Market review

• Tracking the bullish tone on Wall Street, Asian stock markets were mostly higher led by Nikkei 225 and Hang Seng Index – the latter advanced on the back of rally in Chinese banks amid the hawkish statement by Janet Yellen’s. However, Shanghai Composite Index ended lower by 0.16% at 3,212.72 pts.

• Market tone on the FBM KLCI was mixed and formed an inverted hammer – suggesting traders were indecisive and the key index managed to eke out a marginal gain of 0.05% to end at 1,709.79 pts. Market breadth was negative with decliners leading gainers by 469-to-418 stocks. On the broader market, selling pressure was noted on ACE market and plantation stocks.

• U.S. equities charged higher without hesitation as buying interest were strong on the Dow (5-day winning streak) and S&P500 (7-day winning streak) amid strong sets of data such as retails sales (+0.4% mom) and US Consumer price index (+0.6% mom), coupled with "Trumponomics" bet.

Technical view

Inverted hammer formation and overbought

• While the MACD Indicator is still hovering positively above the zero level, the Stochastics oscillator is suggesting an overbought status for the key index. Hence, we may take this as a cautious tone and expect the KLCI’s upside to be capped around 1,720-1,730 levels.

Market outlook

• With the optimistic trading sentiments on Wall Street following the better-than-expected U.S. data, traders are likely to maintain the bullish tone with the Dow having a potential upside towards 21,000. However, traders will continue to observe further developments on Donald Trump's economic policies.

• Meanwhile, positive sentiments may spillover to the local bourse on selective heavyweights. Nevertheless, traders might deploy sell-into-strength strategy if the FBM KLCI trades into the region of 1,720-1,730 after rallying more than 40 points over the past two weeks.

• Closed position: We took profit on TAS (9% gain) yesterday as technicals turned mildly negative

• Trading Buy-EVERGRN. The stock is attractively traded at 7.3x FY17 P/E (about 14% below 10-year P/E of 8.5x), supported by FY16-18 core earnings CAGR of 22%, decent dividend yield of 3.6-4.1% and strong FCF of 12.6 sen and 20.4 sen for FY17-18, respectively. Following the bullish daily and weekly downtrend line breakout, share prices are expected to advance further towards RM1.07- RM1.22 in the medium to long term. Key supports are set around RM0.93-RM0.965. Cut loss at RM0.91.

Source: Hong Leong Investment Bank Research - 16 Feb 2017