Market Review

• Most of the Asian benchmark indices ended on a mixed note after President Trump’s comments on potential termination of US-South Korea trade agreement; the Kospi Index fell 0.18%. Meanwhile, Nikkei 225 and Hang Seng Index declined 0.29% and 0.34% respectively, but Shanghai Composite Index gained marginally by 0.08%.

• With the cautious sentiments floating in the market environment, share prices on Bursa Malaysia trended sideways. The FBM KLCI ended marginally higher by 0.01% to 1,768.06 pts (+0.69% wow). Overall market volumes on Friday stood at 3.10b, worth RM2.90b and market breadth was positive with 544 advancers, 403 decliners and 358 traded unchanged.

• US stock markets trended on a mixed note despite the US government averted the shutdown for the time being. Also, investors were not aggressively turning on the buying mode after softer-than-expected April economic data such as US factory and consumer spending. The Dow slipped 0.13%, but Nasdaq advanced 0.73% led by Apple prior to its results reporting.

Technical View

FBM KLCI capped around 1,770 after momentum oscillators overbought

• The weekly and daily MACD Indicators are trending positively above zero. However, daily RSI and stochastics oscillators are suggesting that the short term movement on KLCI might be due for a pause and pullback could be seen towards the support of 1,750-1760. KLCI’s upside will be envisaged around 1,770-1,780.

Market Outlook

• On the US, we opine that the sentiments are likely to stay on a cautious note ahead of the two-day FOMC meeting and Friday's employment data. Hence, the Dow could be taking a breather this week near the 21,000 level following strong weekly gains last week. Similarly, shares on the local bourse could stay on a wait-and-see mode ahead of the Federal Reserve meeting. The FBM KLCI's resistance is envisaged along 1,770-1,780.

• Trading Buy-LEONFB. LEONFB is involved in the business of trading and processing of steel products. Whilst most of the steel players recorded softer performance over the years due to slowdown in demand and overcapacity, LEONFB continues to register consistent earnings track record despite the highly challenging operating environment. Riding on better operating landscapes, LEONFB’s mid to long term growth will be driven by capacity and efficiency enhancements from the commencement of a new warehouse in the Port Klang Free Zone and major renovation and refurbishment of processing plant since 2016. In order to widen income stream, LEONFB has ventured into steel pipe manufacturing business by 2H18.

Source: Hong Leong Investment Bank Research - 2 May 2017