Market review

• Key regional benchmark indices drifted lower amid a potential US-Syria tension, but the fear has contributed towards higher crude oil prices, which managed to hover above US$70 during the Asia session.
• Similarly, market sentiments were affected by President Trump’s tweets on Russia and Syria, resulting in heightened concerns on geopolitical risk. Market breadth was negative with losers led gainers by a ratio of 8-to-5. The FBM KLCI, however inched higher by 0.2% to 1,873.62 pts amid last minute buying. Overall market traded volumes stood at 3.27bn, worth RM2.34bn. Also, we noticed most of the oil and gas stocks were topping the active list amid stronger crude oil prices.

• US stock markets ended on a positive tone after President Trump tweeted to clarify his position on a possible missile attack in Syria and investors were focusing on the upcoming earnings season. The Dow rallied 1.21% led by Boeing and Goldman, while S&P500 and Nasdaq gained 0.83% and 1.01%, respectively.

Technical View

Revisiting 1,876 level amid positive momentum

• The FBM KLCI ended marginally higher, resulting in a 6- day winning streak. The MACD indicator expanded positively, while the RSI and Stochastics oscillators are recovering above 50; suggesting that the positive momentum is intact. The KLCI’s resistance will be envisaged around 1,876, followed by 1,896. Meanwhile, support will be pegged around 1,840-1,850.

Market Outlook

• Dow outlook: In the US, the market volatility and interest will be highly dependent on Trump’s actions or tweets. Nevertheless, investors would also be monitoring the upcoming results season as this will reflect the first quarterly earnings after the passing of corporate tax bill by Donald Trump late last year.

• KLCI outlook: Meanwhile, positive sentiment may spillover towards the Malaysia’s equities on the back of the soothing comments by President Trump, easing the geopolitical tension risk. We may expect another round of buying opportunities amongst oversold small caps and lower liners.

• Trading Buy - PECCA: HLIB maintains a BUY rating with RM1.72 TP (45.7% upside) and we remain positive on PECCA amid its undemanding valuations at 11.6x FY19 P/E and 1.37x P/B (30% and 19% lower than average 16.6x P/E and 1.7x P/B since listed), supported by a commendable 12% EPS CAGR from FY17-20, net cash of RM92m or 49sen (ex-cash P/E of 6.8x), and potentially higher dividend payout (expecting 5.1%-6.8% for FY18-19 DY). We see potential downtrend reversal owing to the hammer candlestick formation (daily chart).

Source: Hong Leong Investment Bank Research - 13 Apr 2018