Market Review

• Stock markets in the Asian region ended on a mixed note after Trump-Modi meeting while investors were focusing on key developments on European Central Banks forum and Janet Yellen's speech. The Nikkei 225 and Shanghai Composite Index rose 0.36% and 0.18% respectively, while Hang Seng Index slipped 0.12%.

• Shares on Bursa Malaysia ended marginally higher last Friday as buying interest emerged for the second consecutive day. The FBM KLCI inched marginally higher by 0.1% to 1,779.45 pts. Meanwhile, FBM Small Cap added 0.6%. Market breadth was positive with 438 gainers vs 321 losers. However, market volumes were thin at 1.31bn shares (below 2.0bn mark) as investors remained sideline prior to the long weekend holiday.

• US equities closed on a negative note led by another round of tech tumble which contributed to the softer performance on Nasdaq (-1.61%). Meanwhile, sentiments were also weighed by the Senate postponing a healthcare bill vote after 4th of July; the Dow and S&P500 fell 0.46% and 0.81% respectively.

Technical View

KLCI may turn into pullback phase following weakening technicals

• The MACD Indicator is still trending lower after the negative crossover last week, while the RSI and Stochastics oscillator are weakening. We opine that the KLCI’s upside will be capped near the 1,790-1,800 levels, while the support will be located around 1,760-1,770.

Market Outlook

• In the US, investors will maintain its focus on Trump's pro-growth policies and trading tone may be swayed negatively should there be any further delay in corporate tax and healthcare bill policies. We expect the Dow may trend on a pullback phase towards 21,200 support.

• Meanwhile, tracking the negative performance on the overnight Dow, shares on the local front are likely to take a beating, especially among the technology related stocks. Also, the KLCI may trade lower to the support of 1,760.

• Trading Buy-JAKS. At RM1.49, JAKS is trading at 1.25x P/B (12% below its 10-year average P/B of 1.42x), supported by RM2.6bn orderbook and 25% EPS CAGR for the period FY17-19. Going forward, JAKS construction division is expected to remain the main pillar for the group’s profitability in the next two years underpinned by an outstanding order-book size of RM2.6bn of which ~60% are from Vietnam while the remaining from Malaysia

Source: Hong Leong Investment Bank Research - 28 Jun 2017