Market Review

• Despite the cautiousness driven by President Trump’s tour in Asia, stocks on the regional exchanges trended on a bullish tone led by energy shares with the recovery of crude oil prices.

• Heavyweights on the local received a boost led by stronger buying interest on Genting Berhad after Genting Singapore registered strong results – the FBM KLCI managed to surpass 1,750. Meanwhile, O&G stocks managed to rally higher amid firmer crude oil prices.

• US equities ended on a mixed note as Priceline and TripAdvisor plunged more than 20% after reporting weaker-than-expected earnings. Also, financials sector has led market sentiments on a mildly negative tone.

Technical View

More positive technical indicators, KLCI may retest 1,760

• The KLCI formed a flag formation breakout above 1,745 and ended above 1,750. The MACD indicator and momentum oscillators are turning more positive. We think the FBM KLCI may revisit 1,760 over the near term. Support will be located around 1,740-1,745

Market Outlook

• In the US, the cautious tone remains in the markets amid the on-going reporting season as any result disappointment may attract selling pressure as the major indexes are located at the all-time-high zone. Nevertheless, we think certain merger deals and tax overhaul hopes will be able to lift investors’ confidence.

• Meanwhile, the return of buying support from foreign funds may spur further buying interest on selected heavyweights. However, without fresh catalysts in the stock market, broader market within the small cap space may stay muted. Nevertheless, we opine that the trading interest may linger within O&G sector with the Brent crude oil hovering above US$63.

• Closed position: We took profit on 4Q17 stockpick, Johotin (13.8% return) after hitting R2 target at RM1.48.

• Trading buy – GAMUDA. Gamuda’s share price plunged after MRT Corp reported that it is opening a tender to select a turnkey contractor to build and finance the upcoming MRT3 (estimated RM35-40bn), triggering speculation that the MRT3 will no longer employ the project delivery partner (PDP) model. Despite the uncertainty, HLIB institutional research maintains a BUY rating for Gamuda with unchanged TP of RM6.36. We believe such unwarranted selldown could have priced in most of the negatives, providing sufficient margin of safety to cushion further slide in share prices. A decisive breakout above the immediate resistance of RM4.91 will likely lift share prices higher towards RM5.04-5.33 levels. Key supports are RM4.65-4.73. Cut loss at RM4.60.

Source: Hong Leong Investment Bank Research - 8 Nov 2017