Market Review

• Key benchmark indices were mostly lower following the London attack over the weekend, which snapped some gains on the regional markets. Nikkei 225 was marginally lower by 0.03%, while Hang Seng Index and Shanghai Composite Index declined 0.24% and 0.45% respectively.

• On the local front, sustained buying interest was seen on the selected blue chips and lifted the FBM KLCI towards an intra-day high of 1,790.23 pts, before ending at 1,787.95 pts (+0.62%) led by banking heavyweights such as CIMB and Hong Leong Bank. Market breadth was positive with advancers led decliners by 542-to-382. Overall traded volumes were below the 3.00b mark at 2.50bn.

• Wall Street took a dip led by Apple following a downgrade after the Dow traded towards an all-time-high last week. Also, economic data such as ISM non manufacturing data and factory orders were weaker-than expected. The Dow and S&P500 fell 0.10% and 0.12% respectively.

Technical View

MACD Line trended positively, FBM KLCI may extend towards 1,800

• The daily MACD Histogram has extended another green bar and the RSI has rebounded off the 50 level, indicating the positive momentum could remain steady over the near term; the key index may retest 1,800.

Market Outlook

• Market sentiments may turn negative as crude oil prices had a volatile ride after the tensions heightened in the between Qatar and few Arab nations. Also, other key events that investors would focus will be the U.K. Elections and ECB meeting this week.

• However, buying sentiments on the local front could remain positive with the key index marking a fresh YTD high. Despite the crude oil volatility, we opine that the banking heavyweights may potentially lift the FBM KLCI to test the 1,800 level over the near term.

• Trading Buy – SCABLE. Sarawak Cable (Scable) is involved in several business segments, which include (a) power and telecommunication cables (b) galvanized products and steel structure, (c) transmission lines construction and (d) power generation, helicopter services and corporate services. We see some signs of recovering in the cables divison with revenue contribution rising to 83% in 1QFY17 from 66% in FY16. Also, Scable is a proxy to Sarawak infrastructure play such as Pan Borneo Highways coupled with the implementation of Bekalan Elektrik Luar Bandar which may spur the demand of cables in the local markets.

Source: Hong Leong Investment Bank Research - 6 Jun 2017