MARKET REVIEW

Tracking the gains on overnight Wall Street performance, Asia’s stock markets ended on a positive tone as US-Mexico reached a deal, avoiding the implementation of tariffs (which was supposed to kick in on Monday). Also, the China official trade data suggested that the exports had beat consensus expectations in May, lifted the regional market sentiment; the Hang Seng Index and Shanghai Composite Index added 2.27% and 0.86%, respectively, while Nasdaq rose 1.20% led by a jump in automakers following the withdrawal of tariffs threats on Mexican goods.

Tracking the decent upward momentum in the regional markets, the KLCI gained 0.37% to 1,655.47 pts. Market breadth was positive with 613 gainers vs. 276 losers, while market traded volume stood at 2.28bn, worth RM1.79bn. Bandar Malaysia-theme and construction-related stock such as Iwcity, Ekovest, Gadang and Econpile were topping the active list as the 60-day payment date for the reinstated Bandar Malaysia project will be due next week.

Wall Street closed slightly higher after President Trump announced over the weekend that the proposed tariffs on Mexican imports will be suspended indefinitely. Market participants cheered positively and the Dow and S&P500 gained 0.30% and 0.47%, respectively while Nasdaq jumped 1.05%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI continues to trend higher following the shortened trading week. The MACD Indicator is positive as the MACD Line is above zero, while the MACD Histogram is gaining traction. Meanwhile, both the RSI and Stochastic oscillators are overbought; suggesting that the upside could be limited over the near term. The resistance is pegged around 1,658-1,666. Support will be set along 1,630, followed by 1,600.

With the emergence of better market sentiment following the breakthrough between the US Mexico trade disputes, we believe the short term upward trend could persist. In addition, market participants are likely to restart the speculation on Bandar Malaysia project, which may lead to further trading activities amongst the construction stocks, which have been bashed down over the past month. Meanwhile, healthy foreign trade inflows should be able to support overall KLCI trend in the near term.

TECHNICAL OUTLOOK: DOW JONES

Despite the Dow surged higher yesterday, but formed an inverted hammer candle (near the upper band of the Bollinger band). The MACD Line is still hovering below zero, while the Stochastic oscillator is overbought. Hence, with the slightly negative technical readings from the indicators, we opine that the upside resistance will be located around 26,500. The support will be set around 25,500.

In the US, we believe the upward move could still sustain on the back of the US-Mexico deal. However, the ongoing trade tension between the US and China may still cap the upside potential on Wall Street as investors may stay cautious ahead of the G20 summit, where President Trump and President Xi are supposed to meet and continue trade talks. Should any negative surprises surface ahead of G20, it may pose downside risk for Wall Street. At this juncture, the Dow’s trading range will be between 25,500-26,500.

TECHNICAL TRACKER: INTABINA

Steady earnings growth supported by cheap valuations. Armed with established track record, INTA is expected to grow strongly at 21% FY19-21 EPS CAGR, underpinned by increasing revenue recognition from its RM650m outstanding order book which now has a higher proportion of higher value works. Valuations are undemanding at 4.6x FY19 P/E (46% and 44% lower than its peers and historical average) and 1.2x P/B (13% and 25% lower than its peers and historical average), supported by healthy net cash of RM12m and projected decent FY19-21 dividend yields of 3.5-5.3%. Technically, the stock is ripe for a triangle breakout soon towards our RM0.325-0.355 upside objective.

Source: Hong Leong Investment Bank Research - 11 Jun 2019