Market review

• Showing little reaction to Turkey’s failed coup bid, the MSCI Asia Pacific Index rose for a sixth day, inching up 0.2% to 133.9, amid optimism of US economy following recent upbeat economic data and US corporate earnings as well as better-than-expected 2Q16 Chi na’s GDP data. Sentiment was also boosted by higher likelihood of policy makers and government stimulus.

• Tracking mildly positive regional markets and optimism that BNM and Government will commit more stimulus measures to revive slowing economy, KLCI gained 2.4 pts to 1670.8 after traded within a range of 8.9 pts between an intra-day high of 1671.9 and a low of 1662.9 during the session.

• Wall St showed resilience aft er Fri day’s failed coup attempt in Turkey, with investors resuming a risk-on approach that pushed the Dow (+17 to 18533) to new high for the fi fth day in a row. Sentiment was boosted by mega deal that SoftBank Group agreed to buy ARM Holdings for US$32bn and a better-than-expected result from Bank of America and IBM.

Technical Insights

• Upside bias to test 1684 levels

• After closing above 1666 (200-d SMA) in the last two sessions, we remain upbeat that the rebound from 1611 (Brexit’s low) will continue, probably marching higher towards 1671 (50% FR) to 1684 (61.8% FR) resistance levels before strong profit taking activities emerge.

• On the flip side, a decisive break below key support of 1640 (23.6% FR) will signal an end to the rebound and the index is likely to retrace further to 1620-1630 zones.

Market Strategy

• Riding high on better-than-expected US economic data and results coupled with hopes of more stimulus from central banks and governments and expectations of more mega project roll -outs by Government in the near term, KLCI is still tilted to an upside bias towards our envisaged 1684 resistance levels. However, further strong upside is limited as profit taking may emerge and stoke demand for safe havens again after recent sharp relief rallies.

• Stock on radar (refer separate Trading idea report). Despite the rout, AIRPORT’ s share prices have demonstrated good support at RM5.97 (the triple bottoms), which could be a strong platform for base building activities for an eventual rebound soon. Upside targets are RM6.28-6.59. A breach below RM5.97 will witness lower supports at RM5.68-5.82 zones.

Source: Hong Leong Investment Bank Research - 19 Jul 2016