Market review

• Asian markets ended mixed amid disappointment from BOJ’s smaller-than-expected stimulus. BOJ kept its interest rates unchanged and said it would increase its ETF purchases by 100% to 6 trillion Yen, pending further fiscal stimulus measures by the government and will conduct a complete policy review in Sep meeting.

• Tracking mixed regional markets, KLCI slipped 5.2 pts on continuous knee-jerk selling after Fitch downgraded debt ratings of several GLC-linked companies. Sentiment was also dragged by selldown in Genting-related shares after findings showed its 20.7%-owned TauRx Pharmaceuticals Ltd’s experimental Alzheimer’s drug LMTX failed t o meet its “co-primary end points. WoW, KLCI slid 14.2 pts or 0.8% to 1653.3

• The Dow fell as much as 85 pts intraday, weighed down by a poorer-than-expected US 2Q GDP data and energyrelated stocks due to sliding oil prices. However, encouraging results from Alphabet and Amazon managed to boost sentiment and recued the early losses to 24 pts. After falling in the last five trading sessions, the Dow tumbled 139 pts or 0.8% wow to 18432.

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 immediate resistances at 1656 (mid Bollinger band) and 1667 (200-d SMA) levels, extended sideways consolidation is expected.

• On the flip side, a decisive fall below 30-d SMA near 1649 this week will trigger further retracement to lower supports at 1640 (23.6% FR) and 1630 zones.

Market Strategy

• Taking cue from lower close in Dow last Friday and persistent 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 this week, ahead of the start of Aug reporting season (likely to be another tepid 2Q16).

• Closed positions (FIG5): We closed position on SUPERMX (2.3% loss amid expiry.

• Stock on radar (refer to Trading idea report). We have a Trading Buy on KFIMA as it is a safe haven with earnings and dividend certainty, backed by undemanding valuations (0.7x P/B, 8.8x FY3/17 P/E and 5.3% FY17 DY), backed by solid RM0.77 netcash/share. Key resistances are RM2.16-2.28 while supports fall on RM1.76-1.883. Stop loss at RM1.73.

Source: Hong Leong Investment Bank Research - 1 Aug 2016