Market review

• Despite the negative performance on the final trading day on Wall Street, Asian stock markets ended on a positive tone amid positive China’s Caixin Manufacturing PMI, which rose 1.0 to 51.9 vs. 50.9 in November. Shanghai Composite Index advanced 1.04% and Hang Seng Index added 0.68%. MSCI Asia Pac, however slipped 0.13%.

• However, shares on Bursa Malaysia started the year on a negative tone as Ringgit weakened further towards the 4.49 level; the FBM KLCI slipped 6.20 pts to 1,635.53 pts led by profit taking activities within selected heavyweights like MAYBANK (-19.0 sen) and AXIATA (-20.0 sen) after a sharp window dressing last week. Nevertheless, market breadth was positive with gainers outpaced losers by 446- to-361 stocks.

• U.S. equities had a good start for the year as manufacturing activity in the U.S. gained traction for the month of December; the index of manufacturing activity rose to 54.7 from 53.2 in the month of November, according to Institute for Supply Management and the Dow surged 119.16 pts to 19,881.76 pts.

Technical view

ST momentum indicators turned positive

• The daily MACD Histogram extended another green bar, but the daily MACD Line is hovering below zero. The RSI and Stochastics oscillator are trending positively above the 50 level respectively.

Market outlook

• While market sentiments turned bullish after a long break, Wall Street may extend its mild upward move with the upside target set around the 20,000 on the Dow.

• Meanwhile, trading sentiments on Bursa Malaysia may remain on a softer tone as Brent crude oil price took a pause after hitting an 18-month high of US$58.37 amid an increase of crude inventories in Cushing hub. Hence, we may expect short term consolidation after a mild breakout on selected O&G stocks.

• Trading Buy - Destini one of the leading maintenance, repair, overhaul (MRO) service providers in Malaysia. Valuations are undemanding at 9.4x FY18P/E (47% below its average 10-year P/E of 18x) or 0.2x PEG, supported by a robust 2016-2018 EPS CAGR of 48% and healthy orderbook over RM600m. Following a bullish harami pattern formations in daily and weekly charts, we expect share prices to advance further towards RM0.68-0.75 in the medium to long term, supported by bottoming up indicators. Major supports are RM0.60-0.615. Cut loss at RM0.59.

Source: Hong Leong Investment Bank Research - 4 Jan 2017