Market Review

• Tracking the mixed performance on the US stock markets, Asian regional indices ended on a mixed tone as investors were cautious ahead of the FOMC meeting. The Nikkei 225 added 0.70% and Hang Seng Index rose 0.33%, while Shanghai Composite Index declined 0.35%.

• Despite the mixed sentiments on the Wall Street, share prices on the local front bucked the trend to move higher as FBM KLCI added 0.59% to 1,778.47 pts led by CIMB and Public Bank. Market was also reinforced by ringgit which strengthened to RM4.32/US$. Market breadth was positive with gainers led losers by a ratio of 594-to-411, whilst overall market volumes stood at 3.88b shares, worth RM3.48b.

• Wall Street ended on a slight positive note as investors continued to position themselves ahead of corporate earnings from the technology and auto sectors. The Dow and S&P500 advanced 0.17% and 0.12% respectively.

Technical View

Marking new territory with overbought conditions

• The MACD Indicator is trending positively above zero as the FBM KLCI traded towards the 1,780 level. However, the stochastics oscillator is suggesting that the FBM KLCI is overbought and the recent rally could take a breather. Support will be located around 1,760-1,770.

Market Outlook

• In the US, most traders are anticipating that the Fed would keep the interest rates unchanged. However, the meeting may offer clue for a potential rate hike in June meeting and balance sheet unwinding later this year. Over the near term, we may expect the movements on the Dow would be driven mainly on earnings and employment data this Friday.

• With the positive trading environment from the overseas markets, we opine that the shares on Bursa Malaysia are likely to trend higher, while the FBM KLCI could hold above the 1,770 level. Also, stronger ringgit below the RM4.35 level could be the short-term positive for the market, which may be benefiting auto and aviation sectors.

• Closed positions. We had squared off our positions on DRBHCOM (5.8% gain) due to expiry.

• Trading Buy-Hiaptek. Hiaptek is primarily involved in pipe manufacturing and the trading of general steel products. Through Eastern Steel S/B, a 55%-owned joint-controlled entity (JCE) with Orient Steel Investment Co Ltd (40%) and Chinaco Investment Pte Ltd (5%), Hiaptek is also operating an integrated iron and steel mill at Kemaman, Terengganu. On the back of improving operating environment and reduced interest cost (redemption of convertible bonds) and narrower JCE losses (mainly due to forex), Hiaptek may improve in its 2HFY17 results, driven by its manufacturing and trading divisions. The group is also planning to restart its integrated mill in 4Q17 (may take 3-4 months to ramp up to full capacity which is 700,000 tonnes).

Source: Hong Leong Investment Bank Research - 3 May 2017