Market Review

• Asian stock markets were modestly higher, tracking the gains from technology giants on Wall Street. The Hang Seng Index rose 0.15%, while Shanghai Composite Index added 0.65%. Meanwhile, Kospi Index up 0.27%; blue chips steel players such as Posco and Hyundai Steel in Korea were focused.

• Stocks on the local front managed to rebound higher, in tandem with the moderate gains in the regional markets. Also, the spilled over effect from the overnight Wall Street has contributed towards a positive closing on the Malaysia’s equities. The FBM KLCI increased 10.09 pts to 1,792.79 pts. Most of the GLCs such as FGV, DRBHCOM, MYEG and MRCB were on traders’ radar. Market volumes ballooned to 5.11bn, worth RM3.68bn. Market breadth was exceptionally positive with advancers leading decliners by a ratio of 7-to-3.

• On Wall Street, equities ended on a stronger footing led by technology and energy shares as investors anticipate that the earnings delivery likely to be firmer with the reduction of corporate tax, boosting the bottom line, eventually. The Dow and S&P500 advanced to a multi year high at 24,922.68 pts (+0.40%) and 2,713.06 pts (+0.64%) respectively.

Technical View

Symmetrical triangle breakout remains intact

• The KLCI managed to perform a firm rebound after the hammer candle two days ago and the long term symmetrical triangle formation breakout remains intact with the KLCI closing above 1,786. The MACD Line continues to trend higher, but the RSI is overbought. With the mixed indications on the indicators, upside of the key index could be limited around 1,800 on the near term. Support will be pegged around 1,770-1,780.

Market Outlook

• Investors may maintain the trading optimism as the corporate tax reduction trading theme is likely to stay over the near term. Moreover, with the stable semiconductor growth and continuation of the Brent crude oil sustaining above US$60, we opine that the Dow may visit the immediate resistance of 25,000.

• Similarly, sentiments on the local bourse could stay positive, tracking the bullish performance on the overnight Wall Street. Although selected GLCs retraced mildly on the back of profit taking activities in the second session yesterday, we think stocks in general will remain buoyant driven by the short window of accumulation ahead of the anticipated GE14.

Source: Hong Leong Investment Bank Research - 4 Jan 2018