Market Review

• Despite the strong boost from the US equities, Asian key regional indices ended on a mixed note prior to the tax vote by the US congress. The Nikkei 225 slipped 0.15%, while Hang Seng Index and Shanghai Composite Index gained 0.70% and 0.88% respectively.

• Meanwhile, stocks on Bursa Malaysia succumbed to profit taking activities following the index rebalancing activities with Nestle and Press Metal on the list. Market traded volumes registered above 3.0bn mark at 3.18bn, worth RM2.91bn. On the broader market, the tone was negative as decliners outpaced advancers by a ratio of 576-to-319.

• Wall Street took a breather, easing from the all-time-high zone for most of the major indexes after House members voted to pass the tax bill yesterday. The Dow and S&P500 slid 0.15% and 0.32% respectively.

Technical View

Consolidating below SMA200, with the support at 1,720-1,730

• The FBM KLCI continued to pullback and stayed below the SMA200. The MACD Histogram and Stochastics oscillator has turned lower, indicating that the momentum is weakening. We think the key index may consolidate near the 1,720-1,730 levels over the near term. Meanwhile, the resistance will be envisaged around 1,750-1,760.

Market Outlook

• Currently, investors will be focusing on the tax bill votes in the Senate session, which is widely expecting the similar outcome with the House votes. However, should there be any surprises; it may trigger higher volatility in the markets. On the Dow, the resistance is located around 24,800-25,000.

• Meanwhile, trading tone on the local bourse may extend its consolidation on the back of a negative performance from the US, coupled with the outflows of foreign funds. However, we believe that the window dressing activities could support the KLCI above the 1,720-1,730 levels over the near term. Traders could lookout for oversold technology-related stocks for trading opportunities.

• Trading Buy – PRESBHD. The Group is engaged in 1) ICT Training and Certification, 2) Software Licensing and Distribution and 3) Education. Early this year, they have been awarded with the 15-year concession mega project SKIN and the contribution towards the recent 3QFY17 was significant. We think the Group’s transformation efforts by is positive and we could expect it could generate healthy trading interest over the near to mid term. Technically speaking, after forming the hammer candle in November, it could be a trend changing formation and it may poise for further breakout above RM1.52, targeting RM1.61-1.71. Meanwhile, support will be at RM1.41-1.45 with a cut loss set at RM1.40.

Source: Hong Leong Investment Bank Research - 20 Dec 2017