Market Review

• Shares in the Asian region ended mixed, following the cautious tone on the overnight Dow. Investors were focusing on China's October trade data, coupled with the Trump's tour to China, potentially discussing trade-related and North Korea issues.

• Profit taking activities emerged after the rally on Genting related stocks two days ago. The FBM KLCI ended in the negative territory at 1,744.20pts (-0.38%). On the broader market, market breadth remained negative with decliners led advancers by a ratio of 481-to-367 stocks. Market traded volumes stood at 2.60bn. Similarly, selected O&G stocks ended lower amid a pullback of crude oil prices.

• Over in the US, stock markets were traded higher, despite another session of pullback within the financial stocks as Republican lost some key elections in New Jersey and Virginia, which may increase the uncertainty of passing the tax reform bill.

Technical View

Unable to surpass immediate resistance of 1,750

• The FBM KLCI failed to surpass the 1,750 immediate resistance as selling pressure emerged along 1,750. The MACD Indicator turned flattish, while the RSI has hooked downwards. We opine that the KLCI may range bound between 1,740-1,750. Should the KLCI breaches 1,750, next resistance will be located around 1,760.

Market Outlook

• While US stocks may trend higher over the near term with the uptrend intact technicals, traders will still focus with the on-going reporting season to firm up their investment ideas. Any earnings delivery that is falling below their expectations may contribute to selling pressure, contributing to a pullback phase on the overbought major indexes.

• Back to our local front, the muted sentiments may attract further profit taking activities among small cap and lower liners. Also, the recent pullback on oil prices is likely to cap the upside on oil and gas stocks.

• Trading Buy – DRBHCOM. The recent conclusion of FSP agreement with Geely as Proton’s new strategic partner (and disposal of Lotus) coupled with the appointment of Li Chunrong as Proton’s new CEO (a veteran in the automotive industry with 30 years of experience working with major international brands), marked a significant milestone for DRBHCOM for its earnings turnaround. HLIB institutional research maintains a BUY rating for DRBHCOM with TP of RM2.15 (30% discount to SOP). Meanwhile, yesterday’s positive triangle breakout is likely to kick start another upswing towards RM2.00-2.12. Key supports are situated near RM1.66-1.72. Cut loss at RM1.63.

Source: Hong Leong Investment Bank Research - 9 Nov 2017