Market Review

• Asian stock indices marked another round of notable gains as the US lawmakers reached an agreement to end the 3-day government shutdown. Despite USD weakening against the yen, Japan Nikkei advanced 1.29% led by automakers and technology stocks, while HSI and SHCOMP rose 1.66% and 1.30% respectively.

• Meanwhile, the FBM KLCI (+0.27%, 1,838.04 pts) managed to regain traction after fluctuating between the negative and positive territory after PM Datuk Seri Najib Razak delivered his keynote speech in Invest Malaysia 2018. Government-linked companies such as DRBHCOM, MRCB and GAMUDA were traded actively in the bullish region. Also, export-related stocks were in traders’ radar as trading volumes were seen increasing within gloves and technology sectors.

• Although Dow slipped marginally lower, overall sentiments were positive on the back of the resumption of government activities after the short-lived shutdown, coupled with better-than-expected quarterly earnings from the tech stocks and firmer crude oil. The Nasdaq increased 0.71%, while S&P500 added 0.25%.

Technical View

Poise for a breakout above 1,840

• The FBM KLCI closed near 1,840 after rebounding off SMA10 last week and the MACD Histogram has turned green. Despite the RSI and Stochastics are suggesting that the key index is overbought, we think the uptrend intact move may persist if the KLCI breaches above 1,840. Next resistance will be located around 1,850-1,860. On the other hand, should there be a violation below 1,820, next support will be 1,800.

Market Outlook

• In the US, bullish tone may extend with the removal of government shutdown risk and the on-going 4Q reporting season in the US. Also, following the better-than-expected 4Q results and steady crude oil movements, we believe investors are likely to hang on with the uptrend move.

• Similarly, the positive mood may spillover towards stocks on Bursa Malaysia with the rally in tech stocks on Wall Street and the on-going Invest Malaysia event. Also, O&G stocks could still be on traders’ watch list as the Brent crude oil steadied near the US$70 level.

• Closed position: We took profit on Samchem at RM1.25 (19% gains) after hitting our R2 upside target yesterday.

• Trading Buy – ORNA. ORNA is involved in the paper packaging industry and is a leader in the corrugated boards and carton manufacturing industry. We noticed the online sales have been picking up in terms of volumes and transaction values over the recent e-commerce marketing events and we think it could generate higher demand in paper packaging, eventually.

Source: Hong Leong Investment Bank Research - 24 Jan 2018