MARKET REVIEW

Most Asian markets rose follwoing a positive China 4Q19 GDP at 6% (2019: 6.1%), in line with market expectations and suggesting the world's 2nd largest economy was stabilising amid a 18-month US-China trade dispute. Risk appetite was also whipped up by expectations that more stimulus steps are expected this year to avert a sharp slowdown in China.

Tracking higher regional markets, KLCI jumped 7.9 pts at 1595.8 (+4.3 pts WoW), recovering from a low of 1586.8. Sentiment was also buoyed by the active trading interests in telco stocks following the resurfaced Khazanah-Telenor talks involving Axiata. Trading volume increased to 2.84bn shares worth RM2.26bn as compared to Thursday’s 2.60bn shares worth RM1.91bn. Market breadth was positive with 468 gainers as compared to 388.

The Dow rose 50 pts to end at another record close to 29348 (+1.8% WoW), fuelled by a 17% surge in US Dec housing starts to a 13Y high and positive indications of resilience in China’s economy. Meamwhile, a solid start to the corporate earnings season (based on reported S&P 500 members results, 75% beating EPS estimates and 71% beating revenue estimates) and a truce in the US-China trade war, low interest rates and signs the economy remains healthy also boosted sentiment.

TECHNICAL OUTLOOK: KLCI

After plunging 45 pts from 1M high at 1617 (30 Dec) to a low of 1572 (14 Jan), KLCI managed to record its 3rd straight gains to end 7.9 pts higher at 1595.8. On the back of recent hammer candles formation and bottoming up technicals coupled with a reclaim above 10d/30d/50d/100d SMAs, we opine that KLCI’s upward momentum has strengthened and may rebound towards 1600-1613 (200D SMA) levels in the near term. Support is located around 1584 (50% FR), 1572 and 1566 (76.4% FR) levels.

We opine that KLCI should maintain the upward momentum to test our envisaged 1600-1613 zones amid the bullish Wall St performance. However, further rally beyond 1613 is likely to be capped by the by the long CNY break (half day trading on 24 Jan and resume trading on 28 Jan), expectation of another soft Feb reporting season coupled with the local political noises. Nevertheless, traders could look into construction and technology as well as oil & gas stocks as volumes were building up over the past few trading days.

TECHNICAL OUTLOOK: DOW JONES

The Dow jumped 50 pts to new record close at 29348 (off all-time high at 29374). The MACD and RSI are in bullish mode whilst the stochastic oscillators are taking a breather. Overall, the Dow may trend higher towards 29500-30000 in the short to mid-term, barring any decisive breakdown below 28750 (20D SMA) and 28513 (30D SMA) and zones.

In the US, we believe the Dow’s uptrend is fairly intact amid fading US-Iran geopolitical tensions and de-escalation of U.S.-China trade tensions coupled with the Senate approval of a new trade deal between the US and the Mexico and Canada on Thursday. In wake of the ongoing healthy 4Q19 reporting season, we remain optimistic the Dow could advance towards 29500-30000 territory in the next few weeks, with support set around 28500-28700 levels.

Source: Hong Leong Investment Bank Research - 20 Jan 2020