Market Review

• Most of the Asian stock markets ended slightly higher despite lack of details on the Trump tax plan that was announced on Wednesday; Shanghai Composite Index and Hang Seng Index rose 0.37% and 0.40% respectively. Meanwhile, Bank of Japan raised the economic forecast and kept the monetary policy unchanged, but profit taking activities emerged on Nikkei 225 (-0.19%).

• Shares on Bursa Malaysia ended flattish as buying interest waned after US tax plans were unveiled. The FBM KLCI was fluctuating around the 1,770 level and ended at 1,767.92 pts (-0.06%) at the trading break. Market volumes still above 3.0b at 3.45b, while market breadth was neutral with 448 advancers vs 448 decliners.

• US stock markets returned into the positive territory after investors reassessed the corporate tax reform details. Also, the earnings results so far were still within market expectations, providing mild buying interest to lift the Dow (+0.03%) and S&P500 (+0.08%) marginally higher for the day.

Technical View

FBM KLCI capped near the 1,770 resistance

• The FBM KLCI took a pause near resistance zone as buying interest slowed down. However, the MACD Indicator expanded positively above zero, but the RSI turned overbought after moving above the 70 level. We opine that upside could be limited to around 1,770-1,780. Meanwhile, immediate support will be pegged at around 1,760.

Market Outlook

• As the tax reform would slash 20ppts of the corporate tax rate, we opine that this move would provide a booster towards the bottom line of corporate results in the future on a longer time frame. However, on a short term basis, investors may stay sideline as the Dow is traded near the resistance zone of 21,000.

• Tracking the slight positive sentiments on Wall Street, the FBM KLCI could still trend sideways near the 1,770- 1,780 levels. However, selective rotational play would be seen in the market; buying interest could emerge within the technology stocks as overnight Nasdaq stayed firm above 6,000. Also, GLCs may attract traders’ attention after fresh buying volumes were noted yesterday.

Source: Hong Leong Investment Bank Research - 28 Apr 2017