Market Review

• Asian key regional indices trended lower as sentiments remained subdued following the closure of some of the major markets. The Nikkei 225 and Kospi Index fell 0.02% and 0.39% respectively.

• Meanwhile, shares on the local front went into a choppy trading mode and the FBM KLCI was fluctuating between the negative and positive territories before ending marginally higher at 1,765.34 pts (+0.03%) for the session. Market breadth remained negative for the third consecutive days with decliners ahead of advancers with a ratio of 3-to-1, while market traded volumes stood at 2.61bn shares.

• US equities ended on a weaker tone amid a potential snap election in Italy. Also, investors could be locking in profits after digesting some economic data such as home prices and consumer confidence index that were released yesterday.

Technical View

Mild recovery, but still downward bias

• Following the trendline violation two days back, the KLCI has rebounded marginally. However, the MACD Indicator continues to trend lower. The Stochastics momentum oscillator is suggesting negative bias near term move. We expect the KLCI’s upside will be capped around 1,780, while support will be set along 1,740-1,760.

Market Outlook

• Trading tone on the Wall Street is likely to be sluggish as traders will be focusing on the US jobs data this Friday, coupled with the Dow trading near the all-time-high area with an overbought status which may cap the buying interest in the near term.

• Similarly, shares on Bursa Malaysia may see lukewarm buying interest as market may be looking for fresh catalyst beyond the financial reporting season. Based on the weaker conditions of the technical indicators, we expect KLCI’s direction will be range-bound and capped around 1,780.

• Trading buy – JCY. JCY is involved in manufacturing, trading and assembling of Hard Disk Drive (HDD) mechanical components. JCY recorded a slowdown in quarterly revenue, but profits improved attributed mainly to favourable USD exchange rate against Ringgit. Softer short-term outlook, but demand is improving from data storage with the migration to cloud-based computing systems, as well as growth of "Internet of Things". JCY’s Stable dividend payout of 1.25 sen per quarter may cushion the downside, translating to an attractive dividend yield of ~8.2%.

Source: Hong Leong Investment Bank Research - 31 May 2017