Market Review

• Most of the Asian stock markets trended negatively amid the heightened concerns over geopolitical tensions after the exchange of words between US and North Korea. Selling pressure was noted among equities, while safe haven assets gained traction.

• In tandem with the regional weakness, the negative sentiments hit FBM KLCI and traded towards an intra-day low near the 1,760 level before recouping partial losses to end around 1,765.59 pts (-0.20%). However, only oil and gas related stocks remained traders’ radar riding on the firmer recovery in crude oil prices. Market overall volumes were at 3.7bn, but the market breadth was again negative.

• Wall Street ended on a mixed note as investors digested few softer than expected economic data. Nevertheless, technology giants rebounded contributing to a positive Nasdaq closing. Meanwhile, comments from Janet Yellen boosted the expectations for a December rate hike to 66% vs 38% a month ago.

Technical View

Near term support with a hammer candle

• Despite the FBM KLCI ended lower for the sixth consecutive days, it has formed a hammer candle after retesting the trendline support near the 1,760 level. Although most of the technical are turning negative, we may anticipate buying interest to emerge throughout the trading session. The KLCI’s resistance will be envisaged around 1,770-1,780. Meanwhile, support will be located around 1,760, followed by 1,750.

Market Outlook

• We think investors may still trade on a sideways trend amid the slightly muted North Korea geopolitical developments as traders turned the focus to Janet Yellen's statement yesterday. Hence, the Dow's upside will be capped along 22,420-22,500.

• Although the US stock markets traded softer, we think the selling pressure on our local front is likely to dissipate after the KLCI revisited the support near 1,760. Traders may focus on oil and gas related stocks on the back of firmer crude oil prices trend and stocks that are severely oversold over the past few trading days.

• Trading Buy – T7GLOBAL. T7 Global Berhad (T7G) involved in various industries such as O&G, aerospace, property, construction and ICT. T7G acquired 9.86% in Triangle Energy (TE), an Australian based O&G production and exploration company and TE hits oil in the coastal Xanadu-1 in the Perth Basin. Also, T7G secured two contracts, worth approx. RM7.2m from Petronas and MMC Gamuda KVMRT (UGW) for the refurbishment and delivery of new storage tanks for the MRT Line 2.

Source: Hong Leong Investment Bank Research - 27 Sept 2017