Market Review

• Asian regional stockmarkets ended on a mixed note following the jittery sentiments on Wall Street after the ongoing North Korea tensions. The Nikkei 225 and Hang Seng Index closed lower by 0.14% and 0.46% respectively; the latter dropped on the back of profit taking activities among financial stocks. Meanwhile, the Shanghai Composite Index ended flat (+0.05%).

• However, stocks on the local front managed to recover from a weak opening as bargain hunting activities stayed throughout the session; the FBM KLCI ended higher by 0.16% to 1,772.48 pts. Market breadth was fairly neutral with 417 advancers, 419 decliners, while 372 traded unchanged. On the broader market, steel and technology stocks such as Hiaptek and Frontken traded higher.

• Wall Street's negative sentiments were offset by President Trump's decision to raise the debt ceiling and fund the government until Dec 15 in order to avoid a potential government shutdown. Also, ISM non manufacturing PMI data suggested that the US services sector activity picked up in August amid growth in new orders and employment.

Technical View

MACD Line above zero, oscillators recovering

• In tandem with the rebound of KLCI above the daily SMA50, the MACD Line is hovering above zero. However, the RSI and Stochastics oscillators are threading near the 50 level. We may anticipate the key index to rangebound between the 1,770-1,780 levels.

Market Outlook

• Despite the relief rally was noted on Wall Street, we expect upcoming events such as ECB and FOMC meetings, coupled with the lingering worries over North Korea issues may cap the upside of the Dow near the 22,200 level over the near term.

• Meanwhile, stocks on the local front should be able to gain traction following bargain hunting activities yesterday. The FBM KLCI may revisit 1,780, while trading interest on the broader market is likely to focus on commodities sector such as steel and oil and gas amid the recovering trend in crude oil prices.

• Closed position: Yesterday, we took profit on EVERGRN (+4.5% return) and squared off our position on PECCA (2% loss) amid expiry.

• Trading buy – MASTEEL. MASTEEL is one of the biggest manufacturers of steel billets and steel bars. With the recovering steel prices buoyed by stable demand, capacity cuts and policies to reduce pollution by China, coupled with firmer RM/US$ and Malaysia’s government safeguard duties, we may anticipate that the steel sector outlook to be positive. Currently, MASTEEL is trading at 0.54x P/BV and 6.1x FY17 P/E, 62% and 33% below its peers, respectively.

Source: Hong Leong Investment Bank Research - 7 Sept 2017