Taking cue from the favourable global sentiments following the strong U.S. employment data, additional stimulus measures by the Bank of England and higher crude oil prices, the FBM KLCI (+0.5%) started the week on a strong footing as more than half the FBM KLCI heavyweights rallied. The lower liners also closed higher, led by gains in the FBM ACE which soared 1.2%, amid a mostly positive broader market.

Market breath was positive as winners outweighed decliners on a ratio of 455- to-370 stocks. Traded volume surged 20.9% to 2.62 bln shares, backed by strong buying interest in the lower liners as well as bargain hunting amid selected blue chips.

Significant heavyweights gainers on Monday were BAT (+RM1.76), Hong Leong Financial Group (+20.0 sen), PPB Group (+20.0 sen), Petronas Dagangan (+16.0 sen) and Tenaga Nasional (+16.0 sen). Burn-in chip tester, KESM Industries rose 31.0 sen, while other chart toppers on the broader market include Carlsberg (+26.0 sen), MNRB Holdings (+16.0 sen), Malaysia Smelting Corporation (+14.0 sen) and Petron Malaysia Refining & Marketing (+14.0 sen).

On the other hand, broader market underperformers were Panasonic Manufacturing (-RM1.66), United Plantations (-60.0 sen), Batu Kawan (- 20.0 sen) and SAM Engineering & Equipment (-10.0 sen). Fraser & Neave lost 46.0 sen on worries over its margin compression amid the increasing sugar price. The only three key index losers were KLCC Property & REITs (-9.0 sen), IOI Corporation (-5.0 sen) and Maybank (- 2.0 sen).

Japanese equities rallied the most in about a month after better-than-expected jobs data whet risk appetite for riskier assets and weakened the Yen. The Nikkei skyrocketed to close 2.4% higher, boosted by exporters and major financial firms, while the Hang Seng jumped 1.6% as all but one of its index members rallied. The Shanghai Composite Index also raked-in 0.9% to close in the green, albeit slightly lower than the rest of the key regional benchmark indices due to earlier selling pressure following China’s lower-than-expected foreign exchange reserves. ASEAN indices ended mostly in the green territory.

U.S. key benchmark indices inched lower overnight, even as crude oil prices advanced to settle above the US$43.0 per barrel mark amid renewed talks of a supply freeze by OPEC members. The Dow retraced 0.1%, underpinned by losses in blue chip counters – Merck & Co (-1.6%) and Pfizer (-1.4%). On the broader market, the S&P 500 (-0.1%) and the Nasdaq (-0.2%) clawed back earlier losses, albeit closing slightly in the red.

European equities rose for the third consecutive day on the back of gains in financials and commodity-related stocks. The FTSE finished 0.2% higher, hitting a record high since June 2015. The CAC added 0.1% to close in the positive zone, while the DAX climbed 0.6% as gains in utilities and banks offset losses in the healthcare sector.

THE DAY AHEAD

There remains no change in our immediate market view as we think sentiments are still looking mildly upbeat amid the positive economic data from the U.S. and sustained stimulus measures in Europe and Japan. This is likely to continue fueling the Malaysian stockmarket higher over the near term as bargain hunting activities are likely to prevail.

With the 1,670 level breached, we think the FBM KLCI will make a fresh attempt at the 1,680 level, but we think it may again prove to be a difficult level to breach given the continuing market wariness over the sustainability of the current uptrend. Meanwhile, the 1,670 level is the immediate market support, followed by the 1,660 level.

The lower liners and broader market shares are also likely to see sustained rotational and trading interest as retail investors are capitalising on the calmer market conditions to undertake short-term trading activities.

COMPANY BRIEFS

Malaysia Building Society Bhd’s (MBSB) 2Q2016 net profit fell 26.3% Y.o.Y to RM63.0 mln due to higher allowance for impairment losses on loans, advances and financing amounting up to RM179.9 mln. Revenue for the quarter, however, rose 6.1% Y.o.Y to RM812.5 mln.

For 1H2016, cumulative net profit declined 53.3% Y.o.Y to RM97.8 mln. Revenue for the period, however, gained 11.6% Y.o.Y to RM1.63 bln. (The Star Online)

Destini Bhd’s 2Q2016 net profit surged 147.7% Y.o.Y to RM8.9 mln, due to higher order for the group’s maintenance, repair and overhaul (MRO) services and marine manufacturing services. Revenue for the quarter jumped 113.4% Y.o.Y to RM108.6 mln.

For 1H2016, cumulative net profit soared 261.3% Y.o.Y to RM16.1 mln. Revenue for the period gained 114.2% Y.o.Y to RM190.3 mln. (The Star Online)

HeiTech Padu Bhd’s 51%-owned subsidiary, Duta Technic Sdn Bhd, has been awarded a RM37.3 mln contract by Tenaga Nasional Bhd (TNB) to carry out engineering design works, covering civil and structural works and high-voltage electrical equipment, including retrofitting works at remote end, manufacturing inspection, installation and construction for the Klang Valley Mass Rapid Transit (KV MRT) Semantan project. The contract was for a period of 602 days starting from 12th August 2016 to 5th April 2018. (The Star Online)

Proton Holdings Bhd, which is wholly-owned by DRB-Hicom Bhd, expects to secure a partner to grow its automotive business by 1Q2017. As part of the requirement of the RM1.50 bln loan granted by the government, Proton is currently undertaking request for proposal (RFP) exercise seeking a partner to Proton who can provide a strategic, operational and cultural fit on a permanent basis, with the intention to grow its automotive business.

The exercise, said DRB-Hicom, is expected to be completed in 1Q2017 and its implementation is being overseen by the Task Force Committee formed by the government to monitor the turnaround of Proton. The group also denied that it may dispose of its entire stake in Proton. (The Edge Daily)

Asian Pac Holdings Bhd has proposed a rights issue of 5-year 3.0% Irredeemable Convertible Unsecured Loan Stocks (ICULS), on the basis of one ICULS-for-every 10 shares held. Each ICULS subscribed will come with two free detachable warrants.

The exercise involves up to RM99.3 mln ICULS and 198.5 mln warrants. The ICULS will be issued at 100% of their nominal value of RM1.00 each. Some RM99.3 mln from the proceeds raised from the rights issue will be used for acquisition of new land for future developments, working capital and for the expenses related to the proposals. (The Edge Daily)

Astral Asia Bhd has called off the plan to expand its plantation activity by acquiring 35,000-ac. of oil palm land in Sarawak after Astral Asia and vendor, Sima Properties Holdings Sdn Bhd were unable to reach an agreement on the deal. Both parties have decided to terminate the Memorandum of Agreement (MoA) signed on 10th May 2016 and the RM500,000 refundable deposit will be refunded to Astral Asia. (The Edge Daily)

Fajarbaru Builder Group Bhd has clinched a RM21.0 mln infrastructure contract from the East Coast Economic Region Development Council. The contract is for the construction of the main access road and primary infrastructure and utilities for the Malaysia-China Kuantan Industrial Park. The job will commence on 22nd August 2016 and is scheduled to be completed on 18th February 2018. (The Edge Daily)

PIE Industrial Bhd's 2Q2016 net profit slipped 35.8% Y.o.Y to RM6.1 mln, dragged down by lower profit margin, higher operating expenses and higher provision for slow-moving inventories. Revenue for the quarter fell marginally by 0.3% Y.o.Y to RM135.9 mln.

For 1H2016, cumulative net profit declined 58.4% Y.o.Y to RM8.2 mln. Revenue for the period, however, rose 3.3% Y.o.Y to RM255.6 mln. (The Edge Daily)

Source: M+ Online Research - 9 Aug 2016