Market review

• Asian regional indices turned cautious as most of the key exchanges trended mixed ahead of the Fed’s meeting. The Hang Seng Index and Nikkei 225 slipped 0.01% and 0.12% respectively, but the Shanghai Composite Index gained 0.07% after Industrial Production grew at a better than-expected rate of 6.3% yoy in January.

• The Malaysia’s stock market trended mixed as the FBM KLCI only gained slightly higher by 0.55 pts or 0.03% to 1,722.47 pts. Market breadth was negative with advancers led decliners by a ratio of 473-to-444. However, FBM ACE traded positively as the sub-indices jumped 1.00%. Overall market volumes stayed strong at 3.92bn, a level not seen since 30 months ago.

• The recent OPEC monthly report suggesting that the Saudi Arabian crude oil production rose to 10.1mln in February vs. 9.7mln in January pressured the Brent crude oil and traded towards near the US$50. Selling pressure was noted among energy stocks on Wall Street. The Dow and S&P500 declined 0.21% and 0.34% respectively.

Technical view

Facing resistance along 1,728-1,730 as cautious sentiments prevail

• The FBM KLCI faced some selling pressure around the 1,728 level and formed another inverted hammer candle yesterday. The MACD Indicator has issued a “Sell” signal, but the RSI continues to stay above 50. If the FBM KLCI violates below the SMA10 (1,718), further pull back may be seen towards the 1,700 level.

Market outlook

• We would expect trading sentiments on Wall Street remain jittery amid weaker crude oil price and investors are likely to stay cautious before the Fed’s decision.

• As crude oil trended lower yesterday, traders may focus on O&G stocks on the FBM KLCI. Besides, on the broader market, domestic-oriented and government-linked companies will be in traders’ radar over the near term.

• Closed position: We squared off our position in Destini (RM0.825, 9.3% gain) after hitting our R2 upside target.

• Trading Buy-3A. 3A is trading at undemanding valuations of 1.9x P/B (vs peers: 2.5x) and trailing 13.2x P/E (peers: 18.3x), supported by (i) steady underlying demand growth in the resilient F&B industry; (ii) growing export markets and product range; and (iii) higher economies of scale and production efficiency. We expect 3A to stage an ascending triangle breakout above RM1.39 and move higher towards RM1.46-1.50 in the medium to long term, supported by the bullish rounding bottom pattern in the in monthly chart. Key supports are RM1.24-1.27. Cut loss at RM1.23

Source: Hong Leong Investment Bank Research - 15 Mar 2017