MARKET REVIEW

Led by losses on SHCOMP (-0.47%) and HSI (-0.22%), Asia’s stock markets ended lower as investors feared that Trump’s decision to sign a bill backing HK protestors on Wednesday could derail an interim US-China trade deal. The spat over Hong Kong overshadowed another record high on Dow overnight triggered by a set of strong economic data. Tracking regional markets and earnings uncertainty during the final week of Nov reporting season, KLCI eased 3.4 pts at 1583.8 after locking within intra-day high of 1588.5 and a low of 1582.3. Trading volume decreased to 2.13bn shares worth RM1.44bn as compared to Wednesday’s 2.51bn shares worth RM1.66bn. Market breadth was negative with 305 gainers against 501 losers.

Wall Street was closed overnight for the Thanksgiving holiday after rising 42 pts at 28164 on Wednesday, and Friday will see a shortened day of trade. Meanwhile, European stocks fell overnight in holiday-thinned trading after fresh signs of US-China tensions as China threatened unspecified retaliation after Trump signed a bill supporting HK protestors. The angry reaction by China has cast some doubt on the possibility of a US-China phase one agreement prior to the 15 Dec US tariffs on China goods.

TECHNICAL OUTLOOK: KLCI

Following a 4.3% or 66 pts rally from a 4Y low of 1548 (10 Oct) to 1614 (12 Nov), KLCI has been trending lower to end at 1583.8, violating major SMA supports. In wake of the MACD dead cross formation and declining RSI, we expect further consolidation ahead but the index should find a floor near 1573 (61.8%) due to its grossly oversold position. A decisive break down below 1573 will trigger more selloff to revisit 1564 (23 Oct low) and 1548 zones. Meanwhile, resistances will be pegged around 1594 (10D SMA)/1606 (100D SMA) zones.

On Bursa Malaysia, we expect sentiment to remain tepid owing to the earnings uncertainty by the Nov reporting season and renewed turmoil in the US-China trade deal after Trump signed bills backing HK protestors. Following recent breakdown below multiple key SMA supports, KLCI is envisaged to extend its consolidation but traditional window dressing activities in December and the conclusion of Nov reporting season next week are likely to lend some support, with key supports situated at 1564-1573 levels. On the contrary, stiff resistances are located around 1594-1606 levels.

TECHNICAL OUTLOOK: DOW JONES The Dow continues to trade in an uptrend mode with the MACD indicator expanded positively over the past few sessions. The RSI and Stochastic oscillators however are in overbought region. Hence, the upside could be limited for the near term around 28,500, while the support will be anchored around 27,670.

In the short term, the Dow is likely to remain event-driven until an agreement can finally be reached by the US and China. Overall, Trump’s approval of the bill was not unexpected and neither was the stern reaction from Beijing, given China’s adamant rejections of any commentary on what it considers an internal issue. However, the clash comes at a sensitive time and could upset already thorny trade negotiations. Technically, any overbought retracement is likely to be cushioned near 27100-27400 territory amid recent positive economic data and upbeat US 3Q19 results, whilst resistances are near 28500-29000 levels.

Source: Hong Leong Investment Bank Research - 5 Dec 2019