Market review

• Although overnight Wall Street ended weaker, most of the Asian key benchmark indices trended positively on the final trading day for 2016 on sustained window dressing activities; Hang Seng Index and Shanghai Composite Index advanced 0.94% and 0.24% respectively, but Nikkei 225 fell 0.16%.

• Similarly, shares on Bursa Malaysia turned positive after traded most of the time in the negative territory throughout the session – the FBM KLCI inched up 3.80 pts or 0.2% to 1,641.73 pts (+1.5% wow) on a last minute buying support selected heavyweights like Maybank (+22.0 sen) and AXIATA (+15.0 sen). Also, market breadth was positive with 404 advancers vs. 362 decliners.

• US stock markets ended slightly lower as the Dow stood at 19,762.60 pts (-57.18 pts) on the final trading day in 2016 led by technology shares, but were positive for the year, which most of the gains were noted after Donald Trump was elected as US president; on the yearly basis the Dow advanced 13.4%.

Technical view

Weekly MACD Histogram turned green

• The daily MACD Line has crossed above the daily Signal Line and the MACD Histogram has extended another green bar. Meanwhile, the daily RSI maintained above 50, while the daily Stochastics oscillators continued to trend above the 20 level.

Market outlook

• Despite Wall Street gaining positively for 2016, we expect consolidation to set in with mild profit taking activities after the Dow trended below the 10-d SMA – next support will be located around 19,600-19,700. However, investors may look into healthcare sector on the back of a potential reform of healthcare financing, under the new presidency of Donald Trump.

• Although positive closing was charted on the final day of trading on Bursa Malaysia, we expect FBM KLCI’s upside to be limited around the 1,662 level as profit taking may set in after the four-day window dressing rally. Nevertheless, O&G sector could be seen as a recovering sector as Brent crude oil steadied above US$56.

• Closed position. We took profit on Genting (3.2% gain) on 30 Dec after hitting our R2 upside target.

• Trading Buy - We like Pesona (HLIB institutional SOP TP of RM0.81) due to its robust earnings growth of 60% (FY15-18), strong ROE and solid orderbook of RM2.3bn (~9.6x cover on FY15 construction revenue). A successful breakout above RM0.64 will eventually drive share prices towards our mid to LT objective around RM0.73-RM0.84, giving its beautiful rounding bottom formations. Major supports are RM0.58-RM0.585. Cut loss at RM0.56.

Source: Hong Leong Investment Bank Research - 3 Jan 2017