Market Review

• Tracking the gains on Wall Street, Asian shares were boosted strongly with the subsiding tensions between US and North Korea. The Nikkei 225 gained 1.11% led by a stronger US dollar against the Japanese Yen, while Shanghai Composite Index rose 0.44%.

• Meanwhile, stocks on the local bourse trended mostly higher, but upside was capped by profit taking activities as investors took a cautious stance in the markets despite easing off in geopolitical tensions. Market volumes surged higher to 1.63bn, while market breadth stayed positive for the day with 478 gainers, 363 decliners, while 358 traded unchanged.

• Despite US retail sales registered their strongest gains in seven months, US stock markets ended on a flattish tone as upside was capped by softer retail stocks' performance. Also, US dollar index surged higher towards near the 94 level.

Technical View

KLCI may gradually trend towards 1,775-1,780 amid positive technicals

• The FBM KLCI has rebounded off the SMA50 level and the MACD Line has turned flattish above zero with an upward bias move. The RSI is trending higher above 50 – indicating that the momentum is gaining traction and the FBM KLCI could retest the 1,775-1,780 levels. Meanwhile, support will be pegged around 1,760-1,765.

Market Outlook

• Following the step down of three CEOs from Trump’s manufacturing council; investors would deploy a wait-and see strategy as the departure of the third CEO, coupled with the withdrawal of healthcare bill earlier could indicate a softer confidence towards Trump’s economic agenda such as corporate tax reform. The Dow’s upside may be located near the 22,000-22,200 zones.

• On the local front, stocks are likely to trade on a muted tone following the flattish move in the US. The KLCI could see limited upside around 1,775-1,780. However, technology stocks which are oversold may still be under traders' radar as their uptrend is still intact after a recovery yesterday.

• Closed position: We took profit on LCTITAN (15.8% gain) yesterday.

• Trading Buy – 3A. At RM1.35, 3A is trading at undemanding valuations of 1.83x P/B (33% discount to peers’ 2.75x) and trailing 12.5x P/E (38% below peers’ 20.2x). We expect 3A to stage an ascending triangle breakout above RM1.39, targeting RM1.46-1.56 in the medium to long term, supported by the bullish rounding bottom pattern in the weekly chart. Key supports are RM1.29-1.32. Cut loss at RM1.26.

Source: Hong Leong Investment Bank Research - 16 Aug 2017