Market Review

• Asian key regional indices were generally higher following the recovery in Brent crude oil prices above US$50. Still, the FOMC meeting capped further gains on the regional markets. The Nikkei 225 gained 0.48%, while Hang Seng Index and Shanghai Composite Index rose 0.33% and 0.12% respectively.

• Despite the continued recovery in crude oil prices, trading tone in Bursa Malaysia went into subdued mode as investors stayed on the fence prior to the conclusion of FOMC meeting. Market volumes dwindled more than 30% to 1.30bn shares for the day, worth RM1.55bn. Market breadth was negative with 431 decliners, 375 advancers, while 394 traded unchanged. Technology sector was still the best performer within the market environment.

• US stock markets trended higher on the back of few upbeat earnings from Coca Cola, Ford and Boeing, reinforced by the Fed decision of keeping the interest rates unchanged. Also, the recovery in Brent crude oil prices has helped the overall market sentiments as data showing a decline in US inventories.

Technical View

Continuation of mild rebound formation

• The FBM KLCI extended another marginal rebound, coupled with both the MACD and Stochastics indicators continued to trend higher, the key index could be retesting the 1,770 level. Meanwhile, the support will be set around 1,750, followed by 1,745.

Market Outlook

• With the Fed left with unchanged interest rates, coupled with better-than-expected earnings and a recovery in crude oil prices, we think the Dow may visit the psychological level located around 22,000.

• Similarly, after two weeks of subdued trading tone on our local bourse, buying interest could be seen within lower liners and small caps, especially technology-related stocks. Meanwhile, KLCI may retest 1,770 on the back of positive crude oil recovery.

• Trading Buy – HSSEB. HSS Engineers Berhad (HSSEB) is involved in provision of engineering and project management services. Currently, HSSEB is holding more than RM400m worth of outstanding orderbook, which may last them for another 2-3 years of earnings. Also, with the potential recovery of construction outlook in 2H17, we believe HSSEB will benefit from the award of potential project such as HSR (RM60bn), ECRL (RM55bn), Pan Borneo Highway (RM13bn) and etc.

Source: Hong Leong Investment Bank Research - 27 Jul 2017