Market review

• Asian key indices traded on a softer tone after China posted monthly trade deficit for the first time in three years as imports jumped 44.7% yoy, coupled with increasing anticipation of interest rate hike by the FOMC next week. The Nikkei 225 and Shanghai Composite Index fell 0.47% and 0.04% respectively.

• After retesting the 1,730 level on the FBM KLCI, profit taking activities further took place as plantations heavyweights like IOICORP (-12.0 sen) and KLK (-18.0 sen) were pressured amid weaker CPO prices; the FBM KLCI ended in the negative territory at 1,725.54 pts (-0.18%). Market breadth, however, stayed positive with advancers outnumbered decliners by a ratio of 472-to-416 stocks.

• Despite a better-than-expected ADP jobs data, Wall Street headed for another session of losses after crude oil shed more than 5% as crude oil inventories ballooned much greater-than-expected at 8.21mln vs. the estimates of 1.97mln last week. This was a rise for the ninth straight week. The Dow and S&P500 lost 0.33% & 0.23% respectively.

Technical view

KLCI may pullback amid weaker crude oil prices and overbought Stochastics oscillator

• The FBM KLCI reversed near the upper band of the Bollinger band and formed another negative candle after revisiting 1,730. As Stochastics oscillator is overbought, we opine that the KLCI’s upside might be capped around 1,730-1,750 levels. Support will be located around 1,700.

Market outlook

• With the weaker crude oil position, we anticipate that energy shares will be under pressure over the near term and the Dow could continue its mild pullback formation below the 20,900 level.

• Similarly, with the negative performance on the overnight Dow, coupled with the weaker crude oil prices, shares on the local front are likely to trend lower with a potential sell offs among O&G heavyweights, limiting the FBM KLCI's upside around the 1,730 level.

• Trading Buy-BRAHIMS. HLIB maintains a Trading Buy rating on Brahims with a RM0.98 target price (or 28% upside). Near term re-rating catalysts are securing the Rapid catering contract and kitchen facility rental waiver, which management guided to materialize in 2H17. Technically, its short and long-term outlook remains positive as uptrend support trendlines remain intact and we believe the stock is ripe for a near term downtrend resistance breakout. A decisive breakout above RM0.78 will spur prices higher towards RM0.83-0.945. Key supports are RM0.70-0.725. Cut loss at RM0.69

Source: Hong Leong Investment Bank Research - 9 Mar 2017