Market review

• Still, Asian benchmark indices traded on a mixed note despite the easing of geopolitical tensions in the Korea region after a failed missile test by the North Korea. The stronger US dollar against the yen has lifted the Nikkei 225 by 0.35% to 18,418.59 pts. However, Shanghai Composite Index and Hang Seng Index plunged 1.39% and 0.79% respectively.

• On the local bourse, shares remained buoyant, extending the recent technical rebound as investors traded on oversold stocks; the FBM KLCI gained 0.38% at 1,740.60 pts. Market breadth was positive with gainers leading losers by a ratio of 5-to-3. Overall market volumes stood at 2.79bn, worth RM2.45bn.

• The US stock markets were pulled down by weaker-than expected earnings from Goldman Sachs and IBM - the latter dropped in revenue amid softer demand for technology services business. The Dow and S&P500 slid 0.55% and 0.29% respectively. Meanwhile, Brent crude oil declined below US$55 ahead of inventories data.

Technical view

Short term uptrend intact after FBM KLCI securing the 1,740 resistance level

• The FBM KLCI has rebounded over the past two trading days amid bargain hunting activities on the oversold stocks after the selloffs last week. The MACD Histogram extended another green bar, while the RSI has hooked upwards, indicating that the KLCI may retest 1,743.

Market outlook

• With the on-going financial reporting season in the US, investors may stay cautious over the near term and the Dow could remain within the range of 20,500-20,777. However, should there be further weakness in corporate results, the 20,500 support may be violated and next support will be pegged along 20,000. On the Malaysia's market, after the FBM KLCI securing the 1,740 level, we expect traders to extend their bargain hunting activities on oversold stocks within the technology sector.

• Closed positions (refer FIG4). Yesterday, we took profit on GENTING (1% gain) and squared off our position on KTC (1.7% loss) due to weakening technicals.

• Trading Buy – CCK. CCK is involved in the poultry, seafood, trading and transportation businesses. We anticipate a better 1Q17 results on the back of the festive season in February, which may see a surge in poultry and seafood volumes. CCK is trading at a discount of 7.4% to its book value of RM0.74 and 55% below its peers P/E of 17.0x). Should the price surges above RM0.70, we expect buying interest to pick up towards the targets of RM0.73, RM0.78 and RM0.80. Support will be set around RM0.64-0.655. Cut loss will be at RM0.60

Source: Hong Leong Investment Bank Research - 19 Apr 2017