Market review

• The MSCI Asia Pacific Index (MXAP) rose 0.8% to 135.73 (+1.33 pts or 1% wow) as most Asian stocks gained on weaker yen spurred gains in Japanese shares and optimism grew that the U.S. economy will be able to cope with higher borrowing costs. Overall, sentiment recovered slightly amid repositioning by funds after recent routs with values re-emerged as the MXAP is trading at 13.4x 2017 P/E against 10-year average of 14.5x.

• Tracking regional markets and a mild recovery in RM/US$, KLCI inched up 3.1 pts to 1627.3 (unchanged wow), led by MAYBANK (+10 sen to RM7.80), MAXIS (+8 sen to RM5.86), GENM (+10 sen to RM4.73), SIME (+6 sen to RM8.10) and KLK (+36 sen to RM24.10).

• In a holiday-shortened session following the Thanksgiving holiday, the Dow ended at record high for the 4th day in a row (+69 pts to 19152) and recorded its 3rd weekly gain (+196 pts or 1.03% wow), despite a 4% slide in WTI price on doubts OPEC will come to an accord to cut output as planned talks between OPEC/non-OPEC members were cancelled ahead of the 30 Nov OPEC meeting.

Technical view

ST range bound within 1610-1640 levels

• On the back of choppy pattern in the bonds and RM markets, KLCI was unable to break the immediate 1635 (lower downtrend channel) resistance last week. We reiterate that only a decisive breakout above 1635 will open up further gains toward 1650-1667 levels. On the flip side, a breach below 3M low of 1614 (14 Nov) will witness potential selldown to 1600 psychological support.

Market outlook

• Market sentiment will continue to be adversely affected by the weak ringgit and sluggish oil prices, compounded by the lack of positive domestic catalysts and the ongoing lackluster 3Q16 reporting season. That said, we expect the traditional year-end window dressing activities to provide a good cushion to the crucial 1600 psychological support.

• Trading Buy-TOMYPAK: Currently, the stock is trading at undemanding valuation of 12.5x FY17 P/E (35% lower than its nearest peer’s Daiboci P/E 19.3x), supported by 2016-2018 earnings CAGR of 14.7%. A decisive breakout above key resistances near RM1.69 (100-d SMA) and upper resistance of the downtrend channel at RM1.77 could take the next leg up towards RM1.88 (61.8% FR) territory. Cut loss at RM1.52 levels

Source: Hong Leong Investment Bank Research - 28 Nov 2016