Market Review

• Asian benchmark indices ended on a stronger note following the easing of geopolitical tensions while investors focused on developments by China’s Central Bank and European Central Bank over the weekend. The Nikkei 225 surged 1.41% on the back of weaker yen, while Hang Seng and Shanghai Index added 1.04% and 0.37% respectively.

• With the help of the strengthening in ringgit, trading activities on Bursa Malaysia gained traction as overall market volumes stood at 2.73bn, which is 17% above the 100-day average volumes of 2.33bn. The FBM KLCI ended at 1,782.74 pts (+0.16%) with a positive market breadth as advancers led decliners by a ratio of nearly 5- to-3. Meanwhile, cement and steel stocks such as Hume Industries (+6.7%) and Eonmetall (+6.9%) trended positively.

• U.S. equities trended positively on the back of a relief rally after hurricane Irma was downgraded to a tropical storm, suggesting it may cause less damage than expected. Meanwhile, North Korea geopolitical tension has subsided following the 69th anniversary of the founding day without any missile or nuclear test. Consequently, gold has retraced from the recent peak with the fading of North Korea worries.

Technical View

Steady support above 1,780

• The FBM KLCI traded higher after rebounded off the 1,778 level as the validity of the flag formation breakout remains positive, while the MACD Histogram extended another green bar. We may anticipate that the key index may be targeting the resistance zone of 1,790-1,795 over the near term. Meanwhile, the support zone will be anchored around 1,760-1,770.

Market Outlook

• With the re-emergence of buying support after a long stretch of sideways move on Wall Street due to worries on geopolitical tensions and hurricane-related news, which dominated the headlines of the media recently, we believe that the risk appetite may return and stay in the stock markets over the near term. The Dow may retest the 22,200 level, while S&P500 may trade towards the next psychological level of 2,500.

• We could anticipate that the trading tone on the l ocal bourse will be fairly similar with the overnight performance on Wall Street, extending the gains of the recent KLCI towards the 1,790 level. Also, traders may look into commodities related sectors such as steel, oil and gas and plantations for the time being on the back of firmer underlying commodity trends.

Source: Hong Leong Investment Bank Research - 12 Sept 2017