Market Review

• Asian key benchmark indices ended on a softer note as investors monitored a few China economic data which was released with softer-than-expected readings; China industrial production index and retail sales came in below expectations. The Nikkei 225 and Hang Seng Index fell 0.29% and 0.42% respectively, while Shanghai Composite Index declined 0.38%.

• Stocks on Bursa Malaysia took another round of breather in tandem with the regional stock markets. The FBM KLCI ended lower at 1,781.37 pts (-0.26%). However, commodity-related stocks like steel and oil and gas sectors outperformed the broader market with the recovery in the underlying commodity prices. Meanwhile, market volumes dwindled 30% to 1.89bn and market breadth stayed negative.

• The US stock markets ended on a mixed note following the renewed concerns over geopolitical tensions following some statements from North Korea brought fear to the markets, coupled with better-than-expected inflation data, where the consumer price index gained 0.4% mom and 1.9% yoy in August. The data led the fed December rate hike probability to increase to above 40% from slightly above 20% early this month.

Technical View

Healthy retracement formation towards 1,780

• The FBM KLCI has formed a reversed candle on 13th September and the MACD Histogram has turned red, while the RSI and Stochastics are hooking downwards. However, we think that the recent pullback is healthy after the recent rally from 1,760. Support of the KLCI will be anchored around 1,760, while the resistance is located around 1,790.

Market Outlook

• We believe the investors could be staying sidelines over the near term, focusing on the upcoming FOMC meeting in order to understand the balance sheet dial back status and the rate hike decision. These issues may send jittery move to the markets, curtailing the upside of the Dow and S&P500.

• On the local front, we opine that the FBM KLCI is undergoing a healthy retracement phase after the recent rally in August. However, commodity sectors such as steel, gold, plantation and O&G may remain within traders' radar.

• Closed position: We squared off our position on JAG (7.1% loss) yesterday amid weakening technical.

• Trading Buy – HIBISCUS. After the completion of the acquisition of Anasuria Cluster in UK, HIBISCUS managed to turnaround its business into profit in 1QFY16. With the Brent crude oil prices sustaining above US$50, we may anticipate better results in the upcoming quarters and trading interest may pick up on HIBISCUS.

Source: Hong Leong Investment Bank Research - 15 Sept 2017