Market review

• Following the slide in crude oil prices, coupled with mixed bag of economic data from China, Asian key indices were mostly lower; the Shanghai Composite Index and Hang Seng Index dived 0.74% and 1.18% respectively.

• Similarly, tracking the weaker performance on the Dow and crude oil prices, most of the oil and gas heavyweights edged lower; the FBM KLCI closed in the negative territory at 1,717.42 pts (-0.47%). Also, sentiments on the broader market were bearish as profit taking mode emerged; decliners overwhelmed advancers at a ratio of 558-to-345 stocks.

• Despite U.S. department of Labour recording an increased in jobless claim last week, coupled with weaker crude oil prices, stocks on Wall Street managed to pare down losses and turned marginally higher. The Dow and S&P500 inched higher by 0.01% and 0.08% respectively.

Technical view

KLCI fell below 1,720, weaker sentiments may persist towards 1,700

• With the on-going profit taking activities in the market, the FBM KLCI violated 1,720 and we can expect the key index revisit the support around 1,700. The MACD Indicator is turning weaker, while both the RSI and Stochastics oscillator is hooking downwards.

Market outlook

• Although bargain hunting activities could continue to provide a short term technical rebound on Wall Street ahead of the jobs data today, we expect sentiments to be cautious prior to the FOMC meeting next week.

• Meanwhile, selling pressure might extend on the O&G heavyweights within our local bourse amid weaker crude oil prices. Nevertheless, traders could find opportunities within fundamentally solid lower liners and small caps if they turn oversold.

• Trading Buy-CCK. CCK is involved in the Poultry, Aquaculture (in prawn agriculture and prawn processing for exports), Retail Consumer Frozen Food and Animal Feed. It is trading at 0.86x P/BV, 33% below its peers’ P/BV of 1.29x. Technically, its long term uptrend channel remains intact and we believe the stock is ripe for a near term downtrend resistance breakout, as indicators are on the mend. A decisive breakout above RM0.645 will spur prices higher towards RM0.66-0.74. Key supports are RM0.60-0.62. Cut loss at RM0.59.

Source: Hong Leong Investment Bank Research - 10 Mar 2017