Market review

• Asian key indices were mixed amid rising geopolitical tension as North Korea fired multiple ballistic missiles off its east coast. The Nikkei 225 was down 0.46%, but Shanghai Composite Index and Hang Seng Index gained 0.50% and 0.18% respectively.

• Meanwhile, on the local bourse, shares ended on a stronger tone as the FBM KLCI shot above 1,720 led by Genting Malaysia and CIMB – the latter advanced positively after CIMB-Principal Asset has direct access to China’s capital markets. Also, market breadth was positive with 567 advancers-to-358 decliners.

• Wall Street took a breather as Investors remained cautious after the Dow surged above the 21,000 psychological level, coupled with Donald Trump's comments on twitter that Obama has wiretapped him during the election process. The Dow and S&P500 slipped 0.24% and 0.33%.

Technical view

KLCI revisiting 1,730 resistance amid strong momentum

• Despite the overbought signal on Stochastics oscillator, the FBM KLCI is still hovering above the SMA20, suggesting that buying support is healthy. Support will be pegged at around 1,700.

Market outlook

• Without any clear guidance from Donald Trump on his economic plans, investors are likely to remain on a wait and-see mood over the near term. Also, the FOMC meeting may contribute to a mild wariness in the stock markets at this juncture.

• However, shares on Bursa Malaysia may see further upside in the view that the buying support may extend on selective banking stocks after favourable corporate newsflow, eventually lifting the FBM KLCI towards 1,728- 1,730 levels, followed by 1,750.

• Closed position: We had closed our position on GADANG (11.1% gain) after share prices hit above R2 upside resistance yesterday.

• Trading Buy – PPHB. Despite a steady revenue growth of 3.5% CAGR over the past four years, EPS rose at a faster pace of 12.7% CAGR in the corresponding period. With the EPS of 15 sen in FY2016, valuation is undemanding with P/E standing at 6.7x, below the industry average of 14.7x. A low P/B ratio of 0.6x adds on to the attractiveness of PPHB. On the daily chart, we can expect follow-through buying interest to emerge, with target price levels envisaged at around RM1.04, RM1.10 and RM1.16. The supports will be set around RM0.955-RM0.97, with the cut loss level at RM0.93.

Source: Hong Leong Investment Bank Research - 7 Mar 2017