Market Review

• Most of the Asian stock markets trended in the negative territory as crude oil prices plunged to a five-month low. The Shanghai Composite Index and Hang Seng Index declined 0.77% and 0.84% amid weakening commodities prices such as iron ore.

• Following the shock in the market on the back of the lapsed Bandar Malaysia deal, market sentiments managed to recover amid bargain hunting activities with FBM KLCI gaining 0.23% to 1,762.47 pts (-0.30% wow). On the broader market last Friday, market breadth was positive with advancers led gainers by a ratio of 2-to-1.

• U.S. equities stayed positive as employment data as U.S. economy added 211,000 jobs in April and unemployment rate fell to 4.4%, which contributed to higher chances of rates hike in the upcoming FOMC meeting in June. The Dow added 0.26%, while S&P 500 and Nasdaq advanced 0.41% and 0.42% respectively led by Apple Inc.

Technical View

Weakened momentum indicator may capped the upside of FBM KLCI around 1,770-1,780

• The weekly and daily MACD Histogram turned red, while the weekly RSI indicator is overbought. Also, daily stochastics oscillator is trending lower. The FBM KLCI may see limited upside around 1,770-1,780 over the near term. The support will be pegged around 1,740-1,750.

Market Outlook

• As landslide win for Macron in the French election is within markets’ expectation. We opine that the overseas markets may continue to stay positive over the near term. The Dow may revisit the 21,178 level over the near term.

• Despite the conclusion of the French election with a positive outcome, investors may stay sideways and cautious in trading the stock market without clear details on Bandar Malaysia deal. Also, weaker crude oil prices have dampened the market sentiments last week. Hence, FBM KLCI’s upside may be limited at around 1,770- 1,780.

• Trading Buy - ENGTEX. At RM1.26, Engtex is trading at undemanding valuations of 9.5x FY16 P/E (29% discount to its peers: 13.3x) and 0.72x P/B (10% below its 10-year historical average 0.8x). Engtex’s earnings growth is likely to gain traction in 2017, mainly driven by a resumption of upturn in its wholesale and distribution and steady growth in manufacturing divisions, amid resilient demand growth from the waterworks, infrastructure and construction activities on favourable product mix and better margins riding on the recovery of steel prices.

Source: Hong Leong Investment Bank Research - 8 May 2017