The FBM KLCI advanced 0.4% to close at 1660.4 points following Bank Negara Malaysia’s surprise reduction of the Overnight Policy Rate (OPR) by 25.0 basis points to 3.0%. The Properties (+3.4%) sector led the gains on the broader market, while the Finance (-0.1%) sector went against the general uptrend to close in the red as the sector is deemed as the big loser in the rate reduction.

Market breadth remained positive as winners outpaced losers on a ratio of 523- to-280 stocks. Traded volumes also gained momentum, increasing by 22.1% to 1.71 bln shares as prospects of strong U.S. growth and expectations of further stimulus sparked investors’ risk appetite for equities.

PPB Group (+28.0 sen) led the heavyweight gainers on the FBM KLCI, followed by Genting Malaysia (+20.0 sen), DIGI (+12.0 sen), AmBank (+8.0 sen) and Petronas Chemicals (+8.0 sen). On the broader market, some of the top gainers include Ajinomoto (+48.0 sen), UOA Development (+30.0 sen), Latitude Tree Holdings (+20.0 sen) and Syarikat Takaful Malaysia (+19.0 sen). Panasonic Manufacturing Malaysia hit an all-time high yesterday, rising RM1.16.

On the contrary, key decliners of the day were Genting Plantations (-18.0 sen), Power Root (-12.0 sen), Kwantas Corporation (-10.0 sen) and Imaspro Corporation (-8.0 sen). Concurrently, some of the major index-linked heavyweight losers were BAT (-72.0 sen), Petronas Gas (-10.0 sen), Maybank (-8.0 sen), CIMB Bank (-6.0 sen) and Petronas Dagangan (-6.0 sen).

Benchmark Asian stockmarkets finished higher, taking cue from the rally in U.S. equities on Tuesday and hopes of further fiscal stimulus from the central bank of Japan. The Nikkei was up 0.8%, fueled by gains in the financials and utilities sectors. Meanwhile, the Hang Seng Index (+0.5%) and the Shanghai Composite (+0.4%) closed in the positive territory. ASEAN stockmarkets, meanwhile, finished mostly higher.

Wall Street staged a new record high overnight, despite falling crude oil prices as investors braced for a potential increase in U.S. inventories. The Dow advanced 0.1% to close at 18,372.1 points, backed by blue chips like Unitedhealth Group (+1.2%) and Verizon Communications (+1.0%). The S&P (+0.01%) also expanded after the index pared off intra-day losses to close marginally higher. The NASDAQ, however, lost ground and finished 0.3% lower after trading mostly in the red.

The majority of the key European benchmark indices closed in the negative zone as the rally in U.S. equities ebbed ahead of the corporate earnings season. The FTSE lost 0.2% as financials and consumer-staples offset gains in defensive stocks in the utilities and healthcare sector. Luxury-goods maker, Burberry was up by 6.3% after reporting higher-than-expected sales on Wednesday. The DAX was in the red, contracting 0.3%, while the CAC (+0.1%) beat the market trend to close slightly higher.

THE DAY AHEAD

Bank Negara’s surprise move to reduce the OPR has certainly buoyed property stocks at the expense of lenders and we think stocks in the above sectors will continue to react accordingly over the near term. Therefore, we think property stocks will continue to gain ground, while banking stocks could moderate further as investors adjust their portfolios.

On the whole, however, we think the key index could consolidate after reaching the 1,660 points level with quick profit taking activities likely to take hold. We think the above level remains a formidable target to breach as the market environment remains largely cautious, in addition to the already toppish market valuations.

We expect the key index could pull back to around the 1,650 level over the near term, before a new course is determined. We also see hit and run tactics prevailing among the lower liners and broader market stocks as retail investors will likely move to preserve their short-term profits.

MACRO BRIEF

Bank Negara Malaysia has reduced the Overnight Policy Rate (OPR) by 25 basis points to 3.0% at its Monetary Policy Committee (MPC) meeting yesterday, citing rising risks from Britain's exit from the European Union.

The ceiling and floor rates of the corridor for the OPR are correspondingly reduced to 3.25% and 2.75% respectively. This move could see banks lowering their lending rates and making it cheaper for eligible consumers and companies to take loans. Correspondingly, the saving rates could also go down.

Meanwhile, inflation was lower as the impact from the Goods and Services Tax (GST) implemented in April 2015 lapsed and is expected to remain stable in an environment of low global energy and commodity prices and generally subdued global inflation.

Consequently, inflation is projected to be lower at 2.0% to 3.0% in 2016, compared to an earlier projection of 2.5% to 3.5% and is expected to continue remaining stable in 2017. (The Star Online)

COMPANY BRIEF

AirAsia Bhd has signed a firm order with Airbus for the purchase of 100 A321neo aircraft, bringing the total number of A320 range of orders to 575. The contract marks the first order placed by the low cost carrier for the largest model in the best-selling A320 family.

To date, over 170 A320s have already been delivered to the airline and are flying with its units in Malaysia, India, Indonesia, Japan and the Philippines. (The Star Online)

Berjaya Assets Bhd and Foshan City Bureau of Commerce (FCBC) plan to undertake a South East Asia Duty Free Trade City (SEADFTC) project at Berjaya Waterfront, Johor Bahru.

Berjaya Assets’ unit, Berjaya Waterfront Sdn Bhd had inked an Memorandum of Understanding (MOU) with FCBC, where by the parties will establish a framework for collaboration with progressive discussions, exchange of information and development and investment updates for the relevant commercial initiatives. (The Star Online)

Puncak Niaga Holdings Bhd is selling its loss-making water treatment company in China, Luwei (Pingdingshan) Water Co Ltd to a Chinese state-owned enterprise (SOE) as it makes its exit from China.

The proposed disposal will allow the group to limit its losses arising from its investment in Luwei. Its 98.7%-owned subsidiary, Sino Water Pte Ltd and Environmental Holding Pte Ltd (EHPL) have signed a framework agreement with the Lushan County People's Government to dispose of Luwei to a SOE to be identified by the Lushan government. Sino Water holds 93.8% equity interest in Luwei and EHPL the remaining 6.2%. (The Edge Daily)

Zhulian Corp Bhd's 2QFY16 net profit fell 28.4% Y.o.Y to RM7.9 mln, due to a drop in revenue and share of profit from its associate. Revenue for the quarter decreased 14.6% Y.o.Y to RM47.2 mln.

For 1HFY16, cumulative net profit decreased 36.5% Y.o.Y to RM15.0 mln. Revenue for the period dropped 13.6% Y.o.Y to RM95.4 mln. A second interim single-tier dividend of 1.5 sen per share, payable on 9th September 2016, was announced. (The Edge Daily)

TH Heavy Engineering Bhd (THHE), whose share price has tumbled nearly 32.0% since it was slapped with two winding-up petitions for a collective sum of US$8.9 mln (RM35.6 mln) on 5th July 2016 from its creditors in relation to the supply of equipment and work done at its floating production, storage and offloading (FPSO) Layang project, assures that it remains focused on completing the project.

THHE, which is 29.8%-owned by Lembaga Tabung Haji, has reported that it is working closely with the relevant stakeholders to ensure the completion and delivery of the project, despite having been served with the winding-up petitions. (The Edge Daily)

Kuantan Flour Mills Bhd's (KFM) Executive Director cum Chief Executive Officer (CEO), Lee Chee Kiean has resigned on 13th July 2016 due to health reasons.

Following his resignation, the business operations of the group will be managed by the group's Chairman with the support of the Chief Financial Officer and other management personnel, in consultation with other board members.

Lee joined KFM in 1986 as a marketing executive and has held various managerial positions in the group since. (The Edge Daily)

Edaran Bhd's wholly-owned subsidiary, Edaran IT Services Sdn Bhd has been awarded a tender to supply a weather prediction system worth RM44.6 mln by the Ministry of Science, Technology and Innovation (MOSTI).

The High Performance Computing and Active Archive System will be used for numerical weather prediction for the Malaysian Meteorological Department. (The Edge Daily)

Source: M+ Online Research - 14 Jul 2016