Market review

• Boosted by overnight Dow’s rally, the MSCI Asia Pac index rose for the 5th day (+0.67% to 142.3) after the Fed refrained from raising interest rates and scaled back expectations for increases in 2017, buoying demand for riskier assets. Sentiment was also spurred by a rebound in energy shares (amid relief rally in oil prices) and BOJ’s decision to overhaul its monetary policy framework.

• Tracking bullish regional bourses, KLCI rose for a 3rd day with a 10.9 pts gain to 1669.7, led by bargain hunting on DIGI (+18 sen to RM5.04), AXIATA (+11 sen to RM5.41), SIME (+14 sen to RM7.89), PCHEM (+8 sen to RM6.74), MAXIS (+7 sento RM6.20) and TM (+10 sen to RM6.80). Overall sentiment improved as market breadth was positive with 529 gainers as compared to 313 losers, supported by a 23% and 18% growth in trading volume and value to 2.1bn shares worth RM2.2bn, respectively.

• The Dow rallied as much as 158 pts intraday before paring its gains to 98 pts as sentiment was strengthened by the Fed’s decision to leave rates unchanged and lowering its outlook for future rate hikes in 2017, soothing worries that global central banks would taper stimulus efforts. For 2016, Chairwoman Janet Yellen indicated a rate rise is still likely by year-end as she expressed confidence in the U.S. economy.

Technical view

• Relief rally to continue

• Following a 3rd day rebound and a decisive reclaim above 1664 (support-turned-resistance) levels, KLCI immediate outlook has turned rosier as the index aims to record its 4th straight gain today, helped by positive technical indicators. The index is likely to test higher upside at 1678 (30-d SMA) and 1684 (61.8% FR) levels next. On the flip side, a decisive fall below 1664 will witness KLCI to retrace back towards 1640-1650 zones.

Market Strategy

• Tracking overnight positive performance from Wall St and a rally in Brent oil prices coupled with extended accommodative monetary policies from key global central banks, KLCI is expected to continue its relief rally in the near term in anticipation of a positive “Election-friendy Budget 2017” on 21 Oct.

• Stock on radar. We recommend MNRB (Trading Buy) following a bullish LT downtrend line breakout lately. A decisive breakout above RM3.15 will spur prices higher towards RM3.28-3.57 zones, helped by an impending release of 1:2 bonus issue entitlement date in the coming weeks. On the flip side, key supports are RM2.93-3.02. Cut loss at RM2.90.

Source: Hong Leong Investment Bank Research - 23 Sep 2016