Market Review

• Asian equities went into panic selling mode following the major selloffs in the overnight Wall Street. The selling pressure intensified as investors remain concern about the rising interest environment. Nikkei 225 and Hang Seng Index plunged 4.7% and 5.1%, respectively. Also, Shanghai Composite Index fell 3.4%.

• Despite the FBM KLCI declining 2.00% for the day, the key index managed to recover from an intra-day low of 1,795.85 pts as bargain hunting activities were noticed among banking heavyweights like Maybank and CIMB. Market breadth was extremely bearish with decliners outpaced advancers by a ratio of 10-to-1. Overall market volumes were above the 100-day volumes average of 3.0bn at 5.21bn.

• After the historic drop of more than 1000 pts on the Dow, Wall Street managed to recoup earlier losses after Fed's Bullard commented that the solid jobs data may not directly translate to higher interest rates environment. That has stabilized the sentiments and noticed the recovery in the broader market; the Dow and S&P500 rose 2.33% and 1.74%, respectively.

Technical View

Hammer candle formed, may close the gap towards 1,840

• The FBM KLCI plummeted towards the 1,812 level contributing towards a weaker MACD Indicator, while the RSI oscillator is hovering below 50. However, we think the KLCI has formed a hammer candle, which may contribute towards a healthy rebound, covering the gap towards the resistance around 1,840. On the flip side, should the key index falls below 1,800, next support will be at 1,750.

Market Outlook

• The market sentiment has turned positive as bargain hunting activities emerged below the 24,000 level on the Dow. Moreover, market cautiousness has stabilised following the statements from one of the Fed’s officials. We think the Dow is likely to revisit the 25,000-25,500 levels over the near term.

• Generally, we think the overnight positive performance on Wall Street could spillover towards Malaysia's equities and KLCI may rebound higher towards 1,830-1,840. Traders could lookout for opportunities within solid fundamental counters with oversold technical signals.

• Trading Buy – ROHAS. We like ROHAS for its exposure to ASEAN, where infrastructure investment needs are expected to be robust and this will generate steady demand for steel towers. The recently concluded acquisition of HGPT will open up more EPCC contract opportunities for Rohas in new markets such as Bangladesh, Papua New Guinea and Indonesia etc. ROHAS formed a bullish candle on the daily chart and we think it may rebound higher towards RM1.65.

Source: Hong Leong Investment Bank Research - 13 Feb 2018