Market review

• Despite China’s GDP growing at a better-than-expected rate of 6.9% yoy in 1Q17, Shanghai Composite Index declined 0.75%. Meanwhile, overall Asian stock markets ended mixed with Nikkei 225 added 0.11%, while Hang Seng Index slid 0.21% amid the Korea geopolitical tensions.

• On the local bourse, the FBM KLCI rebounded after taking a sharp dived last Friday towards the 1,730 level led by the banking heavyweights such as Maybank and CIMB, which added 7.0 sen each. Market breath turned positive with 456 gainers, 397 decliners, while 381 traded unchanged. Overall market volumes dwindled below the 3.0bn mark at 2.89bn shares traded for the day.

• Wall Street ended on a positive note as the Dow rebounded off the support around 20,500 led by relief rally among banking stocks following the two-day selldown last week amid weaker sentiments due to geopolitical tensions in Korea peninsular. The S&P500 gained 0.86%, while the Dow added 0.90%.

Technical view

Technical rebound formed around 1,730, upside may be seen around 1,743

• On the FBM KLCI, there could be a slight uptick after the MACD Indicator (Histogram) formed a green bar. We may expect a mild short-term uptrend after recent consolidation move as the RSI indicator is hovering below 30. Near term support will be pegged around 1,730, while upside target will be envisaged around 1,743.

Market outlook

• On the overseas markets, we anticipate that the near term movement will be dictated by the corporate earnings results later this week. The Dow's resistance will be envisaged at around 20,777.

• Meanwhile, shares on the local front may track the positive performance on the overnight Dow and extend its technical rebound on the FBM KLCI to retest the near term resistance at around 1,743. However, should there be any resurfacing of news related to military decision from the North Korea or the US, jittery tone may weigh the sentiments and KLCI may still consolidate along 1,730.

• Trading Buy – KGB. A leading Ultra-High Purity (UHP) Gas and Chemical Delivery Solutions Provider in Malaysia, China, Taiwan and Singapore with an outstanding orderbook of ~RM277m. KGB is currently trading at 8.3x FY16 P/E (7.1x if excludes 7.9 sen netcash). The stock retraced from 52-week high of RM0.64 (5 Apr) to a low of RM0.53 (14 Apr) before ending at RM0.565 yesterday. Short term rebound seems taking shape amid the formation of hammer-liked candlestick. A decisive breach above RM0.59 (10-d SMA) is likely to spur prices higher towards RM0.64 and our long term objective of RM0.70 (123.6% FR). Key supports are RM0.53-0.545. Cut loss at RM0.525.

Source: Hong Leong Investment Bank Research - 18 Apr 2017