Market Review

• Key Asian markets continued their uptrend amid stronger lead from Wall Street following positive economic data. The Nikkei-225 surged 3.3% to 23506 on its first day of trade after a long New Year weekend, with financials, technology and automakers higher across the board. Similarly, the SHCOMP (+0.5%) and HSI (+0.6%) markets extended rallies, led by energy-related plays while the tech sector also recording sizable gains.

• Young bulls had a strong grip on Bursa as the January effect was clearly apparent where both the market breadth (exceeded 700 counters) and volume (surpassed 5bn shares). Both were impressive to spur KLCI 0.6% or 10.6pts higher and broke its 1800 pts psychological level 1803.5 pts.

• The overnight Dow climbed 152 pts to 25075, with General Electric, DuPont and IBM rising about 2%. The S&P 500 and Nasdaq composite also hit record highs. The bullish sentiment is buoyed by a protracted rise in commodity prices, solid jobs and economic data, as well as the recently passed tax-reform legislation.

Technical View

Symmetrical triangle breakout remains intact to spur KLCI towards 1820 zones

• The bullish hourly chart and long term weekly MACD golden cross could prolong KLCI uptrend in the near term, probably targeting 1820 zones before profit taking activities emerging to neutralize overbought positions. Support will be pegged around 1770-1780.

Market Outlook

• On Wall Street, investors may maintain the trading optimism as the solid economic data and corporate tax reduction coupled with accommodative monetary policy themes are 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 25.5k-26k in the short to medium term.

• Similarly, sentiments on the local bourse could stay positive, tracking the bullish performance on the regional and Dow markets. Although selected GLCs retraced mildly on the back of profit taking activities in the last two days, we think rotational trading interests across the board will remain buoyant driven by the short window of accumulation ahead of the anticipated GE14.

• Please refer to our Retail Research report entitled 1Q18 Quarterly Retail Strategy – Everything is set except one key factor (GE14) for recommendations for 1Q18 after a mild recovery in 4Q17.

Source: Hong Leong Investment Bank Research - 5 Jan 2018