• Bucking the major key regional indices, the FBM KLCI (-0.4%) closed lower as blue chip stocks continue to endure selling pressure following the MSCI’s equity rebalancing last Friday. The weak sentiments sent both the lower liners and the broader market shares into the red.
• Expectedly, market breadth was bearish as decliners outpaced gainers on a ratio of 539-to-250 stocks. Traded volumes thinned by 6.9% to 1.70 bln shares as investors remained on the sidelines ahead of peak period of the results reporting season.
• The main key index stocks that tanked include BAT (-42.0 sen) and Petronas Gas, which fell 40.0 sen despite the increase in crude oil prices. Hong Leong Bank (-14.0 sen), Axiata (-13.0 sen) and UMW Holdings (-13.0 sen) were the other big losers. Meanwhile, Cahya Mata Sarawak plunged 48.0 sen, after its net profit shed 98.0% in 1Q2016. United Plantations (-38.0 sen), Atur Maju (-36.0 sen), Huat Lai Resources (-18.0 sen) and P.I.E Industrial (-16.0 sen) were the other lower liners decliners.
• Significant winners on the broader market, include Hong Leong Industrial (+29.0 sen), Versatile Creative (+17.0 sen), Tasek Corporation (+16.0 sen), Scientex (+14.0 sen) and ACE market stock, Microlink Solutions (+12.0 sen). Taking cue from the stronger crude oil prices, Kuala Lumpur Kepong gained 24.0 sen, while the other significant gainers on the big board include PPB (+20.0 sen), and Ambank (+6.0 sen), while Petronas Chemicals and Petronas Dagangan rose 2.0 sen each.
• Asian benchmark indices advanced yesterday, undeterred by Wall Street’s decline last Friday and the soft Chinese economic data. The Nikkei eked-out a 0.3% gain, while both the Shanghai Composite and Hong Kong’s Hang Seng Index rose 0.8%. Most ASEAN stockmarkets ended in the positive zone on Monday.
• U.S. stockmarkets ended the day on a positive tone, buoyed by the rebound in Apple Inc (+3.7%) after registering a three week loss and a rally in crude oil prices which propped up energy shares. The Dow (+1.0%) pared off most of its previous losses to end at 17,710.7 points, while the S&P 500 and Nasdaq climbed 1.0% and 1.2% respectively.
• European key benchmark indices closed mostly higher, with the exception of the CAC (-0.2%). The FTSE rose marginally by 0.2% as mining stocks such as Anglo American (+5.4%) and Antofogasta outperformed (+3.4%). Meanwhile, Germany’s DAX rose 0.9%.

THE DAY AHEAD

• Although market sentiments remain largely on the cautious side amid the lack of positive catalyst, the FBM KLCI is ripe for a rebound after the recent selldown has left the key index deep in the oversold position. At the same time, it also appears that the selling pressure may be abating after the past two days’ steep falls that emanated from the MSCI’s realignment exercise.
• As the FBM KLCI looks to adjust from oversold, the rebound could lift the key index to the 1,630 level, before re-challenging the 1,650 levels. Still, we think that market breadth will stay on the low-to-moderate side as the cautious environment is likely to keep most market players on the sidelines. This also means that the bargain hunting activities appears limited for the time being.

COMPANY BRIEFS

• Kuala Lumpur Kepong Bhd’s (KLK) 2QFY16 net profit fell 24.2% Y.o.Y to RM168.5 mln, dragged down by net unrealised foreign exchange loss of RM35.8 mln and weaker property sales. Revenue for the quarter, however, increased 20.7% Y.o.Y to RM3.70 bln.
• For 1HFY16, cumulative net profit jumped 120.0% Y.o.Y to RM963.7 mln. Revenue for the period rose 30.1% Y.o.Y to RM8.04 bln. (The Star Online)
• Tenaga Nasional Bhd's (TNB) planned acquisition of a 30.0% stake in India's GMR Energy Ltd for US$300.0 mln (about RM1.21 bln) is credit negative as the move will reduce the national utility company's liquidity, according to Moody's Investors Service.
• The rating agency has reported that the acquisition would also increase TNB's debt, depending on the funding mix for the acquisition. (The Edge Daily)
• Cahya Mata Sarawak Bhd's (CMSB) 1Q2016 net profit plunged 98.2% Y.o.Y to RM1.1 mln on lower revenue and profit margin and share of losses in associates. Revenue for the quarter fell 29.3% Y.o.Y to RM346.9 mln. (The Edge Daily)
• Century Logistics Holdings Bhd's 1Q2016 net profit dropped 40.3% Y.o.Y to RM4.5 mln, mainly due to the lower overall activities of the group as a result of weakness in consumer sentiments. Revenue for the quarter declined 3.3% Y.o.Y to RM69.5 mln. An interim dividend of one sen per share, payable on 17th June 2016 was declared. (The Edge Daily)
• NetX Holdings Bhd is expected to develop electronic payment services for Pakistan-based Rockville Technologies LLC in the Middle East region as its 60.0%-owned subsidiary, Payallz Sdn Bhd, had entered into a technology collaboration agreement with Rockville for the deployment of the technical expertise and solution of Payallz to develop electronic data capture payment solution for the Pakistan firm.
• The collaboration provides an opportunity for NetX to tap into the potential market of 7,000 merchants over four years. (The Edge Daily)
• Berjaya Group Bhd (BGroup) has disposed of 6.0 mln shares in Berjaya Sports Toto Bhd (BToto) via its 100% equity interest in Bizurai Bijak (M) Sdn Bhd for RM17.7 mln cash. Separately, Berjaya Land Bhd (BLand) has also announced the disposal of 5.2 mln shares in BToto for RM15.3 mln cash.
• The net cash proceeds from the disposals will be used for working capital and to repay bank borrowings. (The Edge Daily)
• Tien Wah Press Holdings Bhd is proposing to jointly undertake a mixed-use commercial development in Petaling Jaya, Selangor with Singapore-listed Lum Chang Holdings Ltd. Tien Wah’s subsidiary, Tien Wah Properties Sdn Bhd (TWPSB) has entered into a shareholders' agreement with Lum Chang's unit Kemensah Holdings Pte Ltd to form and operate a 50:50 joint venture company called Sterling Model Sdn Bhd for the proposed development.
• TWPSB has also entered into a sale and purchase agreement with Sterling Model to sell the land measuring 13,040 sq.m. for RM63.8 mln. The total net book value of the land as at 31st December 2015 is RM26.5 mln, giving rise to a gain of approximately RM29.5 mln. (The Edge Daily)
• Signature International Bhd’s 3QFY16 net profit sank 62.6% Y.o.Y to RM5.0 mln, mainly due to lower project revenue contribution from the kitchen and wardrobe and glass and aluminium segments. Revenue for the quarter decreased 37.5% Y.o.Y to RM54.7 mln.
• For 9MFY16, cumulative net profit dropped 51.8% Y.o.Y to RM15.6 mln. Revenue for the period declined 29.1% Y.o.Y to RM154.5 mln.
• Separately, Signature has received a compensation sum of RM80.0 mln from the Selangor state government following the compulsory acquisition of land measuring 13,506 sq.m. in Sungai Buloh to build the Damansara-Shah Alam Elevated Expressway. (The Edge Daily)
• Scan Associates Bhd’s director, Yeoh Eng Kong has resorted to the courts in a bid to get a receiver and manager appointed for the Guidance Note 3 company. The company has been embroiled in a boardroom tussle with Yong and former CEO, Datuk Norbik Bashah Idris that began late 2015. (The Edge Daily)

Source: M+ Online Research - 17 May 2016