The FBM KLCI (+0.8%) staged a strong recovery on last Friday, taking cue from the positive developments in Wall Street overnight as well as from China’s above expectation GDP performance with the key index finishing 1.5% W.o.W higher. The lower liners also ended higher, while the Properties sector (-0.7%) was the sole decliner on the broader market.

Market breadth turned positive as gainers outnumbered losers on a ratio of 476-to- 340 stocks. Traded volumes rose by 19.6% to 1.89 bln shares as investors returned amid the positive market sentiment.

Two-thirds of the key index constituents rose, led by Axiata (+22.0 sen) and Genting (+22.0 sen), followed by Maybank (+15.0 sen), Petronas Gas (+10.0 sen) and Petronas Chemicals (+9.0 sen). Leading the gainers on the broader market were consumer products stocks like Nestle (+RM2.98), Fraser & Neave (+22.0 sen), Dutch Lady (+20.0 sen) and Kawan Food (+16.0 sen). Bintai jumped 3.0 sen after bagging a RM18.0 mln contract to provide electrical and extra-low voltage services for the construction of a logistic centre.

Significant decliners include Hartalega (- 14.0 sen), Southern Acids (-11.0 sen), Cycle & Carriage Bintang (-10.0 sen) and Panasonic (-10.0 sen). Microlink Solutions fell 7.0 sen, snapping three straight days of gains. There were only four decliners on the big board – KLCC (-4.0 sen), BAT (- 4.0 sen), RHB Bank (-2.0 sen) and Public Bank (-2.0 sen).

Japanese stockmarkets advanced for the fifth straight day as the Nikkei gained 0.7% to climb 9.2% W.o.W – the biggest rally in over six years. The Hang Seng Index added 0.5%, recording a 5.3% W.o.W gain – the biggest jump in 15 months, but the Shanghai Composite only added 0.01% as the stronger-thanexpected 2Q2016 GDP of 6.7% Y.o.Y dashed hopes for further stimulus from the Bank of China. ASEAN stockmarkets, meanwhile, finished mostly higher.

U.S. stockmarkets ended mixed on Friday as the Dow (+0.1%) closed in the green in the eleventh trading hour to stage another record closing, owing to the strongerthan- expected at 0.6% Y.o.Y. On the broader market, the S&P and the Nasdaq, however, fell 0.1% each on profit taking activities after five consecutive sessions of gains.

Earlier, European benchmark indices ended mostly lower as the CAC fell 0.3% as airline and travel-related stocks fell on the terror attack in Nice, France, while the DAX closed 0.01% lower, defending the 10,000 psychological level. Meanwhile, gains from banking stocks like Royal Bank of Scotland Plc (+1.0%) and Barclays Plc (+.2%) sent the FTSE higher 0.2% to register a 1.2% W.o.W gain.

THE DAY AHEAD

China’s better-than-expected economic performances helped to buoy Asian stocks last Friday as the stronger performance will also permeate to other regional countries, given their strong reliance on China’s growth.

We think the near term positivity is likely to prolong amid the availability of more encouraging market catalysts that could encourage more short-term participation. As it is, we expect more market participants to capitalise on the positive to undertake more short-term trading activities that could also lead the FBM KLCI to the next target of 1,680 level.

By then, however, we think the market would reach overbought and a consolidation spell is likely to follow.

COMPANY UPDATE

Oldtown Bhd’s China unit, Oldtown’s Shenzhen Kopitiam Asia Pacific Limited (SZKAP) has signed a territorial license agreement (TLA) with China’s G&L Food and Beverage Management Company Limited (G&L) on 4th July 2016, conferring the rights to operate and to sub-license the rights to operate the Oldtown White Coffee restaurants in Jiangsu, China to the latter. G&L is set to open its first outlet in China in October 2016, located in the city of Wuxi, in the southern Jiangsu province.

Further, SZKAP had earlier entered into a TLA with Oldtown Asia Pacific Limited, the Master Licensee, to accept the Territorial License for Jiangsu on 1st May 2016. The TLA was for a period of five years, commencing on 1st Ma, 2016 until 30th Apri, 2021 and is subject to automatic renewal for two successive five-year terms.

Comments:

The re-launching of Oldtown’s café outlet into China comes as no surprise to us as it is in-line with the group’s strategy to expand its market presence regionally. We are sanguine on the opening of the café outlet in China as it will provide ample opportunities for more new outlets to be opened in the future.

We think that the café outlet and the aggressive sales and marketing of its beverages products via retail channels and online platforms (ie: China’s Tmall), as well as resilient Chinese consumer spending will further strengthen Oldtown’s position as one of the leading household white coffee brand regionally.

As there is no immediate effect to Oldtown’s earnings, we maintain our HOLD recommendation on Oldtown with a target price of RM1.95. Our target price is derived from ascribing a unchanged target PER of 16.0x to our FY17 EPS of 12.2 sen.

COMPANY BRIEF

AMMB Holdings Bhd (AmBank Group) has decided to reduce its base rate (BR) and base lending rate (BLR) by 20.0 basis points (bps) to 3.8% and 6.65% respectively, starting from 19th July 2016 onwards.

According to AmBank Group and AmBank (M) Bhd Chief Executive Officer (CEO) Datuk Sulaiman Mohd Tahir, the rate reduction is not expected to significantly impact the banking group's performance and will benefit borrowers.

Moving forward, consumers will have the options of exploring other investment opportunities, such as unit trusts and other wealth management products, which may yield higher returns compared to fixed deposits. (The Edge Daily)

CIMB Group Holdings Bhd has also its BR by 20.0 bps for loans/financing products for its Malaysian business, following Bank Negara Malaysia’s (BNM) decision to cut its overnight policy rate (OPR) last week.

Its BR will be cut from 4.1% to 3.9%, while its base lending rate/base financing rate (BLR/BFR) will be decreased from 6.95% to 6.75% per annum, effective from 22th Jul, 2016.

Accordingly, CIMB’s fixed deposit rates will also be revised downwards by up to 20.0 bps.

The group’s Chief Executive Tengku Zafrul Aziz said that BNM's pre-emptive decision to reduce the OPR is both timely and strategic, given the current obstacles faced by the domestic economy due to possible spillover effects from global uncertainties. (The Star Online)

SKP Resources Bhd has secured a fouryear contract worth RM2.0 bln (RM500.0 mln a year) from its major customer Dyson Ltd to manufacture an electronic consumer product.

However, the group would also be annulling its five-year contract worth RM2.0 bln (RM400.0 mln per year) which was awarded by Dyson in May 2015 for the manufacture of cordless vacuum cleaners to optimise limited labour resources following the government's decision to freeze the hiring of foreign workers.

Meanwhile, its five-year contract worth a cumulative RM3.0 bln to manufacture a specific model of cordless vacuum cleaners for Dyson Ltd awarded in September last year remains unchanged. (The Star Online)

China Automobile Parts Holdings Ltd (CAP)'s Managing Director (MD), Li Guo Qing is no longer a substantial shareholder in the company after selling off a 6.2% equity stake in CAP.

The MD has disposed of approximately 72.1 mln shares through its private vehicle, Guotai International Holdings Ltd via an off-market deal on 20th June 2016. Following the disposal, Mr. Li would only control a 3.6% stake in the company. (The Edge Daily)

Magma Prima Bhd has announced the resignation of its CEO, Cheah Len Khoon with immediate effect as he will pursue other business interests. His resignation came barely 4.5 months after his appointment on 3th March 2016. (The Edge Daily)

The Employees Provident Fund (EPF) increased its stake in Axiata Group Bhd to 14.9%, from 14.7% previously after receiving some 30.3 mln shares from Axiata's dividend reinvestment plan (DRP) on 11th June this year. (The Edge Daily)

Source: M+ Online Research - 18 Jol 2016