Market review

• Asian benchmark indices trended positively after a jump in crude oil prices after Russia and Saudi Arabia commented on the extension of the output cuts. Nikkei 225 rose 0.25%, while Shanghai Composite Index gained 0.75%.

• However, most of the shares on Bursa Malaysia ended in the negative zone at closing amid profit taking activities despite the recovery in Brent crude oil. Market breadth was negative with 497 decliners, 412 advancers while 408 traded unchanged. Overall traded volumes stood above 3.00bn mark at 3.52bn, worth 3.84bn. Also, selected property stocks such as IWCITY and MALTON were traded heavily amid newsflows from the media.

• Wall Street ended on a flattish tone amid softer-than expected US housing data, coupled with renewed concerns over Trump's economic policies, which held back traders' buying interest for the day.

Technical view

Failed to secure the territory above 1,780

• The FBM KLCI surged above the 1,780 level and selling pressure emerged. The MACD Histogram has turned red, while the Stochastics oscillator could be hooking downwards after flashing an overbought status yesterday. The resistance will be set around 1,780-1,790.

Market outlook

• Without any fresh catalyst in the markets, we opine that the US stock markets are likely to be capped along the 21,000-21,178 levels on the Dow. However, traders may focus on cyber security sector following the outbreak of 'ransomware'.

• Similarly, on the local front, given the cautious and flattish performance on the overnight Dow, the FBM KLCI may trend sideways. Also, profit taking activities are likely to emerge, which may curtail the upside on the key index around 1,780-1,790.

• Closed position: We took profit on EKOVEST (7.3% gain) yesterday after hitting above our R1/R2 upside targets.

• Trading buy – HTPADU. HeiTech Padu is a global IT systems and technology services provider that specialises in developing ICT systems for public and private sectors, with its core business focuses on system integration and managed services. Despite a drop in FY16 revenue to RM363m (-3.62% yoy), managed services division grew 7.2% yoy to RM119m, providing a steady recurring revenue (70% of total revenue). Under this division, Disaster Recovery and Facility Management Services improved strongly by 53.9% to RM45m. We opine that cloud services could be the trend moving forward in this digital economy era

Source: Hong Leong Investment Bank Research - 17 May 2017