Market review

• Despite a softer closing on the Wall Street, the Asian stock markets rallied on Friday amid better-than-expected china trade data. Both the September exports and imports in dollar terms advanced 18.7% and 8.1% yoy respectively. The Nikkei 225 increased nearly 1%, while Shanghai Composite Index gained 0.16%.

• Trading activities on the local front mainly focused on lower liners as the volumes surged above 3.0bn mark at 3.22bn shares traded for the day. Meanwhile, the FBM KLCI started the day on a lackluster mode before closing in the green territory on a last minute buying support. Market breadth was positive with 452 advancers vs 396 decliners. Most of the technology stocks regained traction after the sub-indices marked a 10-year high

• US stock markets closed higher fueled by the better than-expected earnings released by Most of the banking stocks. Also, investors were betting on a stronger results season, resulting in the fifth consecutive week of gains on the Dow and S&P500.

Technical view

KLCI could be due for a technical rebound

• The FBM KLCI trended near the 1,750 level amid few rounds of selling pressure on the index heavyweights. However, the MACD Histogram has turned green, while the RSI has crossed above 30. As such, the key index may be due for a technical rebound, targeting 1,770. Support will be pegged around 1,745-1,750.

Market outlook

• We think the upbeat start of the reporting season in the US could continue to boost the buying support on Wall Street. However, the upside could be capped along the 23,500 level on the Dow amid overbought signals.

• On the local front, we think the trading activities could continue to focus on lower liner and penny stocks within the technology sector. Also, oil and gas stocks may be lifted by the firmer crude oil prices last week.

• Trading Buy – AYS. AYS is involved in two main business divisions, namely trading division and manufacturing division. AYS is installing a fully automatic CNC structural steel facility to produce steel structure components and this facility will be able to develop industrialised building system (IBS) and may create a new income avenue for the group. We think the sentiments on the construction sector should be able to recover amid the start of the LRT3 contract awards, coupled with the potential awards of few mega projects such as MRT2, ECRL and HSR in CY18. Currently, AYS is trading at ~8.3x trailing-12M P/E (peers P/E: 13.8x, 40% discount).

Source: Hong Leong Investment Bank Research - 16 Oct 2017