Following the Brexit referendum which saw the U.K. voted in favor to leave the European Union, the FBM KLCI tanked 28.1 pts to its intraday low of 1,611.88 pts, but managed to recover most of its intraday losses before closing just 0.4% lower last Friday. The lower liners ended in the red, while the Industrial sector (+0.4%) outperformed the negative broader market.

Market breadth was expectedly negative as losers overwhelmed gainers on a ratio of 760-179 stocks. Traded volumes, however, jumped 101.1% to 2.23 bln shares, owing to the earlier panic selling and mild bargain hunting activities that surfaced towards the end of the trading session.

Leading the decliners on the big board was Genting (-31.0 sen), followed by Tenaga (-240 sen), KLK (-20.0 sen), Genting Malaysia (-15.0 sen) and Hong Leong Financial Group (-12.0 sen). Consumer products stocks like Nestle (- 56.0 sen), Carlsberg (-48.0 sen), Fraser & Neave (-40.0 sen) and Heineken (-28.0 sen) topped the broader market decliners lists. SCGM fell 21.0 sen after reporting a weak set of quarterly earnings.

In contrast, significant gainers on the broader market include MPI (+17.0 sen), Wellcall (+9.0 sen), Country Heights Holdings (+8.0 sen), Genting Plantations (+8.0 sen) and Apollo (+7.0 sen). Meanwhile, BAT (+RM1.22), IHH (+20.0 sen), DIGI (+15.0 sen), Hap Seng (+15.0 sen) and Telekom (+5.0 sen) were key winners on the FBM KLCI.

Japanese stockmarkets endured its steepest single day decline since 2011 as the Nikkei plunged 7.9% to close below the 15,000 psychological level. The Hang Seng Index fell 2.9%, dragged down by the selling pressure in British banks like HSBC (-6.6%) and Standard Chartered (-9.3%), while the Shanghai Composite Index slipped 1.3%. ASEAN stockmarkets, meanwhile, ended negative.

Wall Street took a beating last Friday after Britain’s vote to exit the European Union rattled global stockmarkets. The Dow dipped 3.4%, while the S&P 500 tanked 3.6%, both marking their biggest daily fall in 10 months. Significant decliners were banking stocks like Citigroup Inc (-9.4%), JPMorgan Chase & Co (-7.0%) and Goldman Sachs Group Inc (-7.1%).

European benchmark indices – the FTSE (-3.2%), CAC (-8.0%) and DAX (-6.8%), also sank. The British Pound slid to 31-year low against the Greenback, whereas a whooping £100.0 bln were wiped off from banking stocks like Lloyds Banking Group (-21.0%), Barclays (-17.7%) and Royal Bank of Scotland (-18.0%).

THE DAY AHEAD

The surprise Brexit referendum results has certainly sent shockwaves to global stockmarkets and the continuing uncertainties will dampen market sentiments over the near term. Although Malaysian stockmarket has weathered the referendum results last Friday, market sentiments are likely to remain dour for the time being as investors assess the impact of the U.K.’s impending exit from the European Union.

While there is little immediate economic impact on the Malaysian economy, we expect the Leave decision to continue its impact on Bursa Malaysia stocks over the medium term as the fallout from the Brexit vote will continue to unfold and this will leave investors on a flight to safety with investors likely to shift to safer asset classes like gold and/or government bonds. Therefore, the corresponding market volatility is expected to prevail over the medium term.

Although the FBM KLCI has managed to close above the 1,620 level last Friday, we still think that the downside risk is still prevalent as investors shun equities amid the uncertain global market sentiments. Consequently, we think that the key index could head lower over the near term and potentially drop back to the 1,620 support level, notwithstanding the continuing support on selective index heavyweights by local institutions, as most investors are likely to retreat to the sidelines.

COMPANY BRIEFS

Berjaya Credit Sdn Bhd (BCredit), which is indirectly-owned by Tan Sri Vincent Tan, is planning to inject a freehold commercial unit in Berjaya Times Square into Berjaya Assets Bhd (BAsset) for RM13.4 mln. The 13,369 sq. ft. commercial unit is currently rented to Sports Toto Fitness Sdn Bhd, which runs a fitness centre at an annual rental of RM442,368. The property's open market value was valued at RM14.7 mln. The proposed acquisition will be funded by internal funds and/or borrowings. (The Edge Daily)

MyEG Services Bhd was fined RM2.3 mln by the Malaysian Competition Commission (MyCC) and possible daily fines in the future for abusing its dominant position in the provision and management of online Foreign Workers Permit renewals.

It was found that MyEG, together with MyEG Commerce Sdn Bhd, had abuse its dominant position to harm competition in the downstream market, in which MyEG Commerce is participating as an insurance agent for online Foreign Workers Permit renewal applications.

The Commission has also imposed several remedial actions, which is to be adhered to by MyEg, failing which it will result to a higher daily penalty. (The Star Online)

Sime Darby Bhd expects little impact as a result of the United Kingdom’s leave from the European Union on the feasibility of the Battersea Power Station project.

The group, which holds a 40.0% equity stake in the project, foresees the project to continue to generate interest in the longer term. Meanwhile, SP Setia Bhd and the Employee Provident Fund owns the other 40.0% and 20.0% equity stake respectively.

The Battersea Power Station regeneration project, with an estimated gross development value of £10.0 bln (RM57.0 bln), involves the redevelopment of London’s iconic Battersea Power Station into a mixed development. (The Edge Daily)

Kelington Group Bhd’s Chairman and Chief Executive Officer (CEO), Raymond Gan expects its FY16 revenue to rise due to a strong order book. Currently, the group’s outstanding orderbook stands at RM250.0 mln and it managed to secure new orders totaling to RM160.0 mln this year.

Further, Kelington also aims to secure 20.0% of the RM500.0 mln worth of projects it is currently tendering for. Forty percent of these projects are from the high-technology industry, while the remainder is from the general industry.

The group is also planning to expand its business abroad to Vietnam and Myanmar. (The Edge Daily)

REDtone International Bhd has posted a 4QFY16 net loss of RM23.5 mln, despite reporting revenue of RM51.8 mln due to high project costs and impairment losses.

For the 11 months to 30th April 2016, net loss was at RM29.8 mln, while, revenue was at RM148.6 mln. There were no comparison figures as the group had changed its financial year end from 31st May to 30th April, in line with Berjaya Corporation Bhd’s (BCorp's) financial year-end when the latter took over REDtone on 8th May 2016. (The Star Online)

Oriental Interest Bhd (OIB)'s largest shareholder, Jupiter Sunrise Sdn Bhd (JSSB) will hold 58.7% equity stake in OIB after it sells its 13.7% equity stake in the company at a price that was undisclosed. (The Edge Daily)

Kumpulan Wang Persaraan (Diperbadankan) (KWAP) has emerged as a substantial shareholder in special purpose acquisition company (SPAC), Red Sena Bhd, targeting food and beverage-related businesses.

KWAP has acquired 4.0 mln and 750,000 of Red Sena’s shares in the open market between 9th June 2016 to 10th June 2016, bringing its equity stake in Red Sena to 5.2%. (The Edge Daily)

Source: M+ Online Research - 27 June 2016