Market review

• Following the surge on Wall Street after Trump commented on potential reforms on tax plan, Asian stock markets trended on a bullish tone with Nikkei 225 surging 2.49% (+2.44% wow), leading the regional indices such as Shanghai Composite Index (+1.80% wow) and Hang Seng index (+1.93% wow) higher.

• Share prices on the local front also traded on a positive tone led by banking heavyweights such as Maybank (+1.22% wow) and CIMB (+2.21% wow). Overall market volumes recorded 2.68bn shares traded on Friday. Also, market breadth was positive with advancers led decliners by a ratio of 5-to-3 stocks.

• Wall Street marked another all-time-high as Donald Trump reiterated his promise of a major tax reform. The Dow and Nasdaq rallied 1.0% and 1.2% respectively. Meanwhile, crude oil rebounded more than 1% on Friday as IEA reported that global oil output has fallen 1.5m barrels per day in January.

Technical view

FBM KLCI revisited 1,700, but overbought

• Following the retest of the 1,700 level, the MACD Histogram has turned green and the KLCI formed a short term uptrend intact position. However, the RSI has moved above 70 – indicating that the KLCI is overbought and could be due for profit taking activities. Support will be set around 1,690.

Market outlook

• With the sustained buying interest in the overseas stock markets, we may expect the Dow to trend higher towards the 20,300-20,400 levels with anticipation that Donald Trump would introduce new economic policies over the near term.

• As the trading interest surged strongly on Friday with a gap-up formation, we can expect profit taking activities to set in this week for the index heavyweights. Nevertheless, trading interest may focus within the O&G stocks amid a recovery in Brent oil prices.

• Trading Buy - TAS. We opine that the recent positive quarterly result, which was announced in January 2017, gave a confidence boost to traders that TAS might be on a lookout for a turnaround story after suffering three quarters of losses consecutively. Also, three contracts have been awarded to TAS over the past six months. We expect a breakout above the RM0.335 (200-d SMA), targeting RM0.35 and RM0.375, followed by a LT objective target of RM0.40. Support will be located around RM0.32 and RM0.315, while cut loss will be set around RM0.31

Source: Hong Leong Investment Bank Research - 13 Feb 2017