Market Review

• Asian stock markets ended on a positive note with Japan 3Q GDP data revised upwards to 2.5% (vs. previous estimated figure of 1.4%), leading investors for further buying support and the Nikkei 225 rallied 1.39%, while Shanghai Composite Index and Hang Seng Index gained 1.19% and 0.55% respectively.

• Overall, the FBM KLCI managed to regain mild buying support led by positive inflows of foreign market participation over the past week; the key index managed to end above the 1,720 territory. However, on the broader market, it is still negative with 490 losers vs 327 gainers. Market volumes stood at 1.89bn, worth RM2.48bn. On the active counters, some of the oil & gas counters such as Hibiscus and UMWOG were down following the plunge in Sapura Energy after reporting weaker earnings.

• The US stock markets returned with buying support after jobs data suggested that the US employers added 228k jobs November and the unemployment rate stood at 4.1% (17-year low). The Dow and Nasdaq rose 0.49% and 0.40% respectively - the latter gained traction with the recovery in tech stocks such as Microsoft and Oracle.

Technical View

Managed to secure the region above 1,720

• The FBM KLCI breached above 1,720 and the MACD Line continues to trend higher towards zero level. Also, the RSI and Stochastics oscillators are gaining momentum over the past week. We believe the current key index is on an upward bias mode with the recovering technical indicators. The technical rebound may retest the 1,730-1,740 levels, while the support will be anchored around the 1,700-1,710.

Market Outlook

• We believe that the progress on the tax bill reform will be focused by investors to firm up their decisions on sectors to be invested. Also, the next major event that may change the tone of the stock markets could be the upcoming FOMC meeting. Should there be any unexpected interest rates decision, it may heighten the volatility in the stock markets.

• Meanwhile, stocks on our local bourse may expect mild pick up in buying support on the back of steady inflows of foreign funds over the past two weeks. Hence, we think the window dressing activities may pick up over the next two weeks. The FBM KLCI could see further upside towards 1,730-1,740.

• Trading Buy – ROHAS. With the acquisition of HGP T completed two months ago, we think Rohas may book in 1-2 months HGPT earnings in 4Q. Currently, Rohas EPCC orderbook is estimated at RM650m, This is expected to provide a boost to Rohas earnings moving forwards. Also, the company is targeting to double its job replenishment next year to c.RM800m.

Source: Hong Leong Investment Bank Research - 11 Dec 2017