Market Review

• The key regional benchmark indices ended mostly higher amid resumption of buying interest as investors walked past North Korea tensions. The Hang Seng Index and Nikkei 225 rebounded higher by 0.52% and 0.25% respectively. Meanwhile, Shanghai Composite Index surged 0.76% despite a mild drop in Caixin services PMI to 51.6 in June from 52.8 in May.

• On the local bourse, shares were traded on a subdued mode where FBM KLCI trended sideways most of the session before closing higher at 1,768.16 pts (+0.35%) on a last minute push. Market breadth turned positive with advancers led decliners by a ratio of 422-to-389. Technology stocks such as INARI and UNISEM were traded actively. However, overall market volumes declined to 1.49bn vs 1.90bn on Tuesday.

• The US stock markets ended on a mixed note as gains were being capped by the softer energy stocks amid a plunge in crude oil prices, snapping a winning streak of 8 consecutive days. Meanwhile Nasdaq was higher led by a recovery in tech stocks.

Technical View

Trending sideways between 1,760-1,770

• The FBM KLCI rebounded off the 1,760 level and the MACD Histogram turned green. Also, the RSI has rebounded higher, approaching 50. Meanwhile, the stochastics oscillator has moved out of the oversold region. Immediate resistance will be pegged around 1,770, followed by 1,780. Support will be located around 1,750-1,760.

Market Outlook

• In the US, the trading tone could stay indecisive as the Fed's meeting minutes that were released yesterday sent mixed signals of the third interest rate hike this year. Traders and investors would focus on the July FOMC meeting to get more insights on the rate hike decision.

• Meanwhile, tracking the mixed performance on the overnight Dow, stocks on the local bourse may trend sideways, coupled with the softer trading volumes yesterday. Nevertheless, the recovery in tech stocks in the US may spillover to Malaysia's technology sector.

• Trading Buy – MITRA. Mitrajaya managed to secure RM434m worth of jobs YTD. This brings its orderbook to RM1.7bn, implying a cover of 2x on FY16 construction revenue. Management is gunning to hit RM1bn in new job wins this year. Meanwhile, after a slow start in 1Q17, we expect its property recognition to accelerate in the later parts of the year when construction of the Wangsa 9 Residency project reaches advance stages (unbilled sales ~RM204m).

Source: Hong Leong Investment Bank Research - 6 Jul 2017