Market review

• Despite the bullish trend on Wall Street with good sets of data, Asian equities were largely in a mixed trading mode ahead of the unemployment claims data in the US. Shanghai Composite Index and Hang Seng Index gained 0.51% and 0.47%, while Nikkei 225 fell 0.47% led by another day of losses in Toshiba (-3.34%) shares.

• Similarly, trading sentiments on the Malaysia’s stock market followed suit and turned negative - the FBM KLCI was hovering in the negative territory most of the session, falling 0.13% to end at 1,707.59 pts amid selling activities within selected index heavyweights such as CIMB (-8.0 sen) and Tenaga (-6.0 sen). There were 511 decliners, 379 advancers and 358 traded unchanged. Overall market volumes, however, were still above the 2bn mark at 2.11bn shares traded, worth RM2.35bn.

• In the US, Trump rally lost momentum as investors started to lock in profits on energy and banking stocks, which led the S&P500 lower at 2,347.22 pts (-0.09%). However, the Dow was marginally higher 20,619.77 pts (+0.04%). Meanwhile, dollar index slipped 0.74% and gold added 0.52%.

Technical view

FBM KLCI overbought and selling pressure could emerge near the upper Bollinger band

• The MACD Line is hovering above the zero level while the MACD Histogram has turned green. However, the stochastics oscillator is situated in the overbought region. Hence, we opine that the KLCI’s upside will be capped around the 1,720-1,730 levels. Support will be located around 1,700.

Market outlook

• With the fading steam in the overnight Wall Street, investors may reassess the "Trumponomics" situation and could limit the Dow's upside around the 20,600-20,700 levels as Trump's tax reform plans are yet to be revealed.

• Meanwhile, we opine that the market is lack of fresh catalyst to boost the buying interest over the near term and the mixed sentiments abroad would escalate more profit-taking activities among stocks on the local bourse today.

• Trading Sell-CIMB. While CIMB has charted encouraging recovery in its earnings, we remain cautious on its near term outlook due to its exposure in weak operating environment in Singapore and Indonesia, especially in the oil & gas sector. Hence, after a strong 13.4% rally from RM4.49, we expect the stock to consolidate in the near term, with downside support at RM4.83 amid toppish indicators. Key resistances are near RM5.19-RM5.29

Source: Hong Leong Investment Bank Research - 17 Feb 2017