Market Review

• Stocks on the regional markets ended on a mixed tone as investors turned their attention to the geopolitical tensions after North Korea missile test resurfaced in the media. The Nikkei 225 slipped 0.17%, while Shanghai Composite Index and Hang Seng Index gained 0.61% and 1.28% respectively.

• The recovering crude oil prices failed to excite the local stock market. The FBM KLCI ended on a lower note amid profit taking activities on banking heavyweights like Public Bank and CIMB. Overall market breadth was negative with 586 losers vs 309 gainers. Market trade volumes were higher at 1.94bn. Nevertheless, technology sector remained bullish with the sub-index marking another fresh high at 37.84 pts.

• Again, stocks in the US trended mixed as the Dow rallied to another new high, but profit taking activities among technology giants capped gains on the S&P500 (-0.07%) and Nasdaq (-0.42%). Meanwhile, Chicago business barometer slipped to 58.9 in July vs 65.7 in June and pending home sales added 1.5% in June.

Technical View

Immediate support may form a technical rebound

• After the retest of 1,770 last week, the FBM KLCI retraced this week towards 1,760 and we believe the selling pressure may pick up if the support is breached. The MACD Histogram has turned red, while the Stochastics remained overbought and the RSI has turned slightly weaker yesterday. Next support will be anchored around 1750.

Market Outlook

• Despite the Dow recording new highs over the past few trading days, investors remained cautious with the rich valuations on technology giants which may contribute to further profit taking activities on the broader market. Possible weakness may be seen if S&P500 and Nasdaq breach below the support levels of 2,460 and 6,310 respectively.

• Meanwhile, tracking the mixed sentiments on the Wall Street, stocks on the local front may remain subdued with a negative market breadth amid further potential profit taking activities on the broader market in the absence of leading catalyst to excite the market over the near term.

• Trading Buy – FPGROUP. FoundPac Group Berhad (FPG) is principally involved in the design, development, manufacture, marketing and sale of precision engineering parts such as stiffeners, test socket, hand lids and other accessories. We believe ringgit trend is likely to hover between the RM4.20-4.40/US$ levels into 4Q17, which may benefit FPG as export revenue accounted to nearly 90% of their total revenue.

Source: Hong Leong Investment Bank Research - 1 Aug 2017