Market review

• Following the weaker sentiments on the overnight Wall Street, key regional benchmark indices follow suit – the Shanghai Composite Index and Hang Seng Index pulled back 0.11% and 0.35% respectively, while Nikkei 225 fell 0.35% as investors returned to safe haven such as yen and gold.

• Similarly, trading tone was muted on the FBM KLCI as it slipped 2.40 pts to 1,688.84 pts led by profit taking on selected index heavyweights like Petronas Chemical (-6.0 sen), SIME (-6.0 sen) and Maybank (-4.0 sen). Market breadth turned negative with losers led gainers by 460-to- 388 stocks. Overall market traded volumes were lower at 2.14bn shares compared to 2.69bn shares traded on Monday.

• Wall Street extended its rally led by tech stocks such as Apple and Alphabet, but selling pressure were noted among the energy companies amid softer Brent crude oil prices due to growing gasoline stockpiles according to API report. However, the Dow and Nasdaq ended higher by 0.19% at 20,099.29 pts and 5,674.22 pts respectively.

Technical view

Despite weaker tone, KLCI may retest 1,700

• The MACD Line is hovering above zero, while the MACD Histogram extended another green bar – suggesting that the short term uptrend is still positive. Meanwhile, the RSI is hovering slightly below the overbought region, indicating that the FBM KLCI might revisit the 1,700 level.

Market outlook

• Despite the extension of a rally following the inauguration of Donald Trump, we expect short term profit taking to emerge if significant recovery in shale oil production could limit the upside of the crude oil prices, which selling pressure will be seen among energy stocks, eventually.

• Although technical indicators are still positive on the FBM KLCI, trading sentiments may remain cautious given ringgit weakening bias. Hence, the FBM KLCI might be trading on a downward bias mode amid a pullback in O&G stocks. Nevertheless, property stocks might be under the traders’ radar as volumes were strong within the sector.

• Trading Buy - GKENT. HLIB has a BUY rating with SOP target price of RM3.77. Further sharp fall is cushioned by its grossly oversold daily RSI/slow stochastic and undemanding valuations (10.8x FY18 P/E ex-cash) coupled with huge orderbook of ~RM6bn. Key supports are RM2.76-RM2.82. Cut loss at RM2.72. Meanwhile, a decisive breakout above RM2.90 will likely to spur a relief rally towards the RM2.96-RM3.16 zones.

• Closed position: We had closed our position on DESTINI (6.4% gain) yesterday after hitting R1 upside target

Source: Hong Leong Investment Bank Research - 8 Feb 2017