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Market Pulse
Daily updates brought to you by Malacca Securities. 

FMB KLCI - DAILY - 20/2/2018



Suprise Breakout, Looks To Head Higher
• The FBM KLCI extended its gains for the second consecutive session, mainly due to the strong rally in Petronas Chemicals. The lower liners maintained its upward momentum – led by the FBM Small Cap (+0.7%), while the broader market closed positively, with all of its twelve sectors in the green.

• Market breadth was bullish with 517 winners against 385 losers, while traded volumes was flattish at 2.81 bln (+2.0%) shares due to the lack of trading catalysts.

• On the FBM KLCI, key winners include Petronas Chemicals (+33.0 sen), Tenaga Nasional (+32.0 sen), Kuala Lumpur Kepong (+26.0 sen), Hong Leong Bank (+18.0 sen) and Top Glove (+15.0 sen). Significant advancers on the broader market were Heineken Malaysia (+60.0 sen), Dutch Lady (+58.0 sen), Hong Leong Industries (+28.0 sen), Fraser & Neave (+24.0 sen) and MI Technovation (+22.0 sen).

• In contrast, BAT (-98.0 sen), Aeon Credit (-38.0 sen), Southern Acids (-10.0 sen) and DKLS Industries (-9.0 sen) topped the broader market decliners list, alongside Guan Chong (-15.0 sen) following its cash call proposal. Meanwhile, Nestle (-30.0 sen), Press Metal (-6.0 sen), Maxis (-5.0 sen), Petronas Dagangan (-4.0 sen) and Dialog (-3.0 sen) were the biggest losers on the local bourse.

• Japanese shares rose on Tuesday – mostly on gains in defensive stocks as investors turned cautious amid the ongoing U.S.-China trade talks. The Nikkei gained 0.1% but its regional peers like the Hang Seng index (-0.4%) and the Shanghai Composite (+0.1%) remained pressured by slowing economic growth in China. 

• Main U.S. indices posted marginal gains after a volatile session, owing to the gains in retailers while investors monitor the FOMC minutes due Wednesday. The S&P 500 rose 0.2%, boosted by Walmart following stronger-than-expected quarterly earnings, while the Nasdaq closed higher for the seventh-day running. The Dow also eked out gains on Tuesday’s close.

• Earlier, European stocks were mainly downward pressured, weighed down by the weakness in HSBC due to disappointing earnings performance. The FTSE was 0.6% lower as London remains shrouded in Brexit woes, on top of soft wages data and a stronger Pound. The CAC (-0.2%) also retreated, although the DAX beat the regional trend and closed slightly higher.



THE DAY AHEAD


• The FBM KLCI performed better-than-anticipated yesterday after renewed buying on selective index linked stocks lifted it past the 1,700 points level. While we continue to think that the gains were largely superficial and not on fundamental gains, we think that key index is attempting to build up momentum to break out of its rangebound trend over the past two months. 

• The breakout of the 1,700 points level could signal further gains ahead, albeit on a cautious note, as market players also react to the prospects of a trade agreement between the U.S. and China, albeit there remains no significant change to Malaysia’s equity market fundamentals. 

• Nevertheless, we see construction and construction related stocks poised for a positive response to the potential revival of the East Coast Rail Link after the government said that the project could be revived and built at a lower cost.  In the interim, the FBM KLCI is likely to face hurdles at the 1,708 and 1,718 levels, while the 1,700 points level will serve as the main support for now, followed by the 1,693 level. 

• The lower liners and broader market shares, meanwhile, are still looking toppish after their gains over the past two months. Hence, we continue to think that their upsides will be limited as fresh buying is likely to wane. 


 

The Market Pulse is a proprietary report courtesy of Malacca Securities Sdn Bhd (a participating organisation of Bursa Malaysia Securities Berhad) and has been abbreviated by Focus Malaysia. The report is for information purposes only and is not a recommendation to buy or sell any securities or financial instruments.

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