Market review

• With the positive performance on the overnight Dow, coupled with better-than-expected Japan manufacturing PMI, which stood at 52.4 in December 2016 compared to a reading of 51.3 in November 2016; Nikkei 225 rose 2.5% at 19,594.16 pts, while Shanghai Composite Index added 0.73% to 3,518.79 pts. Also, MSCI Asia PAC rocketed 1.53% to 136.96 pts.

• Meanwhile, on our local bourse, despite the Ringgit weakened near the 4.50 level, buying interest emerged as the FBM KLCI surged above the 1,640 level at 1,647.47 pts (+11.94 pts) led by SIME (+30.0 sen), PETGAS (+12.0 sen) and MAYBANK (+7.0 sen), contributing to a potential pre-Chinese New Year rally. Overall traded volumes were higher at 1.98 bn vs. the three-month average volumes of 1.66 bn.

• As traders' digested the minutes on December's FOMC meeting, Wall Street gained buying momentum and the Dow increased 60.40 pts to 19,942.16 pts. Meanwhile, crude oil reversed the sharp fall two days ago after American Institute of Petroleum reported that the crude stocks have declined 7.2 mln barrels to 482.7 mln barrels.

Technical view

Daily indicators gaining traction

• The daily MACD Line is trending higher towards the zero level and the MACD Histogram extended another green bar. The daily RSI has crossed above 50 and stochastics oscillator is trending above 50.

Market outlook

• Market sentiments remained strong after most of the PMI were better-than-expected manufacturing data from US, Japan and China. Short term upsides on the Wall Street may be located around the 20,000 psychological level with an expectation that Trump policies such as tax cuts and infrastructure spending are likely to stimulate the economy

• Similarly, both crude oil rebound and positive sentiments from the overseas markets could extend the buying interest towards the 1,657-1,662 levels. Also, small caps stocks are likely to be actively traded as FBM Small Cap soared 1.1% yesterday.

• Trading Buy-MBSB. After trading sideways upon the approval from BNM for talks to become a full-fledged Islamic bank on 20 Dec, MBSB is ripe for a triangle breakout soon. A strong breakout above RM0.935 (downtrend line) will push share prices towards RM0.96- RM1.00 psychological barrier before reaching our LT objective at RM1.07. Key supports are RM0.87-RM0.90. Cut loss at RM0.86

Source: Hong Leong Investment Bank Research - 5 Jan 2017