Market review

• Asian stock markets cheered positively amid bargain hunting activities after US dollar recovered, as investors accepted the fact on the withdrawal of healthcare bill. The key reigonal indices such as Nikkei 225 and Hang Seng Index gained 1.14% and 0.63% respectively.

• Also, share prices on Bursa Malaysia rebounded on a stronger note, snapping a four-day decline; the FBM KLCI gained 0.54% to 1,754.42 pts. Market breadth was positive with advancers outnumbered decliners by a ratio of 513-to-366 stocks. Overall market volumes fell to 3.07bn shares, vs. 3.97bn shares on Monday.

• US stock markets rebounded positively as consumer confidence index hit 125.6 (highest level in 17 years), coupled with a rebound in crude oil prices after OPEC officials commented that the production cut measures might be extended into second half of the year (decision to be made on 25th May).

Technical view

Flag formation breakout above 1,750

• Following the pullback formation towards the SMA10, the FBM KLCI staged a breakout above 1,750 – forming a flag pattern breakout. The MACD Histogram has turned green. Also, the RSI and Stochastics oscillator have rebounded higher. The key index may retest the resistance of 1,760. Support will be set around 1,750.

Market outlook

• With the Dow rebounded further above 20,500, snapping an eight-day decline supported by energy stocks and better consumer data, the Dow could revisit the resistance around 21,000 with gradual buying interest. Similarly, the Malaysia's stock market is likely to trade in tandem with the positive sentiments abroad; the FBM KLCI may retest the 1,760 resistance level. On the broader market, oil and gas stocks may gain interest amid recovering oil prices.

• Meanwhile, Britain’s Theresa May to trigger Brexit with the European Union on March 29 by invoking Article 50, which may send mild cautious tone to the markets.

• Trading Buy - DRBHCOM. Despite recent selling pressures, DRBHCOM has maintained a strong support above the 50-SMA near RM1.31 amid undemanding valuation and imminent Proton FSP announcement by June. On the back of bullish hourly chart and bottoming up daily indicators, share prices are likely to test immediate resistances at RM1.43 (daily upper Bollinger band) and YTD high at RM1.46 soon. A decisive break above RM1.46 could potentially signal that the next leg up towards 52-week high at RM1.55. Key supports are RM1.34 and RM1.31. Cut loss at RM1.30.

Source: Hong Leong Investment Bank Research - 29 Mar 2017