Market Review

• Despite the negative performance in the US, most of the Asian stock markets ended in the positive region. Meanwhile, tracking the slump in tech giants in the US, the FBM KLCI ended in the negative territory led by extended profit taking activities in the second half of the session. Also, technology index plunged 2.15% contributed by semiconductor related stocks like INARI, MPI and UNISEM.

• Wall Street rebounded from a two-day decline as investors bought into banking stocks with an expectation that the Federal Reserve would raise the interest rate in the FOMC meeting.

Technical View

Another red bar in MACD Histogram

• The FBM KLCI has formed a bearish candle near 1,790 and the technical indicators are suggesting mixed signals. Hence, the key index may consolidate near the 1,790-1,800 levels.

Market Outlook

• We believe that the near term momentum would still be positive as the Dow is marking fresh territory with sustained buying support among the heavyweights. The Dow's trading range will be located between 21,200- 21,500.

• On the local front, we opine that bargain hunting activities may emerge on the back of better sentiments abroad. The FBM KLCI may see upward potential to 1,790-1,800. Also, semiconductor sector is likely to trade higher on a relief rebound.

• Trading Buy – GENM. GENM’s share prices slid 13.1% from 52-week high of RM6.38 (25 May) to a low of RM5.54 (13 June) before creeping up to end at RM5.63 yesterday, mainly caused by sluggish 1Q17 results and recent slump of pound sterling as its UK’s leisure & hospitality business accounted about 10-15% of EBITDA. The local tourism tax and potential delays in the opening of new amenities of GITP represent further dampeners. However, we believe GENM’s 15x FY18 P/E (8.5% below its average 10-year average P/E of 16.4x) and steeply oversold positions have priced in most of the negatives, providing sufficient margin of safety to cushion further plunge in sharp share.

• Trading Buy – ELKDESA. ELK-Desa is involved primarily involved in the business of hire purchase financing for used motor vehicles and diversified into furniture business in FY16. Hire purchase business has been growing steadily led by improvements in hire purchase portfolio. Meanwhile, we expect the furniture business to gain traction moving forward as it is still in early development stage. Meanwhile, ELK has been a steady dividend paymaster with the current yield stood at 5.44%.

Source: Hong Leong Investment Bank Research - 14 Jun 2017