Strategy : The 2016 US Presidential Election Goes Down To The Wire

FOCUS OF THE DAY

Strategy : The 2016 US Presidential Election Goes Down To The Wire      

With the 2016 US Presidential Election going down to the wire, and touted as the most divisive and polarising one in US history, we reiterate our view that a win by Hillary Clinton, while very much the market's "base case", would still trigger a relief rally in the markets with the removal of the "Trump presidential risk premium" from the equation. Technically, we expect DJIA, S&P 500 and NASDAQ to recover from 4 Nov lows by 1.6%, 2.4% and 5.7% to 18,170pts, 2,135pts and 5,335pts over the immediate term. As all boats float on a rising tide, we believe FBM KLCI, technically, should recover by 1.4% to 1,672pts as well. Under this scenario, we will maintain our end-2017 KLCI target of 1,745 pts, which is at a 1x multiple premium to its 5-year historical average of about 16.5x. This premium is to reflect the sustained accommodative monetary policy stance adopted by central banks globally.

A win by Donald Trump will trigger a major selloff - we believe that could last for days, weeks or months - as the market tries to get a better grasp of what is in store for the US and global economies under the more radical tax, foreign relations, international trade, immigration, healthcare and fiscal policies proposed by the Trump administration. Technically, from the 4 Nov lows, we expect DJIA, S&P 500 and NASDAQ to fall further by -4.5%, -4.1% and -7.1% to 17,075pts, 2,000pts and 4,690pts over the immediate term. We do not believe FBM KLCI would be spared, and technically we believe it will ease -2.0% to 1,615pts to retest the June’s low. Under this scenario, we cut our end-2017 KLCI target by 100 pts to 1,645 pts, which is at a zero premium to its 5-year historical average of about 16.5x. This to reflect the uncertainties in the US and global economies under the Trump administration, that would offset the premium arising from the sustained accommodative monetary policy stance adopted by central banks globally.

Others :

Axiata Group : Expanding Myanmar tower presence       BUY

Ikhmas Jaya : Booking In Additional Costs             BUY

IHH Healthcare : Lira & SG$ - the opposite view HOLD

SMIC : Net profit above consensus on stronger operating margin              U.R

QUICK TAKE

Technology Sector : Huawei launches flagship model in US           OVERWEIGHT

ECONOMIC HIGHLIGHTS

Indonesia : Expect GDP to settle within official target

NEWS HIGHLIGHTS

Timber Sector : NWP ventures into construction with a RM22mil contract

Manufacturing Sector : SLP may invest RM24mil to expand plant

IT Sector : Scicom posts profit jump