Market review

• The MSCI Asia Pacific Index surged 1.1% to 137.5, taking cues from a robust US jobs data last Friday and rebound in oil prices, shrugging off slower-than-expected China trade numbers.

• Tracking higher regional markets and oil prices, KLCI rose 8.6 pts to 1672.7, recording its 3rd straight gain, led by TENAGA (+16sen to RM14.58), CIMB (+10 sen to RM4.52), MAXIS (+9 sen to RM6.24), SIME (+10 sen to RM7.70) and BAT (+176 sen to RM51.96). Trading volume increased 4% to 2.63bn shares but value eased 5% to RM1.85bn as market undertone remained focus on lower liners and penny stocks.

• The Dow moderated 14 pts on profit taking after rallying 1% last Friday following a better-than-forecast jobs data underscored the strength of the worl d’s largest economy. A 2.5% rally in WTI oil prices drove oil giants such as Exxon Mobil and Chevron higher, cushioning the declines in Merck & Co and Pfizer.

Technical Insights

• Poised to break 3-month high of 1675

• As anticipated, KLCI finally staged a decisive breakout above 100-d/200-d SMAs and downtrend line yesterday, boosting our hopes of li fting KLCI 3M rangebound consolidation within 1611-1675 band in the near term. A decisive breakout above 3-month high of 1675 (19 July) will spur KLCI higher towards 1684 (61.8% FR) and 1700 targets.

• The ongoing rebound will be disrupted i f the index retraces below the 1667 levels (resistance-turned-support of 200-SMA) again. Lower supports are 1656 (30-d SMA) and 1648 (50-d SMA).

Market Strategy

• The strong rebound in oil prices, solid US jobs data and commitment by policy makers and government to spur global flagging economy are expected to boost market sentiment and spur KLCI to retest 1675-1684 territory this week. However, further strong upside may be capped, given the nagging concern in China economy, lack of fresh local re-rating catalysts and ongoing Aug reporting season.

• Closed positions (FIG4). We took profits on BENALEC (6.6% gains) and TOPGLOV (4.4% gains) after hitting above our R1/R2 upside targets.

• Stock on radar (separate report). Today, we highlight TDM (Trading Buy) for potential upside to test RM0.735- 0.785 territory following a decisive breakout recently in high volume. Supports are RM0.67-0.675. Cut loss at RM0.655.

Source: Hong Leong Investment Bank Research - 9 Aug 2016