Market review

• Despite Wall Street recorded another all-time-high on the all the key indices, Asian stock markets trended mixed. The Nikkei 255 jumped 0.88% led by export-related stocks amid weaker yen against the greenback, but the Shanghai Composite Index and Hang Seng Index slipped 0.52% and 0.24% respectively.

• Meanwhile, tracking the positive tone on Wall Street, the FBM KLCI surged 1.06% to 1,715.67 pts led by Petronas Chemical (+2.74%) and Maybank (+1.51%); the key index had the biggest one-day gains since one year ago. Market breadth turned bullish with gainers led losers by 595-to- 308 stocks. Overall market volumes were healthy at 3.13bn shares traded, worth RM3.05bn.

• Following the bullish gapped-up formation on Wall Street, US equities ended lower and pared down most of the gains in the previous session despite better-than expected jobless claims; the Dow and S&P500 slid 0.53% and 0.59% respectively led by banking stocks, while Caterpillar Inc declined 4.3% after law enforcement officers searched their offices.

Technical view

Strong buying interest above 1,700, key index may retest next resistance near 1,728

• The FBM KLCI managed to secure the territory above 1,700. The MACD Line hooked up, but still hovering below Signal Line, while the MACD Histogram turned green. The RSI and Stochastics oscillator continues to stay above 50. Upside target will be envisaged around 1,728, while the support will be pegged along 1,700.

Market outlook

• After the Dow rallied more than 1,000 points in the past month, investors are likely to turn cautious monitoring details of Trump's economic plans, coupled with the much anticipated interest rates hike in March amid few fairly positive economic data. Hence, we opine that traders may take this opportunity to lock-in profits over the near term.

• Meanwhile, tracking the pullback on Wall Street, profit taking activities may curtail the upside on the local front and investors may deploy selling-into-strength strategy and KLCI’s upside might be capped around 1,728.

• Trading Buy-KUB. On the back of successful turnaround in the last two years and backed by a strong net cash of 13sen/share, KUB is currently trading at 0.87x P/B (~13% below its 5-year average of 1x) and ex-cash FY16 P/E of 8.3x. On the back of a bullish monthly long term downtrend breakout (monthly chart), we remain optimistic after a brief sideways consolidation, KUB is poised to resume its upward trajectory. A strong breakout above RM0.475 may push share prices towards RM0.50 barrier and our LT objective at RM0.61. Key supports are RM0.42-0.44. Cut loss at RM0.415.

Source: Hong Leong Investment Bank Research - 3 Mar 2017