Market review

• Tracking the weaker tone in the US stock markets after the Fed kept the interest rates unchanged, most of the Asian stock markets trended lower. Shanghai Composite Index and Hang Seng Index sild 0.26% and 0.05%.

• On the local front, following the lapsed of Bandar Malaysia and IWC-CREC deal, market environments turned weaker; profit taking activities emerged among the heavyweights and the key index dropped 0.78% to 1,758.67 pts. Market breadth was negative with decliners led advancers by a ratio of 8-to-2. Small Cap Index and FBM ACE declined 1.03% and 0.88% respectively.

• Stocks in the US ended on a flattish tone as financials stocks offset losses in energy stocks, which dragged down by weaker crude oil price amid rising concern of oversupply glut in crude stockpiles. The Dow slid marginally by 0.03%, while S&P500 and Nasdaq inched up 0.06% and 0.05% respectively.

Technical view

KLCI may due for a mild rebound after sharp fall

• The FBM KLCI traded towards the 1,755 level and rebounded off the EMA20 level, suggesting that the key index may due for a technical rebound. Immediate resistance will be pegged around 1,765. Meanwhile, support will be at 1,750.

Market outlook

• In the US, investors are likely to focus on the jobs data to gauge the strength of the US economic activities. Meanwhile, traders may stay cautious ahead of second round French election on 7th of May. The Dow may extend its consolidation within the range between 20,900-21,178. On the local front, after a round of selloffs in the broader market, we opine that the bargain hunting activities may surface within solid fundamental stocks and the KLCI could be due for a short rebound. However, upside of the KLCI is likely to be capped around 1,765 amid weaker Brent crude oil prices, which selling pressure might be seen within O&G stocks, eventually.

• Closed positions (refer FIG4). Yesterday, we squared off our position on MALAKOF (2.9% gain cum 3.5sen dividend) amid expiry.

• Trading Buy-TUNEPRO. TUNEPRO is a dominant player in the local travel insurance segment, riding on its sister company, Air Asia’s low cost carriers’ aggressive network expansion into new markets and strong passenger growth and it could serve as an proxy for investors who wish to participate in AirAsia’s strong growth story without exposures to jet fuel price and US$ borrowings risks.

• Currently, the stock is trading at undemanding 10.7x FY18 P/E and 2.15x P/B, which are 37% below its historical average (since debut) of 17x and 35% below its historical P/B of 3.3x, respectively, supported by decent yields of 3.5- 4.2% and 12% earnings CAGR for FY16-18 and reinforced by the strong passenger growth from AIRASIA

Source: Hong Leong Investment Bank Research - 5 May 2017