Market review

• Asian stock markets traded into the negative territory ahead of the conclusion of the FOMC meeting, which investors were anticipating an interest rate hike of 25 basis points. Hang Seng Index and Shanghai Composite Index declined 0.43% and 0.27%, respectively, while the Nikkei 225 fell 0.47%.

• However, sentiments on the local front were generally more positive with the heavyweights lifting the FBM KLCI above the 1,860 level at 1,865.80 pts (+0.51%). Market breadth was neutral with advancers marginally behind of decliners. Overall traded volumes stood at 2.35bn (RM2.45bn). Oil and gas were among the positive sector the session amid the rebound in Brent crude oil prices.

• Wall Street traded in a volatile manner throughout the FOMC meeting and most of the major indexes ended lower after the Fed concluded it with an interest rate hike of 25 basis points to a range of 1.50-1.75%, but the Dollar Index dropped below 90. The Dow and S&P500 dipped 0.18%, respectively.

Technical view

Technical indicators suggests KLCI to revisit 1,872-1,896

• With the key index closing above 1,860 (slight breakout of trendline), coupled with recovering indicators, we think the FBM KLCI could retest the 1,872-1,896 levels. On the flip side, should there be a downward violation below 1,840 level, next support will be at 1,835.

Market outlook

• In the US, we believe investors will need to further digest Fed's chair statements before committing further into equities as statements have changed from strong to moderate economic growth since December's FOMC meeting. Hence, the Dow may range between the 24,500- 26,000 levels over the near term.

• On the local front, we expect a mild pullback on the FBM KLCI, tracking the negative tone in the US. However, we think the index heavyweights will be well cushioned by buying support from the local institutions ahead of the GE14. Also, with the EIA releasing data on the surprise drop of US crude stockpiles, it could improve trading interest among O&G stocks on the back of the strong recovery in crude oil prices.

• Trading Idea – ARMADA. FY17 core net profit stood at RM282.0m against a loss of RM151.8m in FY16 on the back of the turnaround in FSPO division and stronger OMS contribution. As Brent oil has surged above US$66 we think this will generate trading interest amongst the O&G stocks. With the recent retest of the support near RM0.80, coupled with a short term breakout above RM0.845 level yesterday, we think Bumi Armada could be forming an inverted Head and Shoulders pattern to revisit the resistance along RM0.90-0.975 and LT target of RM1.15 over the long run.

Source: Hong Leong Investment Bank Research - 21 Mar 2018