MARKET REVIEW

After the flip-flop situation on the trade front between the US and China, fresh positive overnight developments have surfaced where a news report from Bloomberg stated Washington and Beijing were moving closer to a trade deal and both countries may be agreeing to roll back selected tariff in the phase-one trade deal. The Shanghai Composite Index and Nikkei 225 rose 0.74% and 0.71%, while Hang Seng Index 0.59%. In tandem with the regional markets, the FBM KLCI added 0.17% after few sessions of declining move previously. Market breadth has turned positive with gainers leding losers by a ratio of 5-to-3, accompanied by overall traded volumes of 2.39bn, worth RM1.70bn. Also, most of the plantation counters trended higher as a result of strong crude palm oil prices, which breached above the RM2,800 level yesterday.

Wall Street gained marginally on the back of strong employment data, where the US weekly jobless claims dropped to 203k last week as compared to the consensus estimate of 215k. Also, developments on the trade front have turned slightly positive as President Trump commented that the trade discussion is going “very well”. The Dow and S&P500 rose 0.10% and 0.15%, respectively, while Nasdaq added 0.05%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has stabilised around the 1,550 level and rebounded mildly above the support. The MACD Indicator has turned flattish (albeit hovering below zero). Meanwhile, both the RSI and Stochastic oscillators are gradually moving higher over the past few sessions. Hence, we believe the KLCI may extend its technical rebound over the near term. Resistance will be located around 1,580-1,600. Support is set around 1,550, followed by 1,530.

As the KLCI had stabilised over the past few days, in tandem with the global stock markets, coupled with the recovering sentiment in the broader market (positive market breadth yesterday) and gradual recovering technical indicators, we expect window dressing activities to continue until end of December. The KLCI could trade within the range of 1,550 -1,600 in the near term.

TECHNICAL OUTLOOK: DOW JONES

The Dow has recovered for the second consecutive day and the MACD indicator is hovering above zero. Also, both the RSI and Stochastic oscillators are hooking up. Thus, we opine that the technical rebound could extend over the near term. Resistance will be envisaged around 28,000-28,200. Meanwhile, support is pegged along 27,400.

In the US, markets are likely to be event-driven in the near term as investors or traders will monitor closely on any new developments on the trade front, especially news or tweets from the Chinese or US officials. Hence, market participants could be tradi ng on a cautious tone until 15th of December as the additional tariffs (15% on about USD160bn Chinese goods) may take effect by then. The Dow’s trading range will be located around 27,400-28,000.

Source: Hong Leong Investment Bank Research - 6 Dec 2019