Market Review

• Asian stocks trended mixed following the softer tone on Wall Street. The Nikkei 225 and Hang Seng Index fell 0.14% and 0.16%, but Shanghai Composite Index added 0.12% after digesting the better-than-expected China PMI at 51.2 (vs. the consensus of 51.0).

• The FBM KLCI ended in the positive zone led by last minute buying support in the banking heavyweights like CIMB, MAYBANK and AMBANK. However, market breadth was negative as investors continued to lock in profits on the final day of reporting season; there were 501 decliners, 437 advancers, while 331 traded unchanged. Selected metal related stocks such as ASTINO and LEONFB rebounded on the back of recovering commodities prices following the stable China’s PMI.

• Economic data that were released yesterday such as Chicago PMI and US pending home sales have dampened investors' mood on the stock markets. The Dow fell 0.10%, while S&P500 slipped 0.05% led by financials such as JP Morgan and Bank of America.

Technical View

Still hovering below the upward trendline with indecisive candles

• The FBM KLCI trended sideways with smaller body candles, while the MACD Line continues to trend below the Signal Line. The Stochastics and RSI oscillators are flattish; the FBM KLCI may consolidate sideways between the 1,760- 1,780 levels over the near term.

Market Outlook

• In the US, we anticipate that the trend will be rangebound over the near term on the back of renewed concerns over US politics as ex-FBI director James Comey will be testifying before Congress next week. Meanwhile, enthusiasm on Trump economic policies could also be fading as investors are waiting for further clarity on corporate tax reform.

• On the local front, trading tone may turn mildly positive after potential RHB-AMBANK merger deal resurfaced on the news following the request of securities suspension by both parties. We think that the FBM KLCI may trend higher for the day with a strong resistance set along the 1,780 level.

• Trading Buy - IFCAMSC. In its 1Q17 results review, business units like HR software and Property365 has gained good traction and expected to contribute positively. Management also anticipates its businesses in China and Indonesia to continue to grow and contribute significantly. The maintenance revenue segment is expected to achieve strong growth from RM 27m recorded in FY2016. As at 31 March 2017, the Group has unbilled orders in hand amounting to RM23.8m. Fundamentally, it is supported by netcash/share of 11.5 sen (or 29% of share price) coupled with prospects of strong FY17-18 earnings turnaround.

Source: Hong Leong Investment Bank Research - 1 Jun 2017