Market Review

• Tracking the strong performance on the overnight Wall Street, Asian regional indices were boosted higher after re-accessing comments from several central banks. The Hang Seng Index rocketed 1.10%, while Nikkei 225 and Shanghai Composite Index rose 0.45% and 0.46% respectively. Meanwhile, Kospi Index retested 2,400 psychological level.

• Despite the positive sentiments on the overseas stock markets, trading tone on Bursa Malaysia was stalemate and the FBM KLCI ended marginally higher at 1,771.36 pts. Market volumes stood at 1.40bn shares, worth RM1.56bn. Market breadth was positive with 469 gainers vs 335 losers. Furniture-related stocks were gaining traction following a piece of news related to government banning of rubberwood export surfaced yesterday.

• Despite the rebound in banking and energy shares, Wall Street ended sharply lower as selling pressure re emerged among technology stocks. The Dow fell 0.78%, while Nasdaq was sharply lower at 6,144.35 pts (-1.44%).

Technical View

Key index below trendline, MACD and RSI trending lower

• The FBM KLCI traded marginally higher to an intra-day high of 1,775.85 pts, retested the immediate resistance near 1,777. Based on the weakening technical indicators, we believe that the trend of the KLCI is downward bias. Next support will be located around 1,760, while the KLCI’s resistance will be set around 1,790-1,800.

Market Outlook

• The tech giants are going through a volatile period with the recent selling activities as the rally since the start of the year could be running out of strength, coupled with stretched valuations.

• Although market on the local front may take a slight negative move, we opine that the half yearly window dressing activities may support the FBM KLCI above the 1,760-1,770 region. Also, wood-based stocks may extend higher with the export ban on rubberwood by the Malaysian government. Please refer to our institutional report today on wood-based manufacturing with Buy call reiterated for Evergreen (TP: RM1.05) and Homeritz (TP: RM1.18).

• Closed position: We squared off our position on CSCSTEL (2.1% loss) yesterday amid expiry.

Source: Hong Leong Investment Bank Research - 30 Jun 2017