Market review

• Asian key benchmark indices fluctuated between the red and green territories as investors were indecisive ahead of the Fed’s outcome on interest rates. MSCI ASIA Pac (MXAP) index inched higher by 0.1%, but Hang Seng Index and Nikkei 225 traded flat.

• Selling pressure on FBM KLCI emerged soon after it traded in the positive zone at the opening bell - the key index ended lower at 1,643.29 pts (-1.99 pts), led by selected heavyweights like Genting Malaysia (-6.0 sen) and Tenaga (-6.0 sen). Buying interests however picked up within small cap stocks as the FBM Small Cap Index gained 0.34%. Also, some metal/steel related stocks such as MYCRON (+4.5 sen) and PRESTAR (+3.5 sen) were regaining momentum.

• The Dow snapped a seven-day winning streak after Federal Reserve decided to increase interest rates by 0.25% and the Fed indicated the need for more rate-hikes next year, which sent the Dollar index (DXY) towards its highest level since 2003. Meanwhile, gold price dipped below the US$1,150 level.

Technical view

KLCI short term weakness to persist

• The MACD Line hovered below zero level and the MACD Histogram has turned red after a series of green bars. Also, the stochastic oscillator continues to hook downwards, indicating that the momentum is weakening. FBM KLCI may be supported near the 1,635 (30-d SMA), 1,633 (10-d SMA) and 1,612 (24 June low) levels.

Market outlook

• On the Dow, after testing the 20,000 psychological level, selling interest emerged after the Fed concluded the FOMC meeting with a rate-hike decision, weaker market sentiments may spill towards the Asian stock markets. Similarly, we believe shares on Bursa Malaysia are likely to maintain its short term selling pressure and the FBM KLCI may trend within the range of 1,630-1,640.

• Trading Buy-Supermx. The stock turned attractive following recent sell-down with undemanding 11.8x FY17 P/E (41% below peers) and 1.37x P/B (67% discount against peers), supported by decent yield of 2.9% (32% higher than peers). Downside risk is limited amid better results ahead amid gradual ramp-up of the remaining capacity, strong US$ and improved glove demand-supply dynamics in the mid-term. A decisive breakout above RM2.14 (10-d SMA) will spur prices higher towards RM2.21-2.38 levels. Key support is RM2.00. Cut loss at RM1.95.

Source: Hong Leong Investment Bank Research - 15 Dec 2016