Market Review

• Following the landslide victory of Macron in French elections, Asian stock markets trended positively led by Nikkei 225 with a rise of 2.31%, while Hang Seng Index added 0.41%. However, Shanghai Composite Index declined amid continuation of stricter regulatory measures in China's financial system.

• Despite the FBM KLCI (+ 0.31%) ended in the positive territory, market sentiments were sluggish as the collapse of Bandar Malaysia’s deal continued to dampen buying interest within the small cap stocks – FBM Small Cap ended lower by 0.27%. Market breadth was positive with gainers led losers by a ratio of 5-to-4 and overall market volumes stood at 4.02bn, worth RM2.43bn.

• US equities ended in the positive territory with marginal gains on the Dow and S&P500 following Macron's victory in the French presidential election. Meanwhile, Brent crude oil prices managed to recover part of their earlier losses after Russia and Saudi Arabia supported the idea of extending the production cut measure into 2018.

Technical View

Buying momentum stabilizes; Recovering indicators suggest KLCI may trend towards 1,780

• The MACD Line is hovering above zero, while the MACD Histogram extended another red bar. Also, the RSI turned upwards – indicating that the momentum is picking up. Resistance will be envisaged around 1,780.

Market Outlook

• In the US, we believed that markets may stay bullish after factoring French election outcome and corporate results reported last month. The Dow is likely to revisit 21,178- 22,000 with the VIX index or fear index fallen to a 20-year low level.

• Similarly, stocks on the local bourse should remain resilient despite the uncertain Bandar Malaysia deal. Also, traders might be staying positive ahead of Malaysia's Prime Minister visit to China next week on the Belt and Road forum. The FBM KLCI could trend slightly higher towards 1,770-1,780 over the near term.

• Trading Buy-MYCRON. Mycron operates in the mid stream sector of the steel industry, with the manufacture of Cold Rolled Coil (“CRC”) steel sheets and Steel Tubes. It is a beneficiary of recent sliding iron ore prices (core raw material to produce HRC) and a recovery in RM (vs US$) as the group imports HRC, which is the core raw material to produce CRC sheets and Steel Tubes. Given the sustained momentum of Mycron’s steel businesses in the 1HFY17, management reiterates that the Group’s prospect for the 2HFY17 remains positive, driven by the recent plunge in iron ore prices, firm steel prices coupled with a mild recovery in RM (vs US$).

Source: Hong Leong Investment Bank Research - 9 May 2017