Market Review

• Asian key indices trended positively following the overnight positive performance on Wall Street, coupled with the firmer Japan’s unemployment rate, which stood at two-decade low. The Nikkei 225 advanced 1.60% to 20,177.28 pts (first time marking above 20,000 since Dec 2015), while Hang Seng Index and Shanghai Composite Index rose 0.44% and 0.11% respectively.

• Meanwhile, stocks on the local bourse traded on a bullish tone in tandem with the regional markets. Also, the RHB AMBANK merger deal has revived the subdued tone over the week. The FBM KLCI gained 0.78% to 1,776.95 pts (+0.26% wow) led by SIME and MAYBANK. On the broader market, there were 3 advancers for every 1 decliner, while market traded volumes stood at 2.46bn.

• Market sentiments on the overseas markets were positive despite weaker-than-expected jobs data; US Labour Department mentioned that only 138,000 (vs. forecasted of 158,000) jobs created last month. The Dow closed higher by 0.29% at 21,206.29 pts (+0.60% wow), while S&P500 rose 0.37% at 2,439.07 pts (+0.96% wow).

Technical View

FBM KLCI rejected the upward trendline, forming a weekly hammer candle

• The FBM KLCI rebounded off the 1,760 level and the trendline, forming a positive candle with on weekly chart. The weekly MACD Line stayed above the weekly Signal Line. However, Stochastics oscillator is hovering in the overbought region.

Market Outlook

• As the Dow secured the territory above the resistance of 21,178, marking a fresh record high, we opine that the buying momentum may extend over the near term. However, investors may focus on some key events such as U.K elections and ECB meeting which will be held on 8th June, while interest rates decision will come in after the FOMC meeting (13-14 June) and may contribute to a slightly volatile trading sentiment in the coming weeks.

• Similarly, tracking the Dow’s movement, shares on the local front could see an increase in trading interest and the FBM KLCI is likely to retest the ytd high of 1,787.

• Trading Buy - Rexit. Rexit is an established web-based solutions player for the General insurance (e-cover), financial (e-PPA) and legal services (InfoGuardian). Rexit’s business model is the provision of Software as a Service (“SaaS”) which is based on a ‘pay per use’ basis and enjoys an average net profit margin of 32% from FY11-9MFY17. The successful localization and implementation of its software in overseas countries has further enhanced the marketability and the acceptability of its products and services.

Source: Hong Leong Investment Bank Research - 5 Jun 2017