Market Review

• The regional key benchmark indices ended on a positive note as US Treasury bond yields retraced from the recent peak and the US dollar slid against a basket of currencies while prior to the first semi-annual testimony on monetary policy to the Congress this week.

• Trading sentiment across the Bursa Malaysia was neutral with the FBM KLCI slid marginally lower by 0.08% to 1,860.08 pts. Market breadth was negative with losers ahead of gainers by a ratio of 513-to-479. Overall traded volumes stood at 2.72bn, worth RM2.74bn. Nevertheless, in this cautious environment, defensive sectors such as banking and consumer were focused.

• Wall Street extended its gains for the third consecutive days led by technology giants such as Intel and Apple - the latter traded on a positive tone as Warren Buffett commented that Berkshire bought more Apple shares last year. Also, concerns over inflation risk waned and the Dow and S&P500 surged 1.58% and 1.18%, respectively.

Technical View

Still trending sideways, technicals still positive

• The FBM KLCI traded within a narrow range yesterday and ended marginally lower. The MACD indicator is hovering sideways above zero. Meanwhile, the RSI and Stochastics oscillators are still trending above 50. With most of the indicators suggesting positive momentum for KLCI, we think the key Index my revisit 1,880 over the near term. Nevertheless, should the KLCI breaches below 1,840, next level will be located around 1,820.

Market Outlook

• In the US, we believe that the recent rebound could sustain and retest the next psychological level near the 26,000 level on the back of easing worries on inflation risk.

• Despite the cautious tone amid the ongoing reporting season, we think the positive performance from Wall Street could spillover towards Malaysia’s equities and trading activities could turn positive on KLCI. Also, traders could focus on selected O&G stocks amid firmer crude oil.

• Closed positions: We took profit on FRONTKN (16% gain, hit R2) and ROHAS (7.1%, hit R1) yesterday.

• Trading Buy – DAYANG. We expect the earnings upcycle to resume with robust 50% FY16-19 earnings CAGR premised on: i) higher TMS/HUC/EPCC services contracts amid improving operating climate and renewed activities due to recovery in oil prices and (ii) better utilisation of its 25 offshore support vessels and vessel charter rates. A decisive penetration above RM0.825 will spur prices higher to retest YTD high of RM0.92 (23 Feb high) and our LT objective of RM1.00. Key supports are situated near RM0.745-0.76. Cut loss at RM0.73.

Source: Hong Leong Investment Bank Research - 27 Feb 2018