Market Review

• Most Asia markets continued their positive runs, taking cues from another fresh record highs by all three major U.S. stock indexes as well as bullish undertone of the global economy. However, SHCOMP (-0.54%) and HSI (-0.23%) declined on downbeat economic data, ending their 11 days and 14 days winning streak, respectively.

• Tracking higher Dow regional markets, KLCI inched up 3.2 pts to 1825.9, lifted by buying interest in heavy weight counters. Despite the gains, broader market sentiment was negative with 378 gainers as compared to 685 losers, led by selldown in the FBM Smallcap (-0.38%) and FBM ACE(-1.24%) indexes. Trading volume increased to 5.40bn shares worth RM3.33bn as compared to last Friday’s 3.93bn shares worth RM3.29bn with focus mainly on lower liners and ACE stocks.

• Wall St and bond markets were closed Monday for the Martin Luther King Jr. Day holiday, providing a break before the corporate earnings season starts to pick up pace. Meanwhile, the USD index remains under pressure (-0.54% to 90.13) amid recent hawkish policy shifts from central banks in Europe and Japan, the improving political outlook in the euro area, and the synchronized nature of global expansion, which is also propelling emerging-market economies and assets.

Technical View

To retest 1830 zones

• Despite expecting a shallow profit-taking consolidation to neutralize overbought momentum, we remain optimistic of KLCI’s further technical bounce, paving the way for building a higher support base. As long as the index can maintain its posture above 10d SMA near 1814, KLCI is expected to retest 1830- 1840 hurdles in the near term. Conversely, a close below 1814 would send prices down towards 1800 next.

Market Outlook

• In the near term, Dow’s uptrend could sustain on the back of positive tax reform and bullish outlook of a synchronized growth in global economy coupled with stellar corporate earnings growth. Key technical indicators are mostly favourable, suggesting that the index is likely to continue its primary uptrend towards 26.0-26.3k. Any pullback is likely limited with support levels at 25.0-25.2k.

• Give the Ringgit strength and surging oil prices, sentiment on the local bourse could stay positive, despite interim consolidations, as KLCI is expected to play catch-up with its regional peers due to its laggard status.

• Trading idea: OCK is principally involved in the provision of telco network services, acquiring/building tower assets in ASEAN and Green Energy and Power Solutions. OCK is expected to rake in 11% EPS CAGR for FY17-19, on the back of the steady rapid network expansion plan undertaken by the local major telcos as well as growing its recurring revenue business via own build and acquiring existing tower-sites operators in ASEAN. We opine that OCK is at the tail-end of the consolidation and poised for a triangle breakout towards RM1.00-1.06 zones.

Source: Hong Leong Investment Bank Research - 16 Jan 2018