Market Review

• As investors were waiting for the conclusion of the FOMC meeting and economic data from US, key regional stock markets traded on a negative mode – the Shanghai Composite Index fell 0.25% and ASX 200 ended lower by 0.98%.

• In tandem with the mixed development in US stock markets, coupled with strengthening in ringgit, the FBM KLCI hit an intra-day high of 1,784.79 pts amid strong buying interest in most of the banking heavyweights. However, selling interest emerged and the KLCI ended in the negative territory at 1,777.51 pts (-0.34%) on the back of profit taking activities. Overall market volumes stood at 3.90b, worth RM3.04b. Also, market breadth turned negative with 535 decliners, 391 advancers, while 392 traded unchanged.

• With the Fed keeping the interest rates unchanged, which was within investors' expectations, stocks ended on a mixed tone with the Dow inched up marginally by 0.04%, while S&P500 and Nasdaq dropped 0.13% and 0.37% respectively. Meanwhile, ISM non-manufacturing PMI rose to 57.5 in April vs. 55.2 in March.

Technical View

KLCI rejected 1,780 with overbought indicators

• The FBM KLCI turned into selling mode soon after it surpassed 1,780 and the Stochastics oscillator is suggesting that the key index is overbought. Support will be pegged around 1,760-1,765.

Market Outlook

• With the widely anticipated outcome on FOMC decision, we expect the stock markets would stay neutral until the next speculation hike in June. Meanwhile, the immediate trend would be influenced by the jobs data on Friday. Hence, the Dow is likely to hover between the 20,900-21,178 levels.

• On the local front, further profit taking activities could be seen on the local bourse following the mixed development on Wall Street. The FBM KLCI is likely to consolidate after the key index rejected 1,780 yesterday. Also, property and construction stocks could feel some pressure after the deal between Bandar Malaysia and IWH-CREC lapsed.

• Closed positions. Yesterday, we booked profits on KGB and LEONFB after share prices rallying 16.3% and 7.3% respectively.

• Trading Buy – AYS. AYS Ventures Group is involved in two business segments, namely trading and manufacturing of construction materials. AYS cumulative 9MFY17 profit stood at RM21.5m vs. RM8.8m in the similar corresponding period, which translates to an EPS of 5.64 sen. AYS is trading at 7.9x P/E, which is 23% discount from the industry peers. Given the commendable results over the past three quarters, we can anticipate a better 4QFY17 amid firmer steel prices.

Source: Hong Leong Investment Bank Research - 4 May 2017