Market Review

• Regionally, equities went on a positive mode with most of the major benchmark hitting multi-year highs. Japan Nikkei 225 advanced 0.89% led by financials and automakers as dollar firmed up against Japanese yen.

• On our local front, stocks were generally higher with the FBM KLCI stayed above 1,800 for last week at 1,817.97 pts (+0.81% wow). Also, sentiments were boosted with the optimism in global outlook, coupled with the steadier ringgit. On the broader market, gainers led losers by a ratio of 7-to-4. Market volumes shot up to 5.84bn, worth RM3.94bn.

• Despite the weaker-than-expected jobs data, stock markets In the US continued to soar, marking new highs on the Dow and S&P500 at 25,295.87 pts and 2,743.15 pts. Meanwhile, Brent crude oil ended above US$67 and dollar index rebounded mildly at 91.67 pts.

Technical View

Key resistances around 1,820-1,830

• The key index surpassed the 1,800 level, accompanied by healthy inflows of foreign funds. The MACD indicator trended positively above the zero level, but both the RSI and Stochastics oscillators are overbought. We think the resistances will be envisaged around 1,820-1,830, while the support will be set around 1,800.

Market Outlook

• On Wall Street, we believe the mid-to-long term uptrend remains intact. On the back of the stable US economic data such as unemployment rate of 4.1%, accompanied by two consecutive GDP quarters above 3%. Nevertheless, should there be any profit taking activities, the near term support will be at 24,500-25,000.

• On the local bourse, as the market could be overheated with extreme volumes over the past few trading days, traders could look out for any profit taking opportunities to lock in the recent short term gains. Nevertheless, oil & gas related stocks are likely to stay active as Brent oil managed to stay above US$67 last week.

• Portfolio review. Following the release of our 1Q18 retail stock picks on 5 Jan, we had cleared our final four outstanding positions of T7Global (24% gains), ROHAS (16% gains), 3A (7.3% loss) and AWC (8% loss). The average total return for the 10 stocks under the 4Q17 stock picks recommended on 3 Oct 2017 stood at 5.9%, still outperforming the KLCI’s total returns of 4.2%. The top performing calls were CCK (26.7%), T7GLOBAL (24%), ROHAS (16%), JOHOTIN (13.8%) AND FAJAR (11.8%) while DAYANG (8.6%), AWC (8%) and 3A (7.3%) incurred the largest losses.

• Meanwhile, we also realised PRESBHD recommended on 20 Dec for a 11.4% gain. The average total return for the 4 stocks recommended in Dec 2017 came in at 15.5% vs KLCI’s total returns of 12.4%.

Source: Hong Leong Investment Bank Research - 8 Jan 2018