Market Review

• Following the strong performance on the regional markets, profit taking activities emerged and key Asian indices ended on a mixed note, while technology-related shares rebounded as Apple's earnings beat expectations.

• Meanwhile, FBM KLCI ended in the positive territory, retesting the 1,770 level led by CIMB and MISC. However, on the broader market, market breadth was negative with 446 decliners vs 384 advancers. Overall volumes were still below the 2.0bn mark at 1.80bn. Nevertheless, technology and ACE market stocks were traded actively, in tandem with the movements of the regional tech sector.

• Despite the private sector job creation coming in below expectations, the bullish tone extended on the Dow on the back of better-than-expected Apple's earnings, lifting the Dow to another fresh record above the 22,000 psychological level. However, the Nasdaq slipped marginally into the negative zone.

Technical View

Technical rebound may sustain towards 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

• Despite the Dow surged towards a new high, cautious tone on Wall Street may contribute to a mixed broader market as Nasdaq closed lower yesterday. In the meantime, traders may monitor some key events such as BoE's rate decision and non-manufacturing data on Thursday. Should there be any disappointment, we expect profit taking activities to pick up on the Dow.

• Meanwhile, tracking the Dow's movement, the FBM KLCI could be seen as a laggard move. However, the absence of fresh catalyst may cap the upside along 1,775-1,780. Nevertheless, technology and ACE market stocks are likely to stay positive over the near term.

• Trading buy – LCTITAN. Lotte Chemical Titan (LCTITAN) is an integrated producer of olefin (i.e. ethylene, propylene and other derivatives such as butadiene, TBA benzene and toluene) and polyolefin (i.e. polyethylene and polypropylene) operating in Malaysia and Indonesia, using oil-based naphtha as its feedstock. We believe current undemanding valuations and potential selling climax on 1 Aug (55m shares transacted against 45m sharers on IPO listing) place a floor to downside risk. Technically, the Harami pattern and bottoming up technical on hourly chart could signal further technical rebound on the cards.

Source: Hong Leong Investment Bank Research - 3 Aug 2017