MARKET REVIEW

Despite market participants are waiting for a trade agreement to be struck between the US and China, Asia’s stock markets ended on a higher note after the landslide victory for pro democracy candidates following a record voter turnout. The Shanghai Composite Index and Hang Seng Index rose 0.72% and 1.50%, respectively, while Nikkei 225 added 0.78%.

Stocks on the local front ended negatively given Petronas-related heavyweights traded in the negative territory for the session; the FBM KLCI closed lower by 0.34% to 1,591.35 pts. Market breadth was also negative with decliners leading advancers by a ratio of 5-to-3 stocks. Market traded volumes stood at 2.52bn, worth RM1.54bn. Meanwhile, packaging stocks such as Master Pack, Ornapaper and Advance Packaging traded higher for the day.

In the US, despite the ongoing impeachment inquiry on President Donald Trump, Wall Street marked another fresh high on the back of trade optimism where China and the US could reach a phase one mini deal that could remove the risk of further escalation in the trade war. The Dow and S&P500 rose 0.68% and 0.75%, respectively, while Nasdaq surged 1.32%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI extended its consolidation phase but hovering above the 1,580 level. The MACD Indicator is turning flattish, while both the RSI and Stochastic oscillators are trending lower. With the weaker technical readings, we expect the upside will be capped at this juncture with resistance set around 1,600-1,620 levels, while support will be located around 1,580.

On the local front, we believe the positive sentiment in the US could translate to buying support in the local stocks. However, any of the negative surprises from the ongoing reporting season may cap the upside potential of the upward move on the KLCI. Nevertheless, traders may focus in plantation stocks amid the strong FCPO prices, which traded above RM2,700 at this juncture.

TECHNICAL OUTLOOK: DOW JONES

The Dow remains in the uptrend positive following the rebound yesterday. The MACD Indicator is still flattish, but both the RSI and Stochastic oscillators are hooking up yesterday. Hence, we believe the uptrend may surge towards 28,200 level following the flag breakout yesterday. Support will be located around 27,670

In the US, market participants are mainly trading on the assumption of a phase one mini trade deal to be agreed by both the US and China. However, should this trade deal fall apart, we believe market may succumbed to profit taking activities. Also, the scheduled tariffs that may be imposed on 15th of December could dampen the sentiment further.

TECHNICAL TRACKER: CLOSE POSITION

We had squared off our position on T7GLOBAL (4.9% loss) yesterday amid weakening technicals.

Source: Hong Leong Investment Bank Research - 26 Nov 2019