Market Review

• Despite the mixed trading sentiments on Wall Street, coupled with the political discussion between UK and European Union, Asian key regional indices managed to trend positively as buying interest steadied throughout the Asian trading hours led by Hang Seng Index (+1.16%), followed by Shanghai Composite Index (+0.70%) and Nikkei 225 (+0.62%).

• However, most of the stocks on Bursa Malaysia extended their trading into the red territory; key indices bucked the trend as FBM KLCI fell 0.13%, while FBM Small Caps and FBM ACE declined 0.73% and 2.64% respectively – contributing to a negative market breadth (7 losers for every 2 gainers). Overall market volumes stood at 1.93bn shares, which is below the 2.00bn mark.

• US stock markets were boosted strongly by the 'Technology Week' that was setup by the White House, where Donald Trump met up with tech leaders from Amazon, Apple and other tech companies' leaders discussing how the government can begin reducing waste and improving services through technology.

Technical View

MACD Histogram formed another weaker bar

• The FBM KLCI extended the consolidation below the 1,800 level with a bearish divergence signal on MACD Indicator. The Stochastics oscillator is overbought. Key index’s support will be located around 1,760-1,780, while resistance will be set around 1,800-1,820.

Market Outlook

• In the US, stocks have turned upside bias after the mixed sentiments last week. As the Dow has secured above the 21,500 territory, next resistance will be located around 21,600-21,800, while Nasdaq will be retesting the previous resistance along 6,300-6,400.

• Meanwhile, shares on Bursa Malaysia, especially the local technology stocks that have retraced recently could see some positive trading interest, following the tech rebound in the US. However, we think the technical rebound might be short-lived as the FBM Small Cap and FBM ACE are below the short term SMA20.

• Closed position. We squared off our position in IFCAMSC (5.2% loss) yesterday amid weakening technical.

• Trading Buy - GCB. Guan Chong Berhad (GCB) is involved in the manufacturing and trading of cocoa derived food ingredients and cocoa related products. Lower input cost amid falling raw material cocoa prices may trigger re-rating for GCB. Cocoa prices corrected more than 40% from its peak of US$3,422/mt in 2015. Given the lower coca price of below 2,000 mark, we can expect positive impact towards GCB’s bottomline. QoQ basis, slightly stronger ringgit of RM4.20-4.30 vs RM4.40- 4.50 in CY1Q17 is positive for GCB as raw material is priced in US Dollar

Source: Hong Leong Investment Bank Research - 20 Jun 2017