Market Review

• Following the softer tone in the US, coupled with the cautious sentiment ahead of the French election, Asian stock markets mostly traded on a sideways mode; Shanghai Index and Nikkei 225 ended flattish at 3,172.59 pts (+0.06%) and 18,430.49 pts (-0.01%). However, Hang Seng Index advanced nearly 1% to 24,056.98 pts led by Tencent Holdings, which rallied towards all -time high yesterday.

• Meanwhile, shares on Bursa Malaysia were slightly resilient despite the cautious tone in the US. The FBM KLCI ended higher at 1,741.61 pts (+0.15%) led by RHB Bank and Tenaga Nasional. Market breadth turned positive with 498 gainers, 368 losers, while 395 traded unchanged. Overall market volumes declined to 2.64bn shares, worth RM2.24bn.

• Wall Street ended on a positive note after American Express recorded better-than-expected results, lifted the Dow (+0.85%) above the 20,500 level. Also, stronger sentiments were helped by positive comments from US Teasury Secretary Steven Mnuchin on Trump's tax reforms policy.

Technical View

Creeping higher with mild buying interest, reinforced by recovering indicators

• The FBM KLCI gained mild buying support above 1,740 and the MACD Histogram extended another green bar. The RSI is hovering slightly above 50, while the Stochastics continue to trend higher towards 50.

Market Outlook

• In the US, investors continue to lookout for buying opportunities after solid corporate results were reported. We opine that the direction of US stock markets will be dictated by the on-going reporting season with the Dow's range envisaged around 20,500-20,777.

• Shares on the local front may get a sentiment booster following the triple-digit gains on the overnight Dow, the FBM KLCI is likely to retest the 1,743-1,750 levels amid recovering buying interest.

• Trading Buy-WZSATU. Despite a 43% yoy plunge in bauxite contribution due to the government ban, PBT still expanded at a robust rate of 70% yoy in 1HFY17 on the back of strong turnaround in manufacturing and O&G divisions coupled with the steady performance from civil engineering & construction segment. Its diversification into PRIMA projects will lift its order book to about RM1.4bn, which should be able to keep it busy for the next three years. Technically, WSSATU is forming a positive flag pattern. A decisive break above RM1.31 will spur prices higher towards RM1.38-1.49 region. Key supports are RM1.20-1.22. Cut loss at RM1.18.

Source: Hong Leong Investment Bank Research - 21 Apr 2017