Market Review

• Following the conclusion of the ECB meeting, coupled with the extension of record highs on Wall Street after digesting most of the upbeat earnings on tech giants, Asian stocks trended on a bullish note. The Nikkei 225 (fresh 21-year high) rallied 1.24%, while Hang Seng Index and Shanghai Composite Index added 0.84% and 0.26% respectively.

• The FBM KLCI was traded mostly in the positive region led by Tenaga after declaring a record dividend payout while investors were anticipating a friendly Budget 2018. Also, with the firmer crude oil prices, O&G stocks were traded actively for the day. Market breadth was positive with advancers led decliners with a ratio of 511-to-344 stocks, accompanied by a healthy market traded volumes of 2.76bn.

• Wall Street ended the week of another positive closing as technology heavyweights lifted the sentiments amid better-than-expected earnings. Also, WTI crude oil prices which surged more than 2% on Friday also boosted the trading activities on energy sector.

Technical View

KLCI may breakout of the downward trendline

• The FBM KLCI recovered from the recent low of 1,733 and retested the downward trendline prior to the conclusion of Budget 2018. The MACD Indicator is mildly positive with the Histogram extended another green bar, while the RSI and Stochastics is out of the oversold position. The key index may rebound towards the resistance of 1,755.

Market Outlook

• Moving forward, investors may take a firmer stance after the recent upbeat 3Q US earnings and the stronger-than forecasted 3Q GDP annualized rate of 3%. Next thing that investors may monitor will be the corporate tax reform details that could be releasing soon.

• Meanwhile, stocks on the local front is likely to trend higher following the booster from the recent conclusion of the Budget 2018 which focused on the benefit of rakyat and booster to various sectors (automotive, aviation, consumer and construction) of the economy. Also, with the steadier crude oil prices, we anticipate oil and gas stocks may get a rerating catalyst soon.

• Trading Buy – LAYHONG. Lay Hong is one of the leading fully-integrated livestock farming players in Malaysia, engaging in upstream segments like layers and broilers, while processing downstream food products such as liquid eggs and functional eggs. With the capacity expansion on both the up and down streams divisions, coupled with the tie-up with Japan-based NH Foods, will be able to penetrate into the growing Halal food demand in Middle East region, Indonesia, Singapore, as well as catering for Olympics 2020 in Tokyo, Japan

Source: Hong Leong Investment Bank Research - 30 Oct 2017