Market Review

• Despite softer economic data from China and Japan, Asian stock markets ended largely on a positive note as bargain hunting activities emerged after sharp selling activities last week amid heightened geopolitical tensions. The Shanghai Composite Index and Hang Seng Index rallied 0.88% and 1.36% respectively, but Nikkei 225 fell 0.98%.

• Generally, stocks on Bursa Malaysia managed to rebound after the weak trading tone last week. Most of the technology stocks and ACE stocks rebounded; the FBM KLCI ended higher by 0.23%, while FBM ACE rose nearly 1.29%. Market breadth turned positive with a ratio of 5-to-3, while market traded volumes stood at 1.5bn.

• US stock market managed to rebound strongly led by technology heavyweights after the geopolitical jittery between the US and North Korea subsided and investors bargain hunted stocks which were oversold. The Dow and S&P500 rallied 0.62% and 1% respectively.

Technical View

Technical rebound may extend towards 1,775

• With the emergence of buying interest near the 1,765 level, the FBM KLCI may retest the 1,775 level over the near term. The MACD Line is hovering flattish above zero, while the RSI is recovering above 50.

Market Outlook

• In the US, investors may have digested and priced in most of the negative factors over the near term. Hence, stocks could see stabilizing movements with the traders supporting the "buy on weakness" strategy due to short - lived knee-jerk reaction following the exchange of words between US-North Korea, contributing to further technical rebound on Wall Street.

• Sentiments on the local front are likely to remain buoyant amid the positive performance on the overnight Wall Street. The FBM KLCI could trade towards the 1,775- 1,780 zones over the near term. Also, the stocks within the technology sector should be able to recover higher after a sharp fall last week.

• Trading Buy – ALCOM. Aluminium Company of Malaysia Berhad is involved in the manufacture of aluminium sheets and foil products. ALCOM is supplying to most of the leading manufacturer in the air-conditioner market across Asia and Europe and 65% of its products are being exported. ALCOM registered a PBT of RM15.8m in FY17 vs. RM2.9m in FY16 on the back of an increase of shipment volume in coated fin business (+41% yoy). Also, the better PBT margin was helped by the lower metal premiums (Main Japanese Ports).

Source: Hong Leong Investment Bank Research - 15 Aug 2017