Market review

• Following a mixed closing in Wall St overnight after Fed left rates unchanged and signaled a gradual approach to tightening, the MSCI Asia Pacific Index ended marginally higher by 0.08% to 134.89 as investors await BOJ meeting decision today. Sentiment was also affected by lower energy stocks after oil prices slumped to 3M low amid global glut.

• In tandem with cautious regional markets, KLCI slipped 5.1 pts on knee-jerk selling after Fitch downgraded debt ratings of several GLC-linked companies. Sentiment was also dampened by renewed worries on Malaysia fiscal position as oil prices slid to 3-month low below US$45/barrel.

• Ahead of the widely focused BOJ decision today, the Dow tumbled as much as 106 pts, as sentiment was weighed down by sliding oil prices and slower-than-expected earnings from GM and Ford. However, better-thanexpected results from Facebook and Alphabet reduced the early losses to 15 pts to close at 18456, recording its 4th consecutive decline.

Technical Insights

• Extended consolidation unless closing above 200 - d SMA decisively

• We reiterate our view that as long as KLCI is unable to close decisively above the 1667 (200-d SMA) levels, extended sideways consolidation is expected. Key resistance levels are 1670 (50% FR) and 1684 (61.8% FR), followed by 1700 psychological barrier.

• On the flip side, a decisive fall below 1656 (mid Bollinger band) will trigger further ret racement to lower supports at 1640 (23.6% FR).

Market Strategy

• In the wake of recent oil price correction which could spook renewed worries on Malaysia fiscal position as well as Ringgit performance, KLCI is likely to extend its sideways consolidation today as investors await BOJ monetary policy decision (likely to be released after 2pm).

• Closed positions (FIG5): We took profit on WCT (4.6% return) and cut loss on EVERGRN (7.9% loss) after hitting stop loss levels.

• Stock on radar (refer to Trading idea report). We have a Trading Buy on TOPGLOV (institutional research target price is pegged a RM5.27) following its recent Tweezers bottom formation. Key resistances are RM4.48-4.70 with long term objective at RM4.90. Key supports are RM4.18- 4.28. Stop loss at RM4.13.

Source: Hong Leong Investment Bank Research - 29 Jul 2016