Market Review

• Asian key regional indices trended sideways following the softer tone from Wall Street on weaker retail sentiments. Nikkei 225 and Kospi Index fell 0.39% and 0.45% respectively, while Hang Seng Index and Shanghai Composite Index added 0.12% and 0.45% respectively.

• Similarly, shares on the local front traded on a mixed note as investors stayed cautious on PM’s visit to China, coupled with profit taking activities within the broader market as the FBM KLCI was looking stretched near the 1,780 level. Market breadth was negative, while overall traded volumes stood below 3.0b mark at 2.70b shares.

• Meanwhile, US stock markets were flattish after weaker than-expected earnings were recorded on stock such as JC Penney (consumer sector). The Dow recorded the first weekly loss of 0.53% after three weeks of gains, while S&P500 fell 0.35%.

Technical View

Momentum indicators may be suggesting a sideways trend around 1,770-1,780

• Despite the uptrend position on the FBM KLCI over the past week, the weekly RSI and Stochastics indicators are overbought – suggest FBM KLCI may stay sideways.

Market Outlook

• In the US, we think investors would still trade cautiously after the recent slowdown in earnings on retail sector. Hence, the Dow may hover between the 20,500-21,000 levels. Also, a few economic data to monitor this week include China’s IPI and UK April CPI.

• Shares on Bursa Malaysia, however, could turn slightly positive riding on MOUs signed between Malaysian and Chinese corporates over the weekend. PM's discussion with Jack Ma (Alibaba) and Wang Jianlin (Wanda Group), is likely to generate trading interest within e-Commerce and selected property developer stocks.

• Closed position: We took profit on MYCRON (7.5% gain) last Friday after hitting R2 upside target.

• Trading Buy-EMETALL. EMETALL is involved in steel products (Steel Product Division - contributes about 70% to topline) and machinery and equipment manufacturing (Machinery and Equipment Division – generates about 30% to revenue). Following its capacity expansions since 2015, EMETALL is expected to register earnings CAGR of 43% for FY15-18 to RM18.3m on the back of revenue CAGR of 17.5% to RM129m, premised on the resilient global economic conditions, positive steel industry, growing acceptance by palm oil millers in Malaysia and Indonesia for its solvent extraction plant technology amid resilient plantation sector outlook, coupled with the insourcing of inputs (steel products and metalwork machinery) used in the fabrication of these plants.

Source: Hong Leong Investment Bank Research - 15 May 2017