Market Review

• Following the comments from Janet Yellen, overall regional stock markets ended higher, coupled with better than-expected China trade data. The Hang Seng Index and Shanghai Composite Index advanced 1.16% and 0.67%, while Kospi closed at a record high of 2,409.09 pts (+0.74%).

• After trading in the positive territory towards the intra-day high of 1,760.66 pts, selling pressure emerged and the FBM KLCI drifted lower and closed at 1,753.78 pts (-0.20%). Market breadth was, however, positive with advancers led decliners by a ratio of 441-to-370. Overall market traded volumes stood at 1.75bn, worth RM2.01bn. Stocks within the FBM Ace (+1.41%) and Technology (+1.18%) were traded actively higher.

• Wall Street continued to set record highs on the Dow ahead of the quarterly reporting season from the financial stocks such as JP Morgan Chase, Citigroup and Wells Fargo. The Dow and S&P500 gained 0.10% and 0.19% respectively, while Nasdaq up 0.21%. However, in a separate report, initial jobless claims fell fewer-than expected by 3k (vs expectations of 5k) to 247k.

Technical View

Still, stochastics is oversold, but immediate resistance at 1,760

• The Stochastics oscillator remains oversold amid the negative performance yesterday on the FBM KLCI. Should there be a breakout above 1,760, the key index may turn higher towards 1,770-1,775. Meanwhile, support will be set around 1,740-1,750.

Market Outlook

• In the US, buying support may still extend over the near term as the less hawkish comments from Janet Yellen could be seen as risk-on mode for investors on the equities. The Dow range is likely to trend between 21,500-21,800.

• Meanwhile, shares on the local bourse may further consolidate as selling pressure may resume near the 1,760 level on the FBM KLCI. Nevertheless, technology and FBM Ace are likely to be focused as both the sub indices have marked a fresh 52-week high yesterday.

• Trading Buy – DRBHCOM. HLIB institutional research maintains BUY rating with RM2.26 target price (+34.5% upside). Despite assuming Proton’s RM1.5bn RCCPS, we remain sanguine on DRB benefiting from Proton partnering Geely and a LT re-rating catalyst on DRB’s valuation, as Geely agreed to support Proton’s turnaround plan with its technology, platform and skillset. Meanwhile, DRB‘s forward earnings will improve drastically from reduced stake exposure to Proton’s immediate loss and discontinued exposure to Lotus’s loss (full disposal).

Source: Hong Leong Investment Bank Research - 5 Sept 2017