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

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