Market review

• Despite the softer close of overnight US markets, most of the key regional indices ended positively. The Nikkei 225 and Hang Seng Index added 0.64% and 0.56% respectively, while Shanghai Index gained 0.27% amid a firmer yuan following the setting of higher mid-point by China's Central Bank.

• Sentiments on the local front was subdued amid the absence of fresh catalyst and the FBM KLCI ended mildly lower at 1,761.13 pts (-0.16%) amid profit taking activities on the index heavyweights. Still, the small caps are taking the center stage, resulting in a pickup of overall traded volumes at 2.78b. Market breadth, however, was slightly negative with 418 losers vs 400 winners.

• Wall Street ended firmer led by Wal-Mart after setting a positive tone for the earnings outlook, coupled with a share buyback program. Meanwhile, upside on Nasdaq was being capped by the drop in FANG stocks.

Technical view

KLCI to re-visit the resistance around 1,770

• The FBM KLCI pulled back after rising for two days. Despite the MACD Line is hovering below zero, the Histogram extended another green bar, while the RSI is on a rising mode. We think the FBM KLCI may sustain its mild positive momentum towards the 1,770 level. The support will be pegged around 1,750-1,760.

Market outlook

• Although Wall Street is currently trading at the all-time zone position, investors may be focusing on the upcoming earnings season in order to get an understanding on the economic activities. Banking stocks such as JP Morgan and Citigroup will be expected to announce their quarterly results this Thursday.

• Meanwhile, positive spillover buying interest could be seen on our local bourse following the fresh record position of Wall Street. Also, traders may lookout for opportunities within the O&G after a sharp rise in crude oil prices and stocks within the lower liners with solid fundamental and solid uptrend move.

• Trading Buy – KRONO. Krono is involved in two main businesses, namely i) Enterprise Data Management (EDM) infrastructure technology and ii) EDM managed services, which provides comprehensive data storage services. With the notable increase in earnings after acquiring Quantum Storage India, Krono continues to expand into Hong Kong and Taiwan by acquiring stakes in Quantum Storage Hong Kong (QHK), with a profit guarantee of US$1.2m in FY17. We think Krono is riding on the data storage boom as addition of both business units are EPS accretive and Krono should be able to deliver a positive growth moving forward.

Source: Hong Leong Investment Bank Research - 11 Oct 2017