KUALA LUMPUR (April 3): Hong Leong IB Research said that technically, the FBM KLCI is overbought (Stochastics) on weekly chart, and upside is likely to be capped around 1,780.
In a strategy note today, the research house said support will be set around 1,720-1,740.
"We think heavyweights may take a breather after a decent rally in 1Q17 and focus would be shifted towards lower liner as plenty of catalysts such as restructuring theme, construction projects, property rerating and ringgit trend to keep market warm.
"Rally euphoria could soften in 2Q17 and trading strategy would be picking stocks with catalysts and supported by fundamentals," it said.
The research house said themes for 2Q17 are as follows:
- Construction and GLCs. Infrastructure projects (i.e. packages from MRT2, LRT3 and ECRL) and expedited progress of PR1MA may support jobs flow within construction sector in 2Q17. This is also associated with election-theme that may keep market warm during the quarter.
- Mild re-rating for property sector. Following the IWH-Iskandar Waterfront City Bhd deal, it opines that property companies may be ripe for a re-rating as most of property stocks are currently traded at significant discount to their P/B ratio and RNAV.
- Currency catalyst may come in as booster. The research house believes if ringgit were to strengthen to RM4.30-4.40/US$ range, importing sectors/foreign debt-denominated companies might benefit from a stronger local currency.
"Top Picks for Retailers: We recommend two sets of stock picks for retailers. First set comprises stocks with upside catalysts: Brahim's Holdings Bhd, Tan Chong Motor Holdings Bhd, UEM Sunrise Bhd, Pesona Metro Holdings Bhd and Destini Bhd.
"Second set mainly for conservative investors looking for fundamental with decent dividend yields: Uchi Technologies Bhd, Sunway Bhd, Kumpulan Fima Bhd, YSP Southeast Asia Holding Bhd, and Tune Protect Group Bhd," it said.