Market Review

• The MSCI Asia Pacific index (MXAP) recorded a 1-pt gain to 161.1 as Asian equities bounced back on Thursday, tracking overnight U.S. gains following a deal to extend the federal government’s borrowing limit for three months. Sentiment was also boosted comments from President Putin and President Moon that they saw the Trump administration as willing to solve the North Korean crisis through diplomacy.

• Active buying in index-linked stocks spurred a 10.5-pt hike in KLCI to 1,783, with trading volume and value rose 18% and 33% to 2.63bn shares worth RM2.41bn, respectively. Market breadth was positive with 533 gainers against 317 losers, as sentiment was boosted by higher regional markets, rebound in Brent and FCPO prices, strengthening RM/US$ to 10- month high as well BNM’s optimism of Malaysia’s domestic fundamentals to sustained higher economic growth for 2H17

• The Dow eased 23 pts, led by selldown on Disney (amid profit warning) and Goldman Sachs (concern of declining earnings as 10-year Treasury yields fell to 10M low 2.05%). Sentiment was mixed as investors digested ECB’s relatively dovish view and the combination of devastating hurricanes pummeling the U.S. and the Caribbean over the weekend coupled with fears of possible another missles lauch ahead of the North Korean Founders Day on 9 Sep.

Technical View

Positive triangle breakout

• After tumbling from YTD high of 1796.8 on 16 June to a low of 1751.6 on 12 July, KLCI finally managed to stage a positive triangle breakout yesterday. Barring any adverse external shocks, KLCI may inch higher to retest 1797 in the short term, as technical indicators are on the mend. Key supports are situated near 1772 and 1768.

Market Outlook

• In the short term, the Dow is likely to consolidate near 21,400 as investors assess the political uncertainty driven by Trump’s administration, the FOMC meeting on 20 Sep, geopolitical tension in Korean Peninsula as well the devastating Hurricane damage. On Bursa Malaysia, broader market sentiment turns better amid strengthening RM and commodities prices coupled with optimistic outlook by BNM. We see upward bias to KLCI to retest 52-week high at 1797 barring adverse geopolitical shocks from Korean Peninsula.

• Trading idea-JAG. JAG Berhad is involved in the recycling and manufacturing activities of extraction, production and refinery of ferrous, non-ferrous and precious metals via the recovery and reclamation of industrial and electronic waste (e-Waste). Technically, JAG may trade higher towards RM0.15-0.18 zones. Key supports are RM0.125-0.13. Cut loss at RM0.12.

Source: Hong Leong Investment Bank Research - 8 Sept 2017