Market Review

• Tracking the negative performance on the overnight Wall Street, Asian stock markets closed in a mixed note. Investors started to focus on Japanese quarterly earnings and the Nikkei 225 pulled back 0.33%. Meanwhile, Hang Seng Index and Shanghai Composite Index rose 0.15% and 0.11% respectively.

• With the extended consolidation, the FBM KLCI continued to trade lower, falling another 0.33% at 1,816.88 pts. Most of the gainers within the O&G and technology stocks took a breather on the back of profit taking activities. Market volumes stood at 4.00bn, worth RM3.05bn. Overall market breadth turned negative, with laggards outpacing advancers by a ratio of 3-to-1.

• Wall Street made another round of bullish closing, resuming a two-day retracement session. Investors were focusing on energy and materials sectors on the back of firmer Brent crude oil prices. Besides, financials were traded actively prior to the start of the reporting season.

Technical View

Could be due for technical rebound

• As expected, the FBM KLCI extended its pullback phase for the third consecutive day after RSI and Stochastics oscillators suggested the overbought signals. However, we believe the recent consolidation should be well supported along the 1,790-1,800 levels. Should there be a rebound, next resistance will be at 1,830-1,840.

Market Outlook

• As the uptrend continues on Wall Street, we think investors remain optimistic on the upcoming earnings season. Meanwhile, the firmer Brent crude oil prices, could sustain energy shares for the time being. The Dow may challenge the next psychological level of 26,000.

• Similarly, we think the positive sentiments may spillover towards stocks on Bursa Malaysia. Meanwhile, after few days of consolidation, we could expect mild bargain hunting activities among O&G stocks. The FBM KLCI could perform a technical rebound as 30-min chart is oversold, targeting 1,830-1,840.

• Trading Buy – PTRANS. Perak Transit Berhad (PTRANS) owns and operates a strategic transportation hub, Amanjaya Terminal, the only gazetted bus terminal in Ipoh. We believe Amanjaya Terminal stands to dominate due to its monopolistic business nature and the high barriers. Also, we think the increased traffic flow during the Visit Perak Year 2017 and the Animation Theme Park, which was opened in June 2017 (about 5km from Amanjaya Terminal), should provide support for earnings growth catalyst in FY17 and FY18-19’s earnings impetus may derive from the operation of Kampar terminal. We opine that PTRANS is at the tail-end of the consolidation and poise for a breakout.

Source: Hong Leong Investment Bank Research - 12 Jan 2018