Market Review

• Asian equities rebounded sharply higher with the easing of worries on the imposing import tariffs on steel and aluminium products by the US. The Nikkei 225 rocketed 1.79%, snapping a four-day losing streak amid a stronger US dollar, while HSI and Shanghai Composite Index advanced 2.09% and 1.02%, respectively.

• In tandem with the regional performance, Malaysia’s stock markets ended on a positive note with the FBM KLCI rebounded off the 1,840 level led by selected banking stocks and consumer heavyweights. Also, market breadth turned positive, accompanied by turnover of 2.77bn shares traded, worth RM2.78bn. Besides recovery in metal-related stocks, export-oriented companies under the gloves and semiconductor rebounded as well.

• Meanwhile, Wall Street ended marginally higher as profit taking activities emerged following the technical rebound on Monday. Market participants continued to trade cautiously as traders were re-assessing the impact from the import tariffs set by Donald Trump.

Technical View

Still soft on technicals, likely to be capped around 1,860

• The FBM KLCI rebounded above 1,840 led by bargain hunting activities. Despite the softer MACD Line, we think the technical rebound may extend over the near term as the momentum oscillators are pointing for a recovery. The next resistance will be pegged around 1,860-1,870. Meanwhile, support will be anchored around the 1,830- 1,840.

Market Outlook

• Like we have expected, the technical rebound was short lived and we think the near term upside could be limited as traders would be focusing on the upcoming FOMC meeting to understand the interest outlook for 2018. Also, Dow futures point lower after Trump’s economic advisor, Gary Cohn has resigned.

• With the weaker Dow futures at this juncture, coupled with the softer sentiment across the board after the potential impose of import tariffs by the US, we think the KLCI may trend sideways with the resistance pegged around 1,860. Nevertheless, the downside likely to be limited as buying interest may emerge ahead of the GE14.

• Trading Buy – RHBBANK. RHBBANK remains a top pick (HLIB has a BUY rating with TP of RM6.00, or 11.1% upside), premised on (1) attractive valuations, 2018E P/E: 9.7x (peers: 12.4x) and 2018E P/BV: 0.93x (peers: 1.37x). Following the double bottom formation breakout above the neckline of RM5.29, price may surge higher towards RM5.51, followed by RM5.61 and RM5.87 (LT target). On the flip side, failure to hold near RM5.23-5.29, price may weaken to revisit RM5.00-5.10 zones.

Source: Hong Leong Investment Bank Research - 7 Mar 2018