Market Review

• Key regional benchmark indices turned positive led by Apple-related Taiwan suppliers which received a boost after Apple’s upbeat earnings on Thursday, reinforced by the launching of iPhone X on Friday. Also, market digested the tax bill details and the nomination of the next Fed-chair.

• On the local front, stocks were unexciting with the muted KLCI, which ended flattish near 1,740. Profit taking activities were across the board and market breadth turned negative. Also, most of the technology related stocks headed lower on the back of selling pressure after DFTZ launch. Market overall volumes was below the 3.0bn mark at 2.8bn.

• Despite softer-than-expected jobs data on Friday, sentiments on the US stock markets were lifted by the technology giants and the positive deal from Qualcomm to be acquired by Broadcom. Nasdaq experienced another fresh records close at 6764.44 pts (+0.74%), while S&P 500 and Dow added 0.31% and 0.10% respectively.

Technical View

Weakness remains as KLCI hovers below SMA200

• With both the MACD indicator and RSI oscillator staying soft, we anticipate that the KLCI may continue to hover sideways between 1740-1750. However, should there be a breakout above 1,750, next target will be at 1,760. Meanwhile, support will be located around 1,735-1,740.

Market Outlook

• The overseas markets may continue its optimism with the idea of Trump's tax reform, coupled with the support of better-than-estimated earnings from most of the technology stocks. Given that, we opine the Dow could extend its rally towards 24,000 psychological level.

• Meanwhile, stocks on the local front are likely to stay muted and cautious ahead of the November reporting season. Most of the investors are waiting for the elections to be held to firm up their investment decisions after the major event. We may expect sluggish foreign participation after another week of outflows.

• Trading Buy – MASTEEL. MASTEEL is involved in the manufacturing of steel billets and steel bars. It also has an associate company which manufactures radioisotopes for the imaging of cancer cells for hospitals in Malaysia. For the upcoming 3Q17 results, market is anticipating steel rebars companies such as MASTEEL to perform better, taking cue from strong local steel rebars and expanding margins. At RM1.24, MASTEEL is trading at 0.66x P/BV (based on enlarged shares) and 8.3x FY17 P/E, which are 55% and 16% below its peers, respectively.

Source: Hong Leong Investment Bank Research - 06 Nov 2017