Market review

• Despite a higher chance of a March interest rates hike by the Fed, Asian key benchmark indices were mostly higher. Expectations of a March rate hike have increased to 98% vs. two weeks back of 52% (Source: Bloomberg). The Shanghai Composite and Hang Seng Index gained 0.27% and 0.36% respectively, but Nikkei 225 slipped 0.18%.

• In tandem with the Asian stock markets, share prices on Bursa Malaysia stayed positive; the FBM KLCI ended marginally higher at 1,728.66 pts (+0.08%) after traded towards an intra-day high of 1,734.07 pts. Overall market volumes stood at 3.39bn shares, worth RM2.92bn. Also, market breadth was positive with gainers outpaced losers at a ratio of 586-to-320 stocks.

• Once again, US equities took a breather for another session led by pharmaceutical stocks amid comments from Donald Trump, stating that he might lower down drug prices under a new increased-competition environment. The Dow and S&P500 fell 0.14% and 0.29% respectively.

Technical view

KLCI mildly breached 1,728, formed inverted hammer as it enter the resistance zone

• The FBM KLCI has surged above 1,728 and retested 1,730, but selling pressure emerged and formed inverted hammer candle. With the key index entering the resistance zone between the 1,730-1,750 levels, we may expect further profit taking activities to set in. Meanwhile, support will be pegged around 1,700-1,720.

Market outlook

• Investors are likely to stay cautious over the week and key indices may trend sideways for the time being ahead of the FOMC next week. The Dow currently is holding above the support of 20,900.

• Meanwhile, on the local bourse, sentiments might turn slightly weaker tracking the negative performance on the overnight Dow, coupled with the potential interest rates hike next week. Investors may take the opportunity to reduce their exposure in the market and the upside might be capped around 1,750.

• Closed position: We took profit on KUB yesterday after surging 15.1% in three days.

• Trading Buy - PRTASCO. We see limited downside risks for PRTASCO in the short term, supported by strong orderbook, undemanding valuations (P/B is 20% lower and DY is 103% higher than its peers), bottoming up readings and expectations that work orders for the delayed and upcoming projects would start to trickle in the subsequent quarters. A decisive breakout above RM1.12 will spur prices higher towards RM1.21-1.29 (FR). Key supports are RM1.03-1.06. Cut loss at RM0.995.

Source: Hong Leong Investment Bank Research - 8 Mar 2017