Market Review

• Following the North Korea missile launched early Friday, selling pressure was noted among most of the key stock markets. However, bargain hunting activities emerged as investors were slightly immune towards the incident. Nikkei 225 and Hang Seng Index ended higher by 0.52% and 0.11%, while Shanghai Composite Index ended 0.53% lower.

• Meanwhile, in tandem with the regional stock markets, trading sentiment on the local front was mixed as the FBM KLCI flirted around 1,780. The market breadth was negative as investors focused on the North Korea missile launch headlines. Also, overall market volumes were at 2.14bn, worth RM2.70bn amid last minute buying support into selected heavyweights CIMB, GENM and SIME.

• As investors set asides most of the negative headli nes such as North Korea missile shot and softer US economic data, Wall Street trended higher with the Dow and S&P500 added 0.29% and 0.18% respectively. Meanwhile, US dollar index and gold ended lower, while Brent oil prices closed firmer above US$55.

Technical View

Rebounded off 1,777 with a hammer candle

• After a healthy retracement phase towards 1,777, the FBM KLCI has rebounded to close higher above 1,780. The MACD Line is hovering above zero, while the MACD Histogram is pending for a green bar. Also, both the RSI and Stochastics oscillators are hovering above 50. The key index may revisit the immediate resistance of 1,795- 1,800, while support will be pegged around 1,760.

Market Outlook

• We may expect some slowdown in trading activities on the overseas market ahead of the FOMC meeting as investors may wait for further confirmation on interest rates hike. Nevertheless, short term uptrend remains intact for the Dow towards the 22,500 level.

• Meanwhile, with the rebound on the local front last week, buying interest is likely to sustain throughout this week and KLCI could revisit the resistance along 1,790-1,800. Also, we could anticipate traders to focus on oil and gas shares amid a steadier recovery in Brent oil prices.

• Trading Buy – KUB. After undergoing restructuring over the past 5 years to turn around the company, KUB is starting to show tangible results since 2015, via its core businesses i.e. LPG, ICT and Agro coupled with KUB-BE (a 40% associate), cumulatively contributing on average 80-90% to the group PBT. The stock is currently trading at 0.97x P/B and 10.3x trailing P/E (ex RM0.10 cash, 8.3x P/E). A successful breakout above RM0.535 will spur prices higher towards RM0.575-0.60 zones. Key supports are RM0.485-0.50. Cut loss at RM0.475.

Source: Hong Leong Investment Bank Research - 18 Sept 2017