HLBank Research Highlights
Traders Brief-Profit taking to cap further strong gains ahead of long Raya break and Greece bailout
Profit taking to cap further strong gains ahead of long Raya break and Greece bailout plan
Bursa Malaysia recap
- KLCI ended higher for a 2nd consecutive session but still drops 18.7 pts wow Asian stock markets ended last Friday on a positive note, driven by a 2nd straight session rally in China’s SHCOMP (+4.5% to 3878 and +5.2% wow), as the market seemed to have stabilized amid government's recent drastic measures.
- Sentiment was also helped by optimism that debt-laden Greece will reach a deal with its creditors on 12 July dateline and stave off an exit from the Eurozone after the country’s government submitted a new reform proposal late Thursday.
- Tracking positive regional backdrop, KLCI jumped 14 pts to 1715.6 but still ended 1.1% or 18.7 pts lower wow, impacted by lingering domestic uncertainties over political glitches and ongoing probes on 1MDB and MARA scandals as well as external uncertainties from Greece and China.
Wall St recap
Dow rallies 212 pts to end 30 pts higher wow
- Tracking back-to-back rallies in China and Europe markets coupled with a less hawkish undertone from Yellen’s s peech, Dow surged 212 pts or 1.2% to end at 17760.
- Despite the 1.2% gain, Dow only edged up 30 pts wow as the index endured a turbulent week (fluctuated from a low f 17465 on 7 July to a high of 17797 on 10 July) dominated by the Greek debt drama, Chinese stock market meltdown and a 4-hour shutdown of the New York Stock Exchange.
KLCI outlook
Profit taking to cap further strong gains ahead of long weekend Raya break and Greece bailout plan
- Unless we see a more semblance of stability return to China markets, Bursa Malaysia near term outlook will remain volatile, capped by expectations of profit taking activities , ahead of the long Raya holidays (Bursa Malaysia will be closed on 2H 16 Jul and 17 July), lingering domestic uncertainties over political glitches and ongoing probes on 1MDB.
- Meanwhile, potential “Grexit” risk will continue to haunt the market for this week as Alexis Tsipras will have to push through legislation for sweeping cuts and reforms through parliament by 15 July in order to secure as much as €86bn bailout funds from creditors.
- Key supports are situated at 1700, 1685 (9 July low), 1671 (17 Dec 14 low) and 1660 (28 Aug 13 low).
- A swift recapture of 1718 (76.4% FR) and 1726 (30-d SMA) zones is vital for the local bourse to resume its uptrend from 1671. Further resistance levels are 1746 (61.8% FR), 1754 (50- d SMA) and 1769 (50% FR).
- Today’s recommendation ( FIG4) . We recommend NAIM (Trading Idea) as it is a good proxy to Sarawak’s buoyant economy and Sarawak election play (due by mid-June 2016). Valuations are undemanding at forward 7.6x Y15 P/E (Bloomberg consensus) and trading at 57% discount to its Mar 2015 BVPS of RM5.09. The stock is ripe for further relief rally amid the Tweezers bottom pattern and hammer candlestick formations. Medium to long term upside targets are RM2.48- 2.69 levels. Cut loss at RM1.98.
Source: Hong Leong Investment Bank Research - 13 Jul 2015
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