Market Review

• Key regional benchmark indices ended on a mixed note as heightened worries on a potential trade war after Trump's recent actions and statements. The Nikkei 225 and Hang Seng Index rose 0.12% and 0.34%, respectively, while Shanghai Composite Index closed flattish.

• On the local bourse, we noticed selected stocks within the O&G and semiconductor sectors were recovering, but the market breadth was still negative with decliners ahead of advancers by a ratio of 4-to-5. Index heavyweights such as Nestle, Genting and Maybank also led the FBM KLCI lower at 1,845.27 pts (-0.63%).

• Wall Street traded mixed as most of the stocks pullback after a strong start at the opening bell as Trump's protectionist policies were still a concern towards the future economic growth. Also, Trump could look into further imposing up to US$60bn in tariffs on China goods.

Technical View

Weaker technicals on MACD, next support at 1,835

• The FBM KLCI is on a short term downward bias mode after breaching below the 1,850 support. With the MACD Histogram turned red and the momentum oscillators turning weaker, we may anticipate that the key index to revisit the support at 1,835-1,840. Meanwhile, resistance will be envisaged around 1,860-1,870.

Market Outlook

• In the US, markets are likely to stay cautious and sideways mode under this uncertain environment as Trump's protectionist measure could trigger a potential trade war. Also, investors may turn sidelines ahead of the FOMC meeting (20-21 Mar).

• On the local front, after selected heavyweights were being sold down, we believe the market could shift towards small cap and lower liners over the near term. However, investors may be waiting for more certainty from the political scene on parliament dissolution and GE14 polling dates, resulting in a sideways market.

• Closed position: We had squared off our Trading BUY recommendation UMWOG (4.8% gain) yesterday after hitting above our R1 upside target.

• Trading Buy – KPJ. KPJ (HLIB TP RM1.18, or 25.5% upside) offers investors exposure to Malaysia’s hospital play. Going forward, we opine that growth will continue to be driven by higher contribution from newly opened hospitals and improvement in contribution coming from its more matured hospitals coupled with the benefit from booming medical tourism and a stronger ringgit bodes well for KPJ as it will reduce the volatility and the cost of medical consumables, which in turn will result in higher profitability.

Source: Hong Leong Investment Bank Research - 16 Mar 2018