Market review

• Still, Asian key regional indices were hovering sideways after a mild pullback on Wall Street. Some key events in focus were the potential gradual implementation of Trump’s tax reform, China’s official PMI and BOJ’s rates decision. Hang Seng Index declined 0.23%, while Shanghai Composite Index added 0.12%.

• The FBM KLCI traded most of the time in the positive territory, but ended lower amid profit taking activities led by SIME and PCHEM after 3pm. The market breadth however turned slightly positive, with overall market volumes stood at 3.15bn. Selected technology stocks which related to data centre such as KRONO and SYSTECH ended on a higher note.

• The US equities ended the session on a higher note with the help of consumer staple stocks such as Mondelez and Kellogg after posting their upbeat quarterly earnings. Besides, energy shares were being lifted amid the steadier recovery in Brent crude oil prices above US$60.

Technical view

Consolidating sideways with a upward breakout

• The FBM KLCI maintained its sideways move yesterday within the range of 1,742-1,751. With the recovering buying support post-Budget 2018, coupled with the MACD Indicator turning positive after the crossover signal, we opine that the key index may breakout above 1,750, targeting 1,755-1,760. Support will be pegged around 1,734-1,740.

Market outlook

• Investors are taking a cautious stance ahead of the conclusion of the FOMC meeting as the discussion will be important for the December interest rate hike decision. Meanwhile, we opine that the uptrend position on the Dow is intact to retest the 23,500 level after a mild retracement.

• Similarly, the FBM KLCI could trend sideways over the near term moving into the month of reporting season, which investors will be focusing on earnings to firm up their investment decisions moving forward. Also, positive trading activities may linger within oil and gas stocks as the Brent crude oil sustained above US$60.

• Trading Buy – DESTINI. Destini is an integrated engineering solutions provider with diverse interest in the aviation, marine, land transport as well as O&G sectors. Destini’s value emerged after its share price nosedived 45% from YTD high of RM0.84 (20 Mar) to a low of RM0.465 (25 Oct) before ending at RM0.485 on 31 Oct following the sluggish 2Q17 results. Currently, Destini is trading at undemanding 11x FY18 P/E (38% below its average 10-year P/E of 18x) and 1.13 P/B (18% lower than 10-year average of 1.38x), supported by a strong FY16-18 EPS CAGR of 23% and healthy orderbook over RM1bn (able to last for 2 years).

Source: Hong Leong Investment Bank Research - 1 Nov 2017