Market review

• Despite a softer closing on Wall Street last week and prior to Trump-Xi Jinping meeting and FOMC meeting minutes, Asian stock markets ended positively led by Hang Seng Index (+0.62%), while Nikkei 225 rose 0.39%.

• Share prices on our local front traded on a slightly positive tone after a mild profit taking activities at the start of the trading session. The FBM KLCI ended higher by 5.40 pts (+0.31%). Market breadth was positive with a ratio of 499- to-430 stocks. Meanwhile, overall traded volumes stood at 3.24bn worth RM2.55bn.

• US stock markets declined on the back of softer ISM data and auto sales. Index of manufacturing activity fell to 57.2 compared to reading of 57.7 in the month of February and auto sales were weaker from the Ford, General Motors and Fiat Chrysler. The Dow and S&P500 slipped 0.06% and 0.16% respectively.

Technical view

KLCI overbought, but buying interest re-emerged above SMA20

• Despite the Stochastics oscillator suggesting an overbought status on FBM KLCI, buying interest re emerged around SMA20 – indicating short term momentum is positive and may revisit 1,750.

Market outlook

• The US market may trade in a cautious mode ahead of few key events this week. We expect the Dow to continue its sideways consolidation phase between the 20,500- 20,777 levels. However, on the local front, FBM KLCI could see a good trading momentum following a selective buying momentum yesterday. Also, trading focus may persist on the broader market, specifically the technology lower liners within the ACE market after buying interest was noted among semiconductor related stocks.

• Closed positions. Yesterday, we took profit on CCK (5.5% gain) after hitting above R1 upside target. We also squared off our position on Texcycle (4.4% loss) amid weakening technicals.

• Trading Buy – MALAKOFF. Despite recent selling pressures, we believe Malakoff (the IPP in Malaysia and in ASEAN) offer LT investors a buying opportunity amid its strong cashflow and resilient earnings with attractive dividend yield of 5.2%. Following one month of sideways consolidation, Malakoff is ripe for further relief rally towards RM1.29-1.46 zones, supported by bullish daily technical indicators and positive downtrend line breakout. Key supports are near RM1.16-1.19. Cut loss at RM1.15

Source: Hong Leong Investment Bank Research - 4 Apr 2017