Market Review

• Asian key regional indices ended on a weaker tone following a downward revision of Japan’s second quarter GDP, which suggested a yoy growth of 2.5%, compared to a 4% growth in the previous reading. Also, China exports dipped in August amid stronger yuan. The Nikkei 225 declined, but Hang Seng Index gained 0.53%, while Shanghai Composite Index ended flat.

• Similarly, FBM KLCI traded into the negative territory throughout the trading session as investors focused on trading activities among small caps and lower liners within the ACE market. Overall market volumes surged near the 3.0bn mark at 2.97bn, which is 27% higher than 100-day average volumes of 2.34bn. Also, market breadth was positive with 473 gainers vs. 384 losers. Meanwhile, selected export-related stocks turned lower as ringgit strengthened near 4.20.

• US stock markets ended on a mixed note on Friday and snapped the 2-week gains last week as investors digested few external events such as geopolitical tensions between US-North Korea and hurricane Irma. Also, US dollar continued its downward move with the rising euro after ECB hinted a tapering process of its stimulus measure this fall.

Technical View

Flag breakout on the weekly chart

• The FBM KLCI ended positively for the second consecutive week and the daily MACD Line has crossed above Signal Line. Both the daily RSI and Stochastics oscillator trended higher above 50 – indicating that the momentum may remain positive over the near term and the key index may retest the 1,790-1,795 levels. The support will be pegged around 1,760-1,770 region.

Market Outlook

• In the US, We maintain a sideways view on Wall Street with the weaker US dollar trend, coupled with the ongoing political tensions, which investors could stay cautious in the stock markets if North Korea news continues to surface within the media.

• However, stocks on the local front could see further trading opportunities following the stronger ringgit momentum recently, coupled with higher trading volumes on Bursa Malaysia on small and lower liners after positive inflows of foreign funds last week.

• Closed positions: We took profit on MASTEEL (13.8% return) after hitting above our LT target price. We also squared off our position on FRONTKN (10.3% return) amid weakening technicals.

• Trading Buy – BIOHLDG. BIOHLDG is an integrated health supplement group producing variety of health supplements in herbal and non-herbal based (halal & non halal). Currently, it is trading at a decent FY18 P/E of 10.3x (ex cash). The stock is poise for a bullish triangle breakout, targeting RM0.285-0.305 zones, while supports are located RM0.24-0.245 with a cut loss set at RM0.235.

Source: Hong Leong Investment Bank Research - 11 Sept 2017