Market Review

• The Asian key benchmark indices ended mostly positive as investors were optimistic with the final version of the US tax reform being unveiled last Friday. The Nikkei 225 rocketed 1.55% led by rebound in tech and automakers, while the Shanghai Composite Index and Hang Seng Index gained 0.07% and 0.70% respectively.

• The Malaysia's stock market, however finished slightly lower after Press Metal and Nestle were included as the new members on the FBM KLCI. The market breadth was negative with nearly 5 decliners for every 4 advancers. Meanwhile, market traded volumes stood at 2.40bn, which was above the 100-day average volumes of 2.31bn. Nevertheless, technology related stocks like PUC and Frontken traded on a positive tone yesterday.

• Wall Street continued with another session of fresh record highs on the major indexes with investors staying optimistic on the tax bill passing in Washington. The Dow increased 0.57%, marking the 70th record closing year-to date. Meanwhile, the S&P500 and Nasdaq gained 0.54% and 0.84% respectively.

Technical View

Forming a potential bullish flag breakout

• After two days of consolidation, the FBM KLCI did not violate the support of 1,750. Despite both the RSI and Stochastics are slightly overbought, we think the downside of the key index is limited around the support of 1,740-1,750. Hence, should there be a breakout above 1,756, next resistance will be envisaged around 1,760- 1,770.

Market Outlook

• In the US, the tax bill is taking the center stage for the time being and we believe investors will continue to stay bullish, contributing to a healthy buying support within the stock markets. Also, the technology giants have been able to recoup their earlier retracement as Nasdaq is marking all-time-highs near the 7,000 level.

• Meanwhile, tracking the performance on the overnight Wall Street, we think buying interest could return to stocks on the local front, coupled with the window dressing activities. Also, we opine that stocks within the technology-related small caps and lower liners will be able to capture traders’ attention after Nasdaq traded near the 7,000 level.

• Closed positions: Yesterday, we took profit on MRCB (+11.7%), HUAAN (+26.1%), ROHAS (+7.9%) and AYS (+1.1%), while we squared off our position for CCM (-0.6%).

Source: Hong Leong Investment Bank Research - 19 Dec 2017