Market Review

• Tracking overnight gains in US stocks and Asia equities on Tuesday, KLCI staged a follow-through rebound by 11.63 pts or 0.71% to 1660.62, as Ringgit strengthened further to 4.0985 against USD as Fed may delay interest rate hike this month.

• On external front, Dow staged a mild follow-through technical rebound overnight by 17.95 pts or 0.10% to 17938.28, after Federal Reserve chair Janet Yellen painted a relatively upbeat view of the US economy despite the weak May jobs report.

• Technical Insights Likely to stage a follow-through rebounds amid bottoming-out oscillators

• Based on daily chart, KLCI is expected to gain further buying momentum to test 50% Fibonacci Retracement level at 1665, given recent two long white marubozu candlesticks as well as bullish MACD, RSI and Stochastics oscillators (see FIG3).

• Based on weekly chart, the trend of KLCI is in the midst of experiencing a market correction (see FIG4). However, recent bargain hunting might reverse the current circumstance should the key index could form a long white candlestick this week.

Market Strategy

• We expect local benchmark key index to stage another follow-through technical rebound today, given overnight follow-through rebounds in Dow; appreciation in Ringgit against USD; gain in Brent crude oil price; and its bullish technical readings. A decisively breach above 1665 will drive key index higher towards 1670 – 1680 zones.

• Having said that, overall sentiment remains cautious ahead of FOMC meeting on 14-15 this month; uncertainty surrounding the looming BREXIT; as well as higher expectation of lower market consensus for the KLCI yearend target due to lackluster local earnings result.

• Stock on radar for today: We recommend Trading BUY on ARMADA (Trading idea) today. (see our separate report)

• We closed position on TNLOGIS (+4.7% gain) due to expiry and FGV (took profit after surging 10.9% in one day).

Source: Hong Leong Investment Bank Research - 8 Jun 2016