Market Review

• Asian stock markets charted a mixed trend after the Fed's dovish slant despite China posting better-than-expected 2Q17 GDP growth at 6.9% (vs. Reuters poll of 6.8%). The Shanghai Composite Index plunged 1.42% following the weaker sentiment from the ChiNext composite - Shenzhen's tech start-up board. However, Hang Seng Index rose 0.31%.

• Similarly, shares on the local bourse trended sideways. The FBM KLCI drifted lower after hitting the resistance zone around 1,760 in the early session and ended marginally higher at 1,755.19 pts (+0.01%) led by DIGI and Axiata. However, market breadth was slightly negative with 441 losers vs 417 gainers. Market volumes stood at 2.04b, worth RM1.72b.

• Investors were trading cautiously prior to the corporate report season and the Wall Street ended on a mixed tone with the Dow and S&P500 slipped marginally by 0.04% and 0.01% respectively, but the Nasdaq gained 0.03%.

Technical View

Rangebound mode with oversold oscillator

• The FBM KLCI trended sideways within a tiny range of 10 points between 1,750-1,760 over the past week. The MACD Histogram extended another green bar, while the Stochastics oscillator is oversold. Should there be a breakout above 1,760, next resistance will be located around 1,770. Support will be set around 1,745-1,750.

Market Outlook

• In the US, as Wall Street is trading near the all-time-high region, traders may focus on the upcoming earnings season to validate the uptrend movement in the stock markets. The Dow's trading range is likely to hover within the 21,500-21,800 levels.

• Meanwhile, share prices on the local front may see some revival of trading interest as market overall volumes picked up, coupled with oversold signal spotted on FBM KLCI. Sentiments may also be lifted with the recent recovery in crude oil prices near the US$48 level.

• Closed positions: Yesterday, we had squared off our positions on ELKDESA (0.0% return) and PRTASCO (- 1.9% loss after 3sen dividend adjustment) due to expiry. We also took profit on SYSTECH (13.8% gains).

• Trading Buy – SAMCHEM. Samchem Holdings Berhad (SHB) was established in 1989 and is a distributor of industrial chemical of Shell EP (Singapore), BP Chemicals (Malaysia) and Exxon Chemical (M) Sdn Bhd, BASF and Petronas. SHB’s overall revenue grew by 16.2% yoy to RM697.2m in FY16, which Vietnam’s and Indonesia’s operations contributed RM220.4m (+11.4% yoy) and RM97.1m (+17.3% yoy) in the similar period respectively. We believe that SHB is getting traction with the rising demand for petrochemicals in ASEAN region.

Source: Hong Leong Investment Bank Research - 18 Jul 2017