Feb 11, 2016

Bursa Malaysia Marketview - External Concerns to Cloud Sentiment

Blue chips slumped on Wednesday, dragged down by the weaker sentiment at most global markets amid fears of a global recession, falling oil prices and speculation that the US Federal Reserve could change course on interest rate increases. The KLCI lost 18.05 points to close at the day’s low of 1,644.41, off an early high of 1,670.93, as losers edge gainers 506 to 249 on slow trade totaling 887mn shares worth RM1.05bn.

The weak regional sentiment due to worries over the health of the global economy and lacking local fund support on blue chips indicate that the index could likely slide to test support from 1,642, the 38.2%FR level, with better supports at 1,622 and 1,600, the respective pivot lows in the past two months. Immediate resistance will be 1,685, the 50%FR of the 1,867 to 1,503 selloff, followed by the 200-day moving average level, now at 1,691. Next major resistance is at 1,728, the 61.8%FR matching the Oct 2015 peak.

Bearish technical momentum on CIMB shares implies near term downside bias towards lower Bollinger band (RM3.93), where oversold momentum should encourage bargain hunting for rebound towards upper Bollinger band (RM4.23) and the 50-day moving average (RM4.33), going forward. Likewise, further dip on RHB Capital towards 10-day moving average (RM5.28) would be attractive to buy for rebound towards 23.6%FR (RM5.57), matching the 50-day moving average, with next hurdle seen at 38.2%FR (RM5.92). Immediate support is capped at 10-day moving average (RM5.28).

Japan Lead Asia Lower On Global Growth Fear
Monkeys threw a wrench into Asian markets in the Lunar New Year's first week of trading, with sharp sell-offs in Japan, Singapore, and Down Under on Wednesday. Investors are concerned that markets have yet to bottom out, worrying about the health of the global economy and the plight of energy companies as oil prices sink. Investors will be firmly focused on Federal Reserve Chair Janet Yellen later in the day, as she testifies before the U.S. Congress.

Japanese shares continued to tumble, with the Nikkei 225 dropping 372.05 points, or 2.31 percent, to close at 15,713.39, following a 5.4 percent decline on Tuesday, as banking and commodities stocks continued to get hammered. The index, which has closed in the red for six of the past seven sessions, is down 24.70 percent from its 52-week high set June 2015. Japanese stocks have taken a considerable hit since the Bank of Japan's announcement to introduce a negative interest rate policy late last month, while the yen is seeing sharp strength as investors dump riskier assets and look for safe havens amid the market turmoil. Mitsubishi UFJ Financial Group dropped 2.5 percent, Sumitomo Mitsui Financial Group shed 1.2 percent and Mizuho Financial Group fell 1.4 percent.
Meanwhile, Australia’s S&P/ASX 200 Index also dropped more than 1 percent, extending losses at its lowest level since July 2013, with energy stocks falling 4 percent following an overnight slump in oil prices. Australia’s benchmark was down 21 percent from its late-April high, below the 20 percent mark that defines a bear market, joining markets in China and Japan in bear territory. Hong Kong and South Korea will resume trading on Thursday. Mainland Chinese markets and Taiwan will be closed for the week.

Dow Extend Losing Streak on Yellen’s Remark
U.S. stocks closed mostly lower on Wednesday as investors digested remarks from Fed ChairJanet Yellen, as well another choppy trading in oil. Federal Reserve Chairwoman Janet Yellen  highlighted several risks to the economic outlook that could affect plans to raise rates, giving a downbeat tone to her semi-annual testimony to Congress. She said financial conditions have become less supportive of economic growth and stresses overseas could weigh further on the U.S., while emphasizing that officials are watching developments in global financial markets carefully.

Investors also kept an eye on U.S. oil prices, which seesawed Wednesday. Oil slipped back below $28 a barrel in New York amid speculation that crude inventories will resume their gains after an unexpected decline. The Energy Information Administration said supplies dropped 754,000 barrels last week. A 3.2 million barrel stockpile gain was projected by analysts surveyed by Bloomberg. West Texas Intermediate crude for March delivery sank 1.8 percent to $27.45 a barrel.

The Dow Jones Industrial Average fell 99.64 points, or 0.62 percent, to 15,914.74. A 3.8 percent drop in Walt Disney shares was the biggest drag on the Dow. Disney dropped to $88.85 after reporting lower profit at its ESPN sports network. The S&P 500 eased 0.35 points, or 0.02 percent, to 1,851.86 while the Nasdaq Composite gained 14.83 points, or 0.35 percent, to 4,283.59.

source: RHB Capital Research - 11/02/2016