Market review

• Ahead of the key events from U.S. jobs report (2 Dec) and Italy’s referendum (4 Dec), the MSCI Asia Pacific Index gained 0.6-pt or 0.4% to 136.27, spurred by energy related stocks as oil prices surged on positive OPEC’s decision to curb production for the first time in 8 years removed an uncertainty in markets. Sentiment was also boosted by encouraging economic manufacturing from China and US private jobs data.

• Tracking higher regional markets and a strong rally in oil prices (which bodes well for oil-exporting countries like Malaysia), KLCI rebounded 7.3 pts to 1626.4, led by O&G-related stocks and plantation counters. Market breadth was positive with 493 gainers against 307 losers.

• Ahead of the widely-focused US jobs data tonight, the Dow jumped 68 pts to 19192 (another record closing) as sentiment was boosted by strong ISM manufacturing data and energy related stocks amid surging oil prices coupled with banking shares (beneficiaries of impending rates hike).

Technical view

Must break congested resistances of 1635-1640 to begin a new rally

• On the back of sustainable oil prices strength to boost broader market sentiment, we remain cautiously optimistic of potential year-end window dressing activities to lift KLCI above immediate congested resistances of 1635-1640 zones. A decisive breakout above 1635-1640 will open up further gains toward 1650-1667 levels. On the flip side, failure to recapture the 1635 target will witness potential renewed fall to 1600-1611 levels.

Market outlook

• KLCI may extend the rebound today following the positive OPEC deal, which bodes well for oil-exporting countries like Malaysia (oil-related revenue contributed ~15% to government revenue). The traditional year-end window dressing activities are also likley to provide an interim supports at 1600-1611 levels despite concerns of RM weakness and the conclusion of a lackluter 3Q16 results.

• Closed position. Yesterday, we had squared our positions on MISC (+2.5% gain), ECOWLD (+4.4% gain) and TNLOGIS (6% loss).

• Trading Buy-KIMLUN (8.6x FY17 P/E). The stock is a good proxy to the booming local construction and infrastructure sectors given its involvement in MRT2, Pan Borneo Highway and the construction of affordable housing. We expect prices to bottom up amid the formation of hammer candlestick, testing RM2.16-2.45 in the mid to long

Source: Hong Leong Investment Bank Research - 2 Dec 2016