Also, little details were revealed by President Trump during his speech in the Economic Club of New York on Tuesday over the progress of trade discussions and market participants were waiting for more clarity on the first phase of the trade agreement. The Hang Seng Index and Shanghai Composite Index declined 1.82% and 0.33%, respectively, while Nikkei 225 fell 0.85%.

In tandem with the regional markets, FBM KLCI slipped 0.78% to 1,597.22 pts led by Petronas Chemical after announcing weaker results. Market breadth was negative with 589 losers vs. 287 gainers. Market traded volume stood at RM2.14bn, worth RM1.74bn. Meanwhile, consumer giants such as F&N, Nestle and Heineken traded higher.

Despite news reported several concerns over US-China trade progress, where China could be resisting to fulfil requests from the US on tech transfer and intellectual property issues as well as balking at commitments to specific farm purchases from the US, the Dow managed to advance higher on the back of positive sentiment on Disney as the media giant commented that its Disney+ streaming service obtained more than 10 million sign-ups after the launch on Tuesday.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has rebounded sharply from 1,548 level towards 1,614 level over the past 5 weeks and strong profit taking activities emerged yesterday (led by Petronas Chemical and banking heavyweights). The MACD Indicator continues to weaken. Meanwhile, both the RSI and Stochastic oscillators have hooked down in the overbought region. Hence, we opine that KLCI could consolidate further over the near term. Resistance is envisaged around 1,610- 1,620, while support is pegged around 1,580.

On the local front, although some bargain hunting interest may emerge today after a sharp decline yesterday on the KLCI, we opine that the upside will be limited as investors could deploy a cautious tone moving into the full blown reporting season in the near term. Also, without a clear picture on the trade deal between the US and China, market participants may remain sidelines for now. The KLCI’s trading range will be set along 1,580-1,620.

TECHNICAL OUTLOOK: DOW JONES

The Dow could be moving out from the 4-day consolidation phase after forming a bullish engulfing candle. Also, the MACD Line is trending positively above zero. However, with both the RSI and Stochastic oscillators suggesting that the key index is overbought, the upside could be limited around the resistance along 28,000. Support is anchored around 27,400.

Despite the Dow marking another fresh record high yesterday, we still believe the upside could be limited as investors will continue to monitor on the US and China progress as it is hitting some roadblock amid some disagreements on several core issues requested by the US, which may potentially delay the signing of the phase one mini deal. Also, the overbought situation on the Dow is likely to suggest that the upside could be capped near the resistance along 28,000.

TECHNICAL TRACKER: CLOSED POSITIONS

We had squared off our positions on INSAS (3% gain) and MHB (5.2% gain) after hitting their R1 targets

Source: Hong Leong Investment Bank Research - 14 Nov 2019