Market review

• Asian market sentiments turned cautious ahead of the US monthly jobs data, coupled with yen strengthening against US Dollar; Nikkei 225 fell 0.34% (+1.78% wow) led by exporters such as Toyota. Meanwhile, Shanghai Composite Index slipped 0.35% (+1.63% wow) and Hang Seng Index added 0.21% (+2.28% wow).

• However, share prices on Bursa Malaysia were mostly higher, extending the rally for the third straight day. The FBM KLCI jumped 15.67 pts to end at 1,675.49 pts (+33.76 pts or 2.06% wow). Nevertheless, market breadth was slightly positive with 442 gainers, 421 losers and 352 traded unchanged.

• Wall Street traded on a positive tone on the back of rising Dollar amid higher average hourly US wages, which stood at $26 (+0.4% mom) - the Dow flirted around the 20,000 psychological level before ending higher by 64.51 pts to 19,963.80 pts (+198.20 pts or 1.00% wow). Also, Brent crude oil gained steadily above US$57.

Technical view

Trend indicators positive, momentum indicators overbought

• The daily MACD Indicator for FBM KLCI trended positively above the zero level. However, both the daily RSI and Stochastics oscillators are moving into the overbought position – indicating potential exhaustion of the short term trend.

Market outlook

• For the U.S. stock markets, investors could trade cautiously ahead of few economic data such as US December retail sales and China December trade data that will be released this Friday, coupled with the US Q4 earnings season kick off this week.

• Meanwhile, share prices on Bursa Malaysia may succumb to profit taking activities after trended positively over the past week. Traders may lock in short term gains within the small cap stocks as the FBM Small Cap Index is located near the 200-d SMA.

• Trading Buy-DRBHCOM. We see limited downside risks for DRB’s share prices in anticipation of the improving results in FY17-19, undemanding valuations and the announcement of a foreign strategic partner (FSP). Overall, uptrend remains intact as share prices are still trending above RM1.07-RM1.12. A decisive close above immediate resistance at RM1.23 (50% FR) will spur prices higher to RM1.30-RM1.40. On the flip side, a decisive violation below RM1.12 will drive prices lower towards RM1.07. Cut loss at RM1.05.

Source: Hong Leong Investment Bank Research - 9 Jan 2017