Market Review

• Asian stock markets ended on a mixed note following comments from President Trump on the US dollar. The Nikkei 225 closed lower by 0.16% led by finance stocks, while export-oriented stocks were mixed. Meanwhile, Shanghai Composite Index and Hang Seng Index gained 0.30% and 1.53%, respectively - the latter ended higher on the back of banking and technology sectors.

• On the local bourse, stocks generally remained bullish after the BNM's interest rates hike, coupled with stronger ringgit at RM3.87/US$. The FBM KLCI rose 0.44% to 1,853.92pts. Market breadth was however negative with 562 decliners vs. 380 advancers. Nevertheless, semiconductor stocks such as Penta, JHM, Vitrox bucked the general market tone and moved higher.

• The on-going solid 4Q reporting season has contributed to the bullish tone in the US stock markets. Most of the tech giants such as Facebook, Apple, Microsoft and Alphabet have registered strong yoy growth in terms of revenue and earnings. On the weekly basis, the Dow and S&P500 advanced 2.09% and 2.23%, respectively, while Nasdaq rallied 2.31%.

Technical View

Overbought signals on momentum oscillators

• The FBM KLCI extended its upward momentum above the 1,840 level and the MACD indicator continues to suggest the uptrend is intact. However, momentum oscillators like RSI and Stochastics are slightly overbought. Hence, we think the KLCI's upside could be limited around 1,860- 1,870. Support will be pegged around 1,830-1,840.

Market Outlook

• In the US, the bullish momentum may persist in the anticipation of a decent 4Q reporting season in the US. Moreover, investors could be pricing in the corporate tax reform, which could translate to future earnings, eventually.

• Despite KLCI maintained its move above 1,840 on the back of buying interest among banking stocks, coupled with the heavy foreign funds inflow, which stood at RM3.31bn ytd, we think the upward move might be limited as local participants may look for opportunities to take profit after a stretched rally from the 1,760 level within a span of 5 weeks. Also, news flow related to GE14 that may surface in the near term could send cautious note to the market, resulting a higher volatility move on KLCI.

Source: Hong Leong Investment Bank Research - 29 Jan 2018