Market review

• Asian stock markets lost momentum following a softer tone in the U.S. equities, coupled with the increasing possibilities of an interest rates hike this month. Investors were locking-in profits after a long stretch of rally; the Shanghai Composite Index and Hang Seng Index fell 0.34% and 0.74% respectively, while Nikkei 225 slipped 0.49%.

• Tracking the negative performance on the overnight Wall Street, the FBM KLCI ended lower 0.42% on Friday, but managed to advance 0.60% on the weekly basis; foreign funds have been on a net buy position of RM121.1m last week. Also, technology stocks were like D&O and UNISEM were focused. However, market breadth was negative with decliners led advancers by 407-to-508.

• Wall Street ended flattish on Friday with the Dow and S&P500 only rising 0.01% and 0.05%, but managed to conclude the week on a positive note by 0.88% and 0.67% respectively as Janet Yellen signalled a potential interest rates hike in March. Meanwhile, Dollar index rose by 0.42% to 101.54 pts.

Technical view

KLCI fell as profit taking emerged, may retrace back to 1,700

• The weekly MACD Histogram has extended another red bar, while the weekly RSI is overbought – suggesting that the momentum might be weakening over the near term. KLCI’s upside is likely to be capped along the 1,728 level. Meanwhile, the support will be located around 1,700.

Market outlook

• U.S. stock markets are likely to favour short term trading as the indices rallied to all-time-highs and overbought. Also, we expect cautious tone to set in this week with the anticipation that the Fed might raise the interest rates sooner-than-expected. Meanwhile, shares on Bursa Malaysia could see mild pullback formation over the near term after the FBM KLCI retraced from 1,717. Overall direction of the market will be determined by the Ringgit and crude oil prices, which both are on a weaker position at this moment.

• Trading Buy-DESTINI. Currently, Destini is trading at 11.2x FY18 P/E (44% below its average 10-year P/E of 20x), supported by a robust 2016-2018 EPS CAGR of 54% and healthy orderbook over RM1.67bn (to last for 4 years). Technically, a decisive breakout above downtrend line near RM0.78 will likely to lift share prices higher towards RM0.825-0.895 in the medium to long term. Key supports are situated at RM0.71-0.735. Cut loss at RM0.70.

Source: Hong Leong Investment Bank Research - 6 Mar 2017