Market Review

• Asian stock markets settled on a positive note as investors look forward to the Economic Policy Symposium, Jackson Hole that will be taking place later this week. The Shanghai Composite Index and Hang Seng Index advanced higher by 0.91% and 0.13% respectively, while Nikkei 225 ended flattish.

• With the help of mild buying support within index heavyweights like GENM and SIME, the FBM KLCI managed to gain 0.15% to end at 1,774.22 pts. Market volumes were steadier around 1.77bn, worth RM1.89bn. The market breadth was positive with 419 gainers vs 385 losers. Meanwhile, construction stocks were gaining traction as the sub-index rose 0.37% led by IJM (+0.59%) and KERJAYA (+1.92%).

• With the renewed optimism towards the progress of corporate tax reform by the Trump's administration, stocks on Wall Street managed to take a pause on the recent selling pressure and rallied strongly led by technology and financials heavyweights. The Dow and S&P500 gained 0.9% and 1.0% respectively, while the Nasdaq advanced 1.4%.

Technical View

Trend indicator flattish, but momentum oscillators still positive

• The FBM KLCI traded within a narrow range between the 1,771-1,776 zones. The MACD Line was flattish and the MACD Histogram extended another red bar. Nevertheless, the Stochastics and RSI oscillators are hovering above 50 – suggesting that the momentum remains positive. Should there be a breakout above 1,776, resistance will be located around 1,780-1,800. Support will be set around 1,750-1,760.

Market Outlook

• In the US, we expect short term breather to set in after the recent surge. Also, with the upcoming Jackson Hole symposium taking place later this week, that might capped the upside move on the Dow around 22,200 as investors will wait for further cues on monetary policies.

• On the local front, we opine that the sentiments may recover further, tracking the positive performance on the overnight Wall Street. The KLCI may revisit the 1,780 level. Meanwhile, technology stocks are likely to gain traction following Nasdaq's move, coupled with upbeat results from Inari.

• Closed position: Yesterday, we had squared off our positions on AYS at RM0.53 (7.8% loss) after hitting our cut loss levels. We also took profit on DNEX at RM0.525 (11.7% gain).

Source: Hong Leong Investment Bank Research - 23 Aug 2017