Market Review

• Key regional stock markets ended on a positive note, in tandem with Wall Street’s sentiments, coupled with the upbeat US jobs data last Friday, which helped the recovery of US dollar index above 93. The Nikkei 225 rose 0.54%, while Shanghai Composite Index and Hang Seng Index added 0.46% and 0.52% respectively.

• Stocks on Bursa Malaysia were seen mixed as heavyweights continued to sustain its gradual upwards momentum, lifting the FBM KLCI towards near the 1,780 zone at 1,777.91 pts. Meanwhile, on the broader market, sentiments were turning cautious as selected technology stocks were being sold down amid profit taking activities, contributing to a negative market breadth (516 decliners vs. 363 gainers). Market volumes increased near the 2.0bn mark at 1.95bn shares traded for the day.

• US stock markets extended another day of gains accompanied by lighter volumes. The positive tone was lifted by tech and consumer stocks, compensating the declines in energy sector amid the on-going OPEC meeting. Also, the renewed geopolitical tension following the fresh sanctions imposed on North Korea after the missile and nuclear programs has capped gains on Wall Street. Nevertheless, the Dow trended higher for 9 consecutive days, marking another record high at 22,118.42 pts.

Technical View

FBM KLCI still recovering towards 1,780-1,785

• The FBM KLCI extended its recovery above 1,770, and the MACD Indicator is trending positively above zero. However, stochastics oscillator is suggesting an overbought status on FBM KLCI – upside resistance might be located around 1,780-1,785. Support will be set around 1,765-1,770.

Market Outlook

• Although overseas market continued the positive trading tone, upside might be limited as the Dow is overbought as its price movements have extended beyond the upper Bollinger band. Also, conclusion on the two-day OPEC and non-OPEC meeting will be monitored closely and we may expect higher volatility of crude oil trading over the near term.

• Meanwhile, trading environment on the local front is likely to stay mixed with the heavyweights being supported, while profit taking activities could extend on tech and ACE market stocks after selective selloffs yesterday. The KLCI's resistance will be located around 1,780-1,785.

• Closed position: Yesterday, we booked our profit on HSSEB (4.7% return) after hitting R1 upside target and squared off our positions on FPGROUP (4.4% loss) after hitting the cut loss levels.

Source: Hong Leong Investment Bank Research - 8 Aug 2017