Market Review

• Key regional benchmark indices ended mostly lower as investors focused on corporate earnings within the region. Also, the US dollar index has declined for the third consecutive week, which dampened the trading interest in selected export stocks within the region. On a weekly basis, the Nikkei 225 slipped 0.70%, while Shanghai Composite Index and Hang Seng Index rose 0.40% and 1.02% respectively.

• On the local bourse, trading sentiments were negative on Friday with decliners led advancers by a ratio of 495-to- 335, while the FBM KLCI ended lower by 0.17% amid profit taking activities led by Genting Malaysia and Axiata. However, technology sub-index managed to buck the trend to end at a 10-year high, marking the sixth consecutive week of gains.

• Wall Street ended on a mixed note last week as the Dow rallied to another record high, but S&P 500 and Nasdaq went into profit taking mode despite 2Q GDP growing at 2.6% annualized rate vs 1.2% in 1Q. Meanwhile, Brent crude oil prices surged to a 9-week high at US$52.70.

Technical View

Technicals on the mend, but capped around 1,775

• The FBM KLCI retested the 1,770 level over the past two trading days, but the key index was not able to sustain with the emergence of profit taking activities among the heavyweights. The MACD Line is still hovering below zero, while the Stochastics oscillator is overbought. Key index could be capped around the 1,770-1,775 levels over the near term. Support will be located around 1,760.

Market Outlook

• In the US, we believe the rich valuations on technology giants may attract further profit taking activities over the near term. However, recovering crude oil prices may lift energy shares and lift the Dow towards the psychological level of 22,000.

• Meanwhile, on the local front, traded volumes may stay tepid with the lack of fresh catalyst to boost market sentiments. The FBM KLCI is likely to be capped near the 1,770-1,775 levels. Nevertheless, oil and gas counters may gain trading interest with the recovering Brent crude oil prices.

• Trading Buy – ROHAS. We like Rohas for its exposure to ASEAN which is one of the fastest growing economic regions in the world and this will generate steady demand for its steel towers. The recently concluded acquisition of a 75% equity interest in HG Power Transmission S/B (HGPT is a turnkey solutions for high voltage transmission lines and substations in Malaysia and overseas) will open up more EPCC contract opportunities for Rohas in new markets such as Bangladesh, Papua New Guinea and Indonesia, growing at 15% FY16-19 earnings CAGR.

Source: Hong Leong Investment Bank Research - 31 Jul 2017