MARKET REVIEW

Despite weaker-than-expected Chinese industrial production data for October, which grew at 4.7% YoY (vs. 5.4% growth from Reuter’s consensus), Shanghai Composite Index inched higher by 0.16%. Meanwhile, Nikkei 225 and Hang Seng Index dropped 0.76% and 0.93%, respectively - the latter was dragged by Tencent after announcing a drop of 13% YoY in earnings.

On the local front, the FBM KLCI slipped 0.23% to 1,593.55 pts led by profit taking activities in selected heavyweights such as PetDag, PetGas and Tenaga. Market breadth was still negative with 435 decliners and 347 gainers. Market traded volumes stood at 2.20bn, worth RM1.68bn. Nevertheless, power related theme stocks such as Jaks and Mudajaya was traded actively higher for the session.

Wall Street ended on a mixed note amid lacking of fresh catalyst, coupled with the uncertain persisting concerns over US and China trade progress. The Dow and Nasdaq slipped marginally by 0.01% and 0.04%, respectively. However, S&P500 managed to eke our marginal gains of 0.08%. On the data front, weekly jobless claims stood at 225,000 last week, its highest level since June.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI extended another day of decline and the MACD Indicator is weakening (MACD Line is falling, while MACD Histogram is declining). Meanwhile, both the RSI and Stochastic oscillators have trended lower after hovering in the overbought region over the last few trading days. Hence, we believe the KLCI is likely to stay in the consolidation phase for now. Resistance is set around 1,620, while support is located around 1,580.

With the persisting uncertainty over the phase one mini deal, coupled with the political tensions in Hong Kong as well as the cautious tone moving into the November reporting season, we opine that the investors may stay sidelines over the near term. The FBM KLCI should trend sideways within 1,580-1,620 over the near term.

TECHNICAL OUTLOOK: DOW JONES

The Dow has been trending sideways, ranging between 27,600-27,800 over past six trading days. The MACD Line is still above zero, but the MACD histogram has been weakening over the past few sessions. Meanwhile, both the RSI and Stochastic oscillators are overbought. With the current technical readings, we expect the Dow’s upside could be limited around 28,000, while support is pegged around 27,100.

Investors were pushing Wall Street towards the all-time-high region over the past few weeks in the anticipation of a phase one mini deal to go through. However, without any solid details at this juncture until the signing of the agreement, we believe US equities may trend sideways with limited upside. Should there be any negative surprises, it may trigger a retracement, where the support is located around 27,100.

Source: Hong Leong Investment Bank Research - 15 Nov 2019