Tracking the positive developments on Wall Street overnight coupled with the strong gains in crude oil prices, the FBM KLCI inched higher last Friday to mark its winning streak to three days as the key index rose 1.2% W.o.W. The lower liners were also closed in the positive territory while the Consumer Products (-0.1%) and Construction (-0.6%) sectors underperformed the positive broader market.

Market breadth stayed positive as gainers outnumbered losers on a ratio of 487-to-314 stocks. Traded volumes climbed 9.1% to 2.02 bln shares amid the positive market sentiment.

More than two-thirds of the key index constituents advanced, led by BAT (+32.0 sen), followed by Maxis (+12.0 sen), Hap Seng (+10.0 sen), Westports (+8.0 sen) and Genting (+6.0 sen). Amongst the broader market’s biggest gainers of the day include Panasonic (+42.0 sen), KESM (+27.0 sen), Apex Healthcare (+13.0 sen) and Ann Joo Resources (+12.0 sen). Gas Malaysia added 13.0 sen after reporting a strong set of quarterly earnings.

In contrast, consumer products bellwethers like Nestle (-40.0 sen), Frasers & Neave (-30.0 sen) and Dutch Lady (-24.0 sen) topped the broader market decliners list, while other notable losers of the day were Chin Teck Plantations (-28.0 sen) and Lay Hong (- 19.0 sen). Tenaga (-6.0 sen), PPB (-4.0 sen) and YTL (- 1.0 sen) were the only decliners on the big board.

Asian stockmarkets ended the week on a high note as dovish policies from global policy makers such Japan and U.K. fuelled risk appetite for emerging market equities. The Nikkei notched 1.1% as the Yen weakened and defensive counters from the utilities, healthcare and consumer staples-related sectors rallied. The Shanghai Composite Index shrugged off slower-than-expected Chinese economic data to close up 1.6% after corporate earnings beat analysts’ estimates, while the Hang Seng rose 0.8% to hit 9-month highs as gains in the commerce and industry sectors offset the fall in the properties sector. ASEAN indices ended mixed to end the week.

US stockmarkets retreated from the all-time high levels on last Friday as the Dow fell 0.2%, dampened by the soft retail sales data in July which stood unchanged vs. economists’ estimates of 0.4% M.o.M increase. On the broader market, the S&P 500 (-0.1%) was dragged down by the basic materials sector (-0.5%), but the Nasdaq (+0.1%) recovered all its intraday losses in the eleventh trading hour.

Following the weaker-than-expected Eurozone’s Industrial Production data which only grew 0.4% Y.o.Y vs. economists’ estimates of a 0.7% Y.o.Y rise, European benchmark indices ended mostly lower as the CAC and DAX fell 0.1% and 0.3% respectively. The FTSE, meanwhile, closed flat, lifted by gains in oil & gas stocks such as Tullow Oil (+4.2%) and BP PLC (+0.4%) after crude oil prices staged a sharp recovery over the past week.

THE DAY AHEAD

The FBM KLCI has done well last week to attained a breakthrough of the 1,680 level which has been a formidable hurdle for the key index to clear over the past few months. Much of the positivity has been due to sustained low global interest rate environment and increased Central Bank stimulus measures to boost the still slow global economic environment. As a result, risk appetite for equities were heightened to include Emerging Market shares.

After last week’s decent gains, coupled with the weak Friday closing in many key global stocks indices, we think the upsides could also pause on Bursa Malaysia to allow the recent gains to be digested. Hence, we think the FBM KLCI is likely to consolidate to around the 1,680 level over the near term.

The lower liners and broader market shares, however, will continue to draw retail participation as they take advantage of the calmer market conditions to continue their trading activities.

COMPANY BRIEFS

PDZ Holdings Bhd and Pelaburan Mara Bhd have been served a counterclaim in the High Court by the Managing Director cum Chief Executive Officer of Efogen Sdn Bhd Johany Jaafar, for RM166.5 mln in damages, based on a valuation of the enterprise value of Efogen of RM251.1 mln given by Grant Thornton.

PDZ was named as a second defendant on the basis that PDZ had wrongfully terminated a share sale agreement (SSA) on 25th September 2014. PDZ has claimed that the charges against the company were not sustainable as Johany Jaafar was never a party to a contract entered between PDZ and Pelaburan Mara.

However, PDZ noted that the amount stated in Johany’s counter claim against PDZ could significantly and adversely impact PDZ’s earnings for FY17 should the court rule the case in favour of the former. (The Edge Daily)

UEM Edgenta Bhd has clinched a RM87.0 mln contract for the relocation of telecommunication works package V202 of the Sungai Buloh-Serdang-Putrajaya Line (KV MRT2) project from Ahmad Zaki Sdn Bhd. The relocation works includes the construction and completion of viaduct guideway and other associated works from Persiaran Dagang to Jinjang. (The Edge Daily)

APM Automotive Holdings Bhd has entered into a joint-venture (JV) agreement with TACHI-S Co Ltd to manufacture, assemble and sell automotive seats in Vietnam for original equipment manufacturers (OEM).

The new JV company will be incorporated in Vietnam under the proposed name APM TACHI-S Seating Systems Vietnam Co Ltd, with an investment capital and charter capital of US$2.5 mln on a basis of 49:51 between APM Automotive and Tachi. (The Star Online)

SMTrack Bhd is proposing to acquire Wellspring Worldwide Ltd - the global master licensor of Tutti Fruitti Frozen Yogurt, O'My Buns! and YoFlavor, for an undisclosed amount.

The purchase consideration is expected to be satisfied v the issuance of new SMTrack shares and will be subject to a profit guarantee on the minimum profit after tax of the Wellspring Group for two financial years following the completion of the proposed acquisition. (The Star Online)

Petronas Gas Bhd has inked a 51:49 JV agreement with Linde (M) Sdn Bhd to develop an air separation unit (ASU) plant in Pengerang, Johor to meet its demand for gaseous oxygen and gaseous nitrogen.

The revenue stream from the plant is expected to cover capital and operational expenditure for the construction and operations of facilities and will be funded via a combination of equity and debt from the respective parties. (The Star Online)

Tek Seng Holdings Bhd's 2Q2016 net profit rose by more than four-fold to RM16.2 mln, from RM3.7 mln last year on the back of higher contribution from its solar segment, while revenue doubled to RM159.5 mln, from RM78.9 mln in the previous corresponding period. The company has also proposed a one sen interim dividend, payable on 9th September 2016.

Its cumulative 1H2016 net profit stood at RM31.3 mln, from RM5.8 mln a year earlier, mainly due to stronger revenue contribution which rose slightly more than two-fold to RM290.8 mln from RM137.8 mln in 1H2015. (The Edge Daily)

A stronger Ringgit boosted Guan Chong Bhd's 2Q2016 net profit as it jumped by more than five times to RM10.7 mln, compared to RM2.0 mln recorded in the same period last year, fueled by a higher net gain on forex, despite only a 1.2% Y.o.Y increase in revenue to RM583.4 mln, from RM576.6 mln a year ago.

Cumulative 1H2016 stood at RM24.4 mln from RM108,000 from 1H2015 - propped by forex gains, while revenue expanded 14.7% Y.o.Y to RM1.17 bln in comparison to RM1.02 bln in the same corresponding period last year. (The Edge Daily)

Federal Furniture Holdings (M) Bhd is planning to acquire 60.0% of equity stake in Pembinaan Masteron Sdn Bhd (PMSB) for RM33.0 mln to diversify its core business.

The purchase will be funded via a combination of RM6.0 mln cash and an issuance of 270.0 mln new Redeemable Convertible Preference Shares of 10.0 sen each in the furniture company. (The Star Online)

Source: M+ Online Research - 15 Aug 2016