MARKET REVIEW

Stocks in Asia were traded mostly higher and key regional benchmark indices gained traction after China’s Markit/Caixin Purchasing Managers' Index (PMI) for manufacturing suggest that it is still in an expansionary mode in December, the reading stood at 51.5 vs. 51.8 in November. The Shanghai Composite Index and Hang Seng Index advanced 1.15% and 1.25%, respectively. Meanwhile, Japan stock exchange was closed for public holiday.

Meanwhile, stocks on the local front were tracking the movements in the regional markets; the FBM KLCI jumped 0.86% to 1,602.50 pts led by banking and plantation stocks. Market breadth was positive with gainers led losers by a ratio of 2-to-1, accompanied by market traded volume of 3.36bn, worth RM1.86bn. We noticed steel counters were making a decent rally following the anti-dumping duties imposed on cold rolled coils from several countries last week.

Wall Street charged higher on the first trading day of 2020 led by technology stocks under the semiconductor segments like AMD, Taiwan Semiconductor and Micron. Also, the positive sentiment was supported by PBoC’s move on lowering its reserve requirement ratio by 50bps, which will inject about 800bn yuan to the Chinese economy. The Dow and S&P500 gained 1.16% and 0.84%, respectively, while Nasdaq advanced 1.33%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has rebounded above 1,600 level and the MACD Line is hovering above zero. Meanwhile, both the RSI and Stochastic oscillators have hooked higher and still trending above 50; indicating that the positive momentum is intact. The upside target will be setting around 1,620, while support is located around 1,580.

With the trade optimism following the firm statement from President Trump to sign the Phase One trade deal in Washington, we believe market participants will remain positive at this juncture at least until 15 Jan. Also, we think traders will look out for plantation stocks following the rally in crude palm oil prices and steel counters as sentiment has shifted positively recently. The FBM KLCI should trade within the range of 1,580-1,620.

TECHNICAL OUTLOOK: DOW JONES

The Dow continues to stay within the uptrend formation and marked a fresh high yesterday. The MACD indicator remains positive above zero, but both the RSI and Stochastic oscillators have returned to the overbought region. Hence, upside could be limited around resistance of 29,000, while support is anchored around 28,000.

With China PBoC’s move on the reserve requirement ratio, coupled with the trade optimism as Phase 1 trade deal will be signed by 15 Jan. Hence, we believe uptrend on Wall Street will be fairly intact at least over the near term. However, the overbought situation on the Dow may warrant a mild consolidation near the current level with the trading range located around 28,000-29,000.
 

Source: Hong Leong Investment Bank Research - 3 Jan 2020