Market review

• Asian benchmark indices were mixed as investors remained concern over the economic policies that will be implemented by Donald Trump, coupled with weaker US Dollar – Nikkei 225 dropped 0.55%, while Shanghai Composite Index and Hang Seng Index rose 0.22% and 0.20% respectively.

• Despite the negative performance on the overnight Wall Street, FBM KLCI managed to trend higher into the positive territory for the second straight session led by selected index heavyweights such as Axiata (+12.0 sen), IHH (+11.0 sen) and BAT (+RM1.96). The key index rose 0.56% to 1,680.69 pts. Overall trading volumes stood at 1.56 bn shares, while market breadth turned positive with gainers led losers by 416-to-353 stocks.

• US stock markets ended on a positive note after trending sideways over the past week led by financial and technology stocks with immediate support at 19,700. The Dow advanced 0.57% to 19,912.71 pts, while S&P500 and Nasdaq recorded an all-time-high position of 2,280.07 pts (+0.66%) and 5,600.96 pts (+0.86%).

Technical view

KLCI climbed above immediate resistance of 1,680; technicals turning positive

• The MACD Line continued to stay positive and the MACD Histogram extended another green bar. Meanwhile, both the RSI and Stochastics oscillators trended positively above 50. The FBM KLCI might revisit the resistance of 1,700, while the support will be set around 1,660.

Market outlook

• Despite the lack of clarity regarding Trump's policies, Wall Street has sustained well over the past week. Investors are likely to focus solely on the earnings season for the time being. Also, we think that market sentiments will turn from neutral to positive after yesterday’s gains with the Dow potentially retesting 20,000.

• While the FBM KLCI extended its short term rally ahead of the Chinese New Year break, we expect profit taking activities to emerge if the key index trades towards 1,700.

• Closed position: We had closed our SELL rating on VIS (7.7% gain) yesterday at RM0.42 (S1).

• Trading Buy-Ajiya. We like the stock due to its bullish LT downtrend resistance breakout, undemanding valuations of 9.6x FY17 P/E (ex-cash 7.5x) and 0.65x P/BV and higher FY17 earnings as more contribution is expected from better margin AGIBS and expectations of building more affordable housing schemes and implementation of people-centric projects. Key upside targets are RM0.78- RM0.885 while supports fall on RM0.65-RM0.675. Cut loss at RM0.64.

Source: Hong Leong Investment Bank Research - 25 Jan 2017