Market Review

• Despite Wall Street traded near the record levels for Dow and S&P500, stocks in the Asian markets were taking a breather and ended mostly lower. Hang Seng Index fell 0.28%, while Nikkei 225 gained 0.45% led by export related stocks within the technology and automotive sectors.

• Meanwhile, stocks on Bursa Malaysia were slightly weaker compared to earlier this week amid profit taking activities after an overheated trading interest among the lower liners. Market breadth turned negative with decliners ahead of advancers by a ratio of 480-to-385 stocks, accompanied by overall market volumes of 2.70bn. However, steel sector was able to outperform the broader market and traded on a stronger note.

• US stock markets charged towards all-time-high zone amid the continued easing of geopolitical tensions, coupled with renewed hopes on passing the tax reform by Trump's administration. Three major indexes traded to a fresh territory led by consumer stocks, while offsetting gains in the technology sector.

Technical View

Turning softer amid mild retracement

• The FBM KLCI revisited the resistance zone around the 1,795 level and pulled back to end below 1,790. As the MACD Histogram extended with another green bar and the RSI is still hovering above 50, we believe the current retracement is likely to be short-lived. The key index’s support will be anchored around 1,770-1,776, while the resistance will be envisaged around 1,790-1,795.

Market Outlook

• In the US, the ongoing positive sentiments should remain intact over the mid to long term as investors continue to favour Trump's economic policies and economic data are showing signs of healthy growth in the US economy. However, the immediate resistance zone for the Dow and S&P500 are located at 22,200 and 2,550.

• Meanwhile, stocks on the local bourse could trend gradually higher and revisit the 1,795-1,800 levels with the help of stronger crude oil prices after EIA reading suggested a biggest weekly drop in gasoline stockpile and IEA revised 2017 demand outlook higher by 1.7% to 1.6m barrel per day. Nevertheless, small caps and lower liners may face profit taking activities after an overheated trading interest recently.

• Trading Buy – AMBANK. AMBANK is trading at a steep discount of 0.8 P/BV, 41% lower as compared to peers’ 1.36x P/B. On P/E basis, AMBANK’s FY18 P/E of 9.5x is also trading at 21% discount against its peers’ 12x. A successful breakout above RM4.47 will spur prices higher towards RM4.65-4.82 zones. Key supports are RM4.15-4.27. Cut loss at RM4.13.

Source: Hong Leong Investment Bank Research - 14 Sept 2017