Market review

• Despite the flattish performance on the U.S. stock markets, Asian stock markets traded mostly higher with SHCOMP and HSI advanced 1.18% and 0.47% led by mainland banking and consumer stocks. Similarly, the FBM KLCI advanced 0.29% to 1,712.58 pts led by strong buying interest on selected index heavyweights such as Genting Malaysia (+13.0 sen) and Genting Bhd (+17.0 sen) – the latter saw trading near the RM9.00 level. Market breadth turned positive for the session with the ratio of 466 advancers-to-452 losers.

• European stock markets ended mixed as Unilever dived 6.56% after Kraft Heinz withdrew a merger deal. CAC Index fell 0.05%, but Germany's DAX rose 0.60% led by telecoms sector.

Technical view

Resumption of buying interest on FBM KLCI after taking a breather last week

• After forming four short candles last week, the KLCI rebounded off 1,705, forming a bullish candle, which may revisit the resistance of 1,720-1,730. The MACD Line is hovering above zero. However, both the RSI and Stochastics oscillators are overbought. The FBM KLCI’s support will be set around 1,700.

Market outlook

• Trading activities are likely to be driven mainly by on going corporate earnings and some traders may focus on the Fed's minutes that will be released on Wednesday. Also, the MACD Indicator is suggesting that the KLCI is on a short-term uptrend. However, if the KLCI violates 1,700, we may see further pullback towards 1,660.

• Trading Buy-ASTINO. Undemanding valuations vs. its peers. Currently, Astino is trading at a PER of 6.7x, which is at a significant discount compared to peers’ PER of 20x (source: Bloomberg) and backed by undemanding P/BV of 0.66x. A decisive breakout will spur prices higher towards RM0.775 and RM0.82, before reaching our long term target of RM0.90 (pegged at PER of 8X with Trailing 12M EPS of 11.2 sen). Meanwhile, support will be located around RM0.70-0.71 levels. Cut loss at RM0.695.

• Trading Buy-MASTEEL. The market may have overly punished the stock, as MASTEEL is only trading at 0.39x P/BV, 61% below the sector and 10% below its 10-year average. Shall MASTEEL deliver a strong improvement in its upcoming 4Q16 earnings, share prices are likely to witness further rerating. Following the recent downtrend resistance breakout, share prices may move a tad higher to RM0.885-0.975 in the short to medium term. Key supports are situated near RM0.815-0.83. Cut-loss at RM0.805

Source: Hong Leong Investment Bank Research - 21 Feb 2017