Market review

• In tandem with overnight Wall Street negative performance, profit taking activities emerged among stocks markets in Asia after the interest rates hike move last week. The Nikkei 225 and Shanghai Composite Index fell 0.35% and 0.97% respectively, but Hang Seng Index rose marginally by 0.09%.

• Follow-through buying interest continued to support the stock market on the local front for the second consecutive trading days after the interest rates hike, boosting the FBM KLCI towards 26-month high. Overall market volumes stood at 4.98bn shares (31-month high), worth RM5.04bn. Also, market breadth is positive with 591 advancers, 368 losers, while 356 traded unchanged.

• U.S. stock markets trended sideways amid a mixed bag of economic data such as consumer sentiment index and industrial production data. Meanwhile, investors were also cautious as G20 meeting was held over the weekend. The Dow fell 0.10% (+0.06% wow).

Technical view

FBM KLCI retested 1,750 and turned overbought on Stochastics oscillator

• The weekly MACD Indicator suggests that the FBM KLCI is on an uptrend intact move, but the weekly Stochastics oscillator is overbought. Similarly, both the daily and weekly RSI indicator are also overbought. Consequently, profit taking activities may pick up over the near term as shooting star candle was formed on the daily chart.

Market outlook

• As investors digested the interest rates hike move by the Fed, next investment focus would be on European elections, coupled with U.S. reporting season during April. Both the factors may trigger some wariness in the stock markets, which the Dow may trade between the 20,000- 21,000 levels over the near term.

• Meanwhile, with the overheated trading in local bourse, we opine that the investors may lock in some profits after a strong rally last week on the FBM KLCI and FBM Small Cap indices.

• Trading Buy-HSL. We believe its share price has been unjustifiably punished, given its undemanding valuation of 9.8x FY18 P/E (16% below its 10-year average 11.7x), healthy balance sheet with net cash position of RM88.5m (RM0.16/ share) and strong core profits of 33% CAGR from FY16-18 amid solid orderbook of RM2.4bn. Near term uptrend remains intact as share prices are trending above the support trend line. A breakout above RM1.75 could form a new upswing towards RM1.86-2.00 levels. Key supports are RM1.58-1.61. Cut loss at RM1.57.

Source: Hong Leong Investment Bank Research - 20 Mar 2017