• The FBM KLCI started the week off on a dour note yesterday as the key index wiped out all its gains from last Friday to close more than 1.0% lower due to the concerns over the 1MDB issue and the soft U.S jobs data. The lower liners also ended mostly lower with the exception of the FBM ACE (+0.4%) index. The broader market, meanwhile, ended mixed while the Consumer Products (+0.4%), Construction (+0.1%), Finance (+0.2%) and Properties (+0.1%) sub-indices outperformed.
• Market breadth turned negative as losers outstripped gainers on a ratio of 484-to- 336 stocks, while traded volumes rose 6.8% to 1.69 bln due to the quick profit taking activities.
• MISC Bhd (-RM1.09) topped the FBM KLCI decliners, dragged down by the weaker-than-expected 1Q2016 results, followed by oil and gas stocks like Petronas Gas (- 70.0 sen), Petronas Dagangan (-40.0 sen), Petronas Chemicals (-30.0 sen) and Maxis (-17.0 sen). Meanwhile, Chin Tek Plantations (-35.0 sen), Allianz Malaysia (- 20.0 sen), Lii Hen Industries (-18.0 sen), Ajinomoto (-16.0 sen) and SC Holdings (- 15.0 sen) were amongst the biggest losers on the broader market.
• Notable gainers on the broader market, meanwhile, include consumer products stocks like F&N (+RM1.18 sen), Dutch Lady (+42.0 sen) and Nestle (+20.0 sen), followed by Panasonic (+24.0 sen) and LPI Capital (+20.0 sen). There were only five advancers on the big board – BAT (+22.0 sen), Public Bank (+10.0 sen), Maybank (+0.9 sen), KLCC (+0.5 sen) and CIMB (+0.3 sen).
• Japanese stockmarkets rose 0.7% yesterday, snapping a six-session losing streak as the strong Yen trend paused. Asian benchmark indices closed mostly higher with the exception of the Shanghai Composite, which extended its losses by another 2.8% following the disappointing trade data and warning on the country’s rising debt by People’s Daily. Meanwhile, the Hang Seng Index rose 0.2% as ASEAN stockmarkets closed mixed.
• U.S. stockmarkets were mixed as gains from the healthcare stocks were offset by the fall in metals and energy stocks. The Dow closed 0.2% lower as Caterpillar and Chevron lost ground, while the S&P500 and Nasdaq added 0.1% and 0.3% respectively on the broader market.
• European stockmarkets ended mostly higher even as investors tried to shake off the sharp fall in oil prices and mining stocks. The FTSE was off by 0.2%, dragged by poor performance of U.K. miners. Meanwhile, the DAX and CAC finished higher by 1.1% and 0.5% respectively.

THE DAY AHEAD

• The string of below-expectation results of oil and gas heavyweights, coupled with the ongoing concerns over the 1MDB issue, are proving to be more detrimental to market sentiments than anticipated, sending the key index to its lowest level in more than three months.
• With 1MDB appearing likely to miss another interest payment on its bonds due on Wednesday, sentiments are expected to remain dour over the near term and stocks on Bursa Malaysia are poised for further downsides. This will also leave the key index languishing in the oversold region for longer and the 1,630 level is also likely to give way. The 1,600 points level will now become the major support level.
• The difficult market conditions are expected to prevail among the lower liners and broader market shares over the trade data and warning on the country’s rising debt by People’s Daily. Meanwhile, the Hang Seng Index rose 0.2% as ASEAN stockmarkets closed mixed.
• U.S. stockmarkets were mixed as gains from the healthcare stocks were offset by the fall in metals and energy stocks. The Dow closed 0.2% lower as Caterpillar and Chevron lost ground, while the S&P500 and Nasdaq added 0.1% and 0.3% respectively on the broader market.
• European stockmarkets ended mostly higher even as investors tried to shake off the sharp fall in oil prices and mining stocks. The FTSE was off by 0.2%, dragged by poor performance of U.K. miners. Meanwhile, the DAX and CAC finished higher by 1.1% and 0.5% respectively.

THE DAY AHEAD

The string of below-expectation results of oil and gas heavyweights, coupled with the ongoing concerns over the 1MDB issue, are proving to be more detrimental to market sentiments than anticipated, sending the key index to its lowest level in more than three months.

With 1MDB appearing likely to miss another interest payment on its bonds due on Wednesday, sentiments are expected to remain dour over the near term and stocks on Bursa Malaysia are poised for further downsides. This will also leave the key index languishing in the oversold region for longer and the 1,630 level is also likely to give way. The 1,600 points level will now become the major support level.

The difficult market conditions are expected to prevail among the lower liners and broader market shares over the near term as retail investors are also expected to undertake quick profit taking activities and retreat to the sidelines amid the cautious market environment.

COMPANY BRIEFS

• YTL Power International Bhd and its partners have entered into equity agreements for a US$2.10 bln 554 MW oil shale power generation project to be develop by Attarat Power Company (APCO) in the Hashemite Kingdom of Jordan. APCO will be 45%-owned by YTL Power, Yudean Group (45%) and Eesti Energia (10%).
• The 554 MW oil shale fired power plant will cover a substantial portion of Jordan´s energy needs and reduce the Kingdom’s import of oil products for power generation.
• Earlier this year, APCO has signed agreements with Bank of China (BoC) and Industrial and Commercial Bank of China (ICBC) to provide debt funding valued at US$1.60 bln for the project. The power plant is scheduled to start generating electricity in 2019. (The Star Online)
• Bursa Malaysia Securities Bhd has publicly reprimanded stockbrocker and fund manager KAF-Seagroatt & Campbell Bhd (KAF) for failing to ensure that its 4QFY15 financial result was factual, clear and accurate. There was a 36.3% variance between the KAF group’s audited net profit in FY15 of RM5.7 mln from the unaudited net profit it announced earlier on 31st July 2015 of RM4.2 mln.
• The adjustments were mainly in respect of the reclassification of income derived from the KAF Sukuk Fund amounting to RM1.0 mln from ‘available-for-sale reserve’ to an adjustment in taxation amounting to RM0.5 mln due to an increase in deferred tax assets arising from the additional provision made for bonus in a subsidiary.
• KAF is now required to review and ensure the adequacy and effectiveness of its financial reporting function and carry out a limited review on its quarterly report submissions. (The Star Online)
• AirAsia Bhd has recorded a load factor of 86% in 1Q2016, above the industry average load factor of 78%-79% reported by the International Air Transport Association (IATA) for the Asia-Pacific market during the period.
• Its load factor rose by 9.0% Y.o.Y as the number of passengers carried jumped by 17% Y.o.Y to 13.9 mln. (The Star Online)
• Shell Refining Co (Federation of Malaya) Bhd’s (SRC), 1Q2016 net profit rose 20.7% Y.o.Y to RM101.7 mln, owing to higher margins and lower operating expenses. Revenue for the quarter, however, fell 24.5% Y.o.Y RM1.87 bln. (The Star Online)
• Petronas Chemicals Group Bhd’s (PetChem) 1Q2016 net profit fell 2.1% Y.o.Y to RM592.0 mln, mainly due to higher tax expense, which offsets the increase in operating profit. Revenue for the quarter, however, was flat at RM3.15 bln. (The Star Online)
• MISC Bhd will dispose of its entire stake in wholly-owned subsidiary, MISC Integrated Logistics Sdn Bhd (MILS), to Swift Haulage Sdn Bhd for RM257.2 mln. MILS is engaged in the provision of integrated logistics services, which includes freight forwarding, transportation, dry and cold warehousing, repair and storage of containers, and other value-added activities.
• Swift would also fully repay the shareholders loan, owed by MILS, to MISC of RM66.8 mln upon completion of the deal, in addition to other receivables due from MILS to MISC of up to RM34.0 mln. (Bernama)
• IOI Corporation Bhd has filed for a challenge proceeding with the Justice of Peace (JP) in Zurich, Switzerland, against the decision by the Roundtable for Sustainable Palm Oil (RSPO) Board of Governors to suspend the company's RSPO certificates.
• On 3rd April 2015, IOI Corp's RSPO certificates were suspended, following a complaint from the Aid Environment regarding its plantation subsidiaries in Indonesia – PT Sukses Karya Sawit, PT Berkat Nabati Sawit and PT Bumi Sawit Sejahtera for allegedly violating several RSPO principles and criteria. (The Edge Daily)
• Inix Technologies Holdings Bhd is planning to reduce by half the par value of its shares by cancelling five sen from the 10 sen value to eliminate its accumulated losses. Subsequent to that, it plans to consolidate every two shares of five sen each into one consolidated share.
• The below-par-value share price has deterred the company from raising funds from the equity market. Hence, it hopes its par value reduction plan will provide it with greater flexibility to raise funds and implement corporate proposals, which entails the issuance of new shares closer to its market price in the future.
• The proposed par value reduction is expected to give rise to a credit of RM31.3 mln, which will be used to offset its accumulated losses, which stood at RM15.2 mln as at 31st July 2015. Subject to shareholders' approval at an extraordinary general meeting to be convened, it expects the proposals to be completed by 2H2016. (The Edge Daily)
• Bison Consolidated Bhd, the operator of the myNEWS.com convenience store chain, has licensed its brand to a third party to establish outlets in Myanmar. Its wholly-owned subsidiary, Bison Stores Sdn Bhd has entered into a management agreement (MA) with SMI Retail Pte Ltd, a wholly-owned subsidiary of Singapore-listed Singapore Myanmar Investco Ltd.
• SMI intends to establish two myNEWS.com retail outlets at the new terminal of Yangon International Airport. SMI will pay Bison Stores a minimum monthly management fee or a percentage of the gross revenue of the business, whichever is higher; while all salaries, remuneration, and all related expenses and costs will be borne by SMI. The MA is valid for five years and may be renewed for another five years upon mutual agreement. (The Edge Daily)
• Eduspec Holdings Bhd is looking to market its learning programmes and education services products to Thailand after signing a 60:40 joint venture (JV) agreement with Next2Steps, a provider of hardware and software solutions for Thailand's education sector. The yet-to-be-named JV company has a paid-up capital of US$1.0 mln. (The Edge Daily)

Source: M+ Online Research - 10 May 2016