Market review

• Asian markets ended mixed as investors flooded into safe havens amid fresh concerns from Trump’s administration, including a decision to put Iran “on notice” over potential new sanctions and testy exchanges with the heads of one of the U.S.’s best allies and trade partners i.e. Australia and Mexico.

• After a 2-day fall of 20.7 pts, KLCI staged a 7.3-pt technical rebound in the early trades but subsequent profit taking in line with regional bourses saw its gains reduced to 1.9 pts. Overall, trading pattern remained focused on lower liners and penny stocks as volume increased to 1.82bn shares against Tuesday’s 1.16bn shares.

• US stocks, bonds and the dollar ended little changed as investors turned attention to Friday’s jobs report after central banks from Japan, England and the U.S. signaled they’re in no rush to change policy direction as the world assesses the impact of American’s new leadership on global growth. Overall, sentiment remains edgy as fresh worries over the Trump’s administration foreign affairs spats with key allies and trade partners cast a pall over the market. The Dow ended flat (-6 pts to 19,885) as political actions appeared to command attention away from market fundamentals and the economy.

Technical view

Sideways pattern with a base near 1650-1658

• The recent healthy pullback is very well anticipated to neutralise grossly overbought positions after surging 1.8% in Jan, to readjust itself before resuming the next upward move. Unless and until 1650-1658 support levels are breached, KLCI remains on an upside bias towards 1,695-1700 levels.

Market outlook

• Ongoing US 4Q16 reporting season, crucial US jobs data tonight and uncertainty driven by a culmination of Trump’s confrontational policies may witness the Dow to trade sideways in the near term.

• Ahead of the Feb reporting season, shares on Bursa Malaysia will likely to extend its range bound consolidation after surging 1.8% in Jan. Overall, trading momentum may switch to lower liners and smallcaps after their recent retracements.

• Trading Buy-Destini. We like the stock due to its undemanding 12.3x FY17P/E (32% below its average 10- year 18x), supported by a robust 2016-2018 EPS CAGR of 48% and healthy orderbook over RM600m. It is ripe for a downtrend resistance breakout soon near RM0.70 and could march towards RM0.745-0.895 in the medium to long term. Key supports are near RM0.65-0.67. Cut loss at RM0.63

Source: Hong Leong Investment Bank Research - 3 Feb 2017

Traders Brief: Cautious ahead of key US jobs data tonight and fresh concerns over Trump’s widening diplomatic rifts