HLBank Research Highlights

Traders Brief - Moving sideways as cautious tone prevails

HLInvest
Publish date: Mon, 20 Jul 2015, 11:05 AM
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Bursa Malaysia recap

KLCI eased 0.5-pts on 16 Jul but still jumped 11.2 pts or 0.6% wow on technical rebound
 
  • Last Friday, Asian stock markets ended higher, driven by a 3.5% rally in China’s SHCOMP (+2.1% wow but -23.6% from 52-week high), as the index seemed to have bottom up from ongoing government's drastic measures to steam market carnage. However, trading was relatively light, with markets in Indonesia, Malaysia, Singapore and the Philippines closed for Hari Raya holidays.
  • Before an extended holiday weekend, KLCI eased 0.5-pt in a half-day trading session on 16 July amid lack of fresh catalysts and lingering domestic uncertainties over political glitches , weakness in Ringgit and commodity prices, ongoing probes on 1MDB and expectations of another slow upcoming 2Q15 reporting season in Aug.

Wall St recap

Dow eased 34 pts but still gained a whopping 1.8% or 326 pts wow
  • Nasdaq rallied 0.9% or 45 pts to 5210 (+4.3% wow), powered by a rally in technology companies following Google’s blockbuster results. On the other hand, Dow ended 34 pts lower 18086 (+1.8% wow) on profit taking as sentiment was dampened by poor results from Boeing and some oil -related stock amid ongoing lackluster oil prices. Meanwhile, sentiment was cautious as strong U.S. consumer price index data, rebounding housing starts and surging building permits bolstered expectations that the Federal Reserve is moving closer to hiking interest rates.

KLCI outlook 

Moving sideways as cautious tone prevails
  • Technically, the ‘Double-Bottom’ formation and a breakout above downtrend line support a near-term reversal signal. A swift recapture of the 1746 (61.8% FR) level is vital for the index to reassure its uptrend trajectory towards 1769 (50% FR). 
  • Nevertheless, given the lack of fresh impetus and persistent local and external (potential China slowdown, oil prices, Fed rates hike etc) headwinds, KLCI upside is likely to be capped near 1769 levels. Key supports are 1722 (30-d SMA), 1717 (76.4% FR) and 1700.
  • Today’s recommendation ( FIG4) . We recommend LONBISC (Trading Idea) as the group (being the largest domestic manufacturer of assorted wafers and confectioneries) would stay resilient and defensive despite the challenging market environment. Given its bullish symmetrical breakout and bottoming up indicators, LONBISC share prices are likely to break 52-week high resistance of RM0.925 and trend higher to our long term symmetrical breakout objective of RM1.02. Cut loss below RM0.76.

Source: Hong Leong Investment Bank Research - 20 Jul 2015

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