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FBM KLCI - Strong Ringgit to Boost Sentiment


bn2vBlue chips led by banks again extended gains Wednesday, after the ringgit appreciated to a near eight-month high of 3.91 to the USD, the strongest since early Aug last year, copying regional strength after the US Fed chief suggested interest rates may not be raised soon. The KLCI added 2.78 points to end at 1,717.82, off an early high of 1,724.13 and low of 1,716.37, as gainers edged losers 433 to 351 on improved total turnover of 1.85bn shares worth RM2.34bn.

Resistance at 1,728, Support at 1,692
Given the recent strong ringgit trend, companies with high foreign borrowings may recover further from their severe selloffs while major exporters experience profit-taking corrections. Significant resistance for the index stays at 1,728, the 61.8%FR of the 1,867 to 1,503 selloff matching the October 2015 peak, with subsequent stronger hurdles from the August 2015 high of 1,744 and the 76.4%FR level at 1,781. Immediate support stays at the rising 30-day moving average (1,692) and then the 200-day moving average at 1,670, followed next by the 100-day average at 1,667.

BUY AirAsia & AirAsia X for Recovery With overbought momentum neutralized by recent profit-taking dips, AirAsia should attract
buyers again looking for rebound upside towards RM2.00, the 76.4%FR (RM2.01) and
RM2.40 ahead, while key chart supports are at the 61.8%FR (RM1.77), 30-day moving
average (RM1.66) and 50%FR (RM1.58). Similarly, AirAsia X is attractive to bargain on dips
towards chart supports from the 30-day (28sen) or 50-day (26sen) moving averages for
rebound upside towards recent high of 32.5sen, while a confirmed breakout could aim for
the 38.2%FR (37sen), 50%FR (43sen) or 61.8%FR (50sen) going forward.

Cautious Yellen Boosts Asian Markets
Most Asian markets advanced after remarks from Federal Reserve chair Janet Yellen assuaged concerns about a near-term interest rate hike, but Japan's shares retreated as the yen strengthened. Markets scaled back expectations for how fast and far U.S. interest rates might rise this year, after Fed Chair Janet Yellen emphasised global dangers to growth and inflation, and thus the need to proceed "cautiously" on tightening policy. China stocks enjoyed their best day in a month, with main indexes jumping more than 2 percent, as the mainland market joined a global rally after U.S. Federal Reserve remarks hosed down expectations of imminent interest rate hikes. The blue-chip CSI300 index rose 2.6 percent, to 3,216.28, while the Shanghai Composite Index gained 2.8 percent, to 3,000.3 points. The energy sector was among the biggest gainers, with index heavyweights including Sinopec and PetroChina rising sharply on expectations of pending reforms in the sector.

Meanwhile, Australia's ASX 200 was off earlier highs, retracing gains of more than 1 percent to close up 5.78 points, or 0.12 percent, at 5,010.30. Virgin Australia shares tumbled 8.97 percent after Reuters reported the airline's largest stakeholder, Air New Zealand, is considering selling its 25.9 percent stake. However, Japanese stocks fell on Wednesday as  the yen strengthened against the dollar after U.S. Federal Reserve Chair Janet Yellen called for caution on raising interest rates, with the stronger yen weighing on Japan's exporters. The Nikkei share average fell 1.3 percent to 16,878.96 for its lowest close in nearly two weeks. Shares of Takata Corp plunged 19.5 percent after Bloomberg News reported the company's worst-case scenario for its recall could involve 287.5 million potentially defective air bag inflators.

Wall Street Gains on Rate Optimism
U.S. stocks moved further into positive territory for 2016 on Wednesday, as investors continued to scale back bets on higher U.S. interest rates. The bulk of the move came afterFederal Reserve Chairwoman Janet Yellen on Tuesday signalled a slower path for rate increases. Low interest rates have boosted risky assets such as stocks in recent years. On Wednesday, her comments were echoed by Chicago Fed President Charles Evans, who said there was a high hurdle to raising rates in April, given low inflation. The S&P and Dow are on pace for quarterly gains of about 1 percent or more, with the Dow tracking for its biggest quarterly recovery since 1933.

On oil front, U.S. crude oil futures settled up 0.1 percent at $38.32 a barrel. While an increase in U.S. oil stockpiles kept inventories at the highest level since 1930, government data showed U.S. refineries processed the most crude since January. Apple rose 1.75 percent after Cowen & Co raised its rating on the stock to "outperform." The stock gave the biggest boost to the S&P 500 and the Nasdaq. The Dow Jones Industrial Average rose 83.55 points, or 0.47 percent to 17,716.66 points and the S&P 500 added 8.94 points, or 0.44 percent to 2,063.95. The Nasdaq Composite gained 22.67 points, or 0.47 percent to 4,869.29.

source: TA Securities – 31/03/2016

ASEAN Strategy - Not Time Yet For The Bear


■ We are of the view global equity markets are not starting a major bear market phase.
■ US DJIA could be in a major sideways triangle consolidation phase. Long-term uptrend is still intact.
■ MSCI Asia ex-Japan has reached our target levels. Technical indicators show positive divergence signs, an indication the Index is close to its bottom.
■ Crude oil prices should rebound in the immediate term but see one more new low before prices finally bottom.
■ Hang Seng should find strong support at 18,000 levels.

Bear market or not?
While many are calling for the start of a global equity bear market, our time-cycle analysis only points to a peak in 2017/18. Correction has been deep in most equity indices since the start of the year, and the hardest hit were the China equity markets. So far this month, the Shanghai Composite Index is down around 18%.

US DJIA in triangle consolidation?

The US DJIA continued to hold above its major support trendline this week, which is positive. Pattern-wise, the DJIA looks to be trading in a sideways triangle formation since the May 2015 peak, which is a medium-term bullish signal.


Asia equities to bottom soon

MSCI Asia ex-Japan Index (MAxJ) has reached our 425-450pts target. Daily and weekly technical indicators show positive divergence signs. In addition, the weekly and daily RSI has been oversold for around one month. A rebound is long overdue for the MAxJ.

A little lower for oil
Crude oil prices are already below US$30/barrel and prices might see a little more downside before bottoming. Weekly technical indicators show positive divergence signs, an indication that this downtrend is at the tail-end of the trend. Prices could rebound in the immediate term before they finally bottom in the medium term.

Hang Seng has strong support at 18,000
Hong Kong’s Hang Seng Index should find strong support at the 18,000 level, its longterm support trendline. The monthly RSI is testing the 35pts support level. Over the last 20 years, the Index rebounded once the monthly RSI reaches 35.

Crtical period for gloal equities
The next few weeks will be important for global equity markets. While many are calling for the start of a global equity bear market, our time-cycle analysis only points to a peak in 2017/18. Correction has been deep in most equity indices since the start of the year, and the hardest hit were the China equity markets. So far this month, the Shanghai Composite Index is down around 18%.

FBM KLCI Monthly Chart:
klci monthly chart

FBM SmallCap Index Weekly Chart:
malaysia smallcap index weekly chart


Strong support for KLCI at 1,580
Malaysia’s KLCI has been resilient during this month’s global equity sell-off. Monthly charts point to strong support at the 1,580 level. The support trendline was tested a few months back when the index touched 1,500pts and the KLCI could retest the 1,500 level but this is not likely in the immediate term. The FBM Small Cap's medium-term trend remains up, although the weekly MACD has just turned negative. The index could test the 14,350pts support trendline first before starting its next up-leg.

source: CIMB Research – 22/01/16