Market review

• The MSCI Asia Pac index jumped 1.36% to 141.8 (the highest since Aug 15) following last week’s poor US ISM manufacturing and payrolls data raised speculation that patchy growth may prompt the Fed to stay pat for longer. Meanwhile, Australia’s central bank hel d its policy rate at a record low after cutting twice in the past four months. Overall, ultra loose monetary policy is going to remain easy around the world and that will continue to be supportive of risky assets.

• Tracking positive regional markets, KLCI jumped 11.8 pts to close at intraday high. Market breadth was positive with 412 gainers as compared to 341 losers, supported by 11% and 12% increase in daily volume and value at 1.73bn shares worth RM1.57bn, respectively.

• The Dow rose for the 3rd straight sessions to end 46 pts higher as a slower-than-expected ISM services index (on top of last week’s poor ISM manufacturing and jobs data) reinforced markets expectations that the Fed may defer raising interest rates this month.

• Technicals are on the mend

• Following a 3-day technical rebound of 19.4 pts and decisively reclaiming above the support trendline, KLCI’s near term outlook has turned bullish, supported by bottoming up indicators. Key resistances are now situated at 1700 and 1717 territory. On the flip side, key supports are 1684 (61.8% FR), 1675 (30-d SMA) and 1670 (50% FR).

Market Strategy

• On the back of heightened speculation that the Fed will keep a lid on interest rate, the market has walked past a lackluster 2Q16 earnings cycle to focus on upcoming Budget on 21 Oct coupled with the readiness of BNM to support economic growth via easing are overall positive for the market. Hence, KLCI may experience further follow-through rebound this week to retest 1700 psychological levels.

• Portfolio. We had closed our position on WASEONG (0.6% gain) yesterday amid expiry.

• Stock on radar. We recommend KSL (Trading Buy) as we see limited downside risks from here, supported by its positive LT earnings prospects and cheap valuations coupled with bottoming up technicals. Key upside targets are RM1.20-1.28 while supports fall on RM1.08-1.10. Cut loss at RM1.06.

Source: Hong Leong Investment Bank Research - 7 Sep 2016