Trying To Find Support

• The FBM KLCI (+0.01%) snapped a streak of three consecutive sessions of losses last Friday, but the selling pressure at the earlier part of the week sent the key index 1.3% W.o.W lower. The lower liners ended mostly in the red as the FBM Small Cap and FBM ACE fell 0.2% and 0.5% respectively, while the broader market closed mixed.

• Market breadth stayed negative as losers outpaced gainers on a ratio of 402-to-343 stocks. Traded volumes declined 8.9% to 1.32 bln shares, dragged down by the uncertainties over the US political developments.

• Half of the key index constituents advanced, led by Genting (+23.0 sen), followed by PPB Group (+10.0 sen), Sime Darby (+6.0 sen), AmBank (+4.0 sen) and Hong Leong Bank (+4.0 sen). Leading the gainers on the broader market include Carlsberg (+16.0 sen), Press Metal (+11.0 sen), Chin Teck Plantations (+10.0 sen), and TAHPS Group (+10.0 sen). Despite reporting a weaker set of quarterly earnings, Frasers & Neave added 10.0 sen.

• In contrast, notable losers on the broader include Tasek Corporation (-24.0 sen), UMW (-23.0 sen), KESM Industries (-17.0 sen) and Aeon Credit (-16.0 sen). MMC Corporation slipped 11.0 sen after it lost a RM86.2 mln lawsuit. Key decliners on the big board were KLK (-26.0 sen), Maybank (-11.0 sen), Public Bank (-4.0 sen), Maxis (-4.0 sen) and Astro (-4.0 sen).

• Asian benchmark indices remain in the negative territory as the Nikkei fell 1.3% to close below the 17,000 psychological level. The Hang Seng Index (-0.2%) registered its third straight session of losses, while the Shanghai Composite closed 0.1% lower, taking cue from the weakness on Wall Street overnight. ASEAN stockmarkets, meanwhile, ended mostly lower.

• U.S. stockmarkets recorded its longest decline since 1980 on anxiety over the Presidential election overshadowed the unemployment rate data in October that held steady at 4.9%. The Dow slipped 0.2%, while the S&P 500 (-0.2%) registered its ninth straight day of losses as the latter fell 1.9% W.o.W. The weakness were further compounded with the renewed selldown in energy stocks after crude oil prices slipped for the sixth straight session on doubts over OPEC’s production cuts.

• Key European benchmark indices - the FTSE (-1.4%), CAC (-0.8%) and DAX (- 0.7%) all extended their losses, taking cue from the weakness in Asian stockmarkets. The stronger British Pound sent the former to suffer its biggest weekly decline in 10 months, while weak corporate earnings from Commerzbank AG (-1.3%) and International Consolidated Airlines Group SA (-3.6%) also dampened investors sentiments.

The Day Ahead

• Despite the generally indifferent market performance last Friday, the general market trend remains dour as market participation continues to thin and market breadth is still on the negative side. Nevertheless, the support on the key heavyweights is helping to cushion the near term downside risk and the key index could be attempting to find a near term parity around the 1,650 level.

• Hence, we think the near term weakness could be dissipating and the buying support on index-linked stocks could help to start the mild recovery process, albeit we think the upsides could be limited due to the weak market following.

• Similarly, we think the scant market interest will leave most lower liner and broader market stocks on the wayside until a more definitive market trend emerges.

Company Briefs

• Boustead Holdings Bhd was awarded a non-binding Letter of Intent from the Malaysian government for the supply of four vessels to the Royal Malaysian Navy. The company said that the vessels are littoral mission ships and further announcements will be made in due course. (The Star Online)

• Tan Sri Kong Hon Kong, who had emerged as a substantial shareholder of The Store Corp Bhd on 1st November 2016, further increased his direct stake to 13.9% from 9.0% previously after purchasing a 4.9% equity stake (or 3.3 mln shares) worth RM10.7 mln in the open market. (The Edge Daily)

• SLP Resources Bhd's 3Q2016 net profit plummeted 33.9% Y.o.Y to RM6.2 mln, from RM9.4 mln in the previous corresponding period – mainly due to lower revenue contribution which was down 4.0% Y.o.Y to RM40.9 mln vs. RM42.6 mln in 3Q2015 and weaker domestic demand for its polymer products. Even so, the group announced a second single-tier interim dividend worth 1.5 sen, payable on 6th January 2016.

• Its cumulative 9M2016 net profit fell 14.3% Y.o.Y to RM17.3 mln, from RM20.3 mln last year, despite a 0.9% Y.o.Y increase in its revenue from RM126.6 mln a year earlier, to RM127.8 mln. The lower net profit was attributed to a forex loss of RM0.3 mln. (The Edge Daily) ? Reach Energy Bhd has adjourned its Extraordinary General Meeting (EGM) for as many as 30 days after a group of shareholders rejected the proposed Qualifying Acquisition (QA) of a 60.0% shareholding in an oilfield in Kazakhstan. The shareholders who voted against the proposal were estimated to have about 16.0% equity stake in Reach Energy.

• The conditional Sales and Purchase Agreement (SPA) for the QA, inked in March, would expire on 10th November 2016. (The Star Online)

• Malaysia Smelting Corp Bhd (MSC) registered a 15.3% drop in its 3Q2016 net profit to RM17.3 mln, from RM20.4 mln in 3Q2015, in-tandem with the 15.9% Y.o.Y decline in revenue and a lower valuation adjustment on its tin inventory. Revenue for the quarter stood at RM323.1 mln, down from RM384.1 mln in 3Q2015.

• MSC’s cumulative 9M2016 net profit, however, grew by more than 12 times to RM32.0 mln against RM2.6 mln last year, mainly due to higher tin prices, better profit margin, as well as foreign currency gains. Meanwhile, MSC’s revenue gained 1.6% Y.o.Y to RM1.13 bln, from RM 1.11 bln previously. (The Edge Daily)

• BHS Industries Bhd is planning to diversify its business to include the construction, development and management of Green Technology Park Pekan, as well as other construction and property development activities.

• The proposed diversification will reduce its dependence on its existing printing business, amid weaker demand.

• The Pahang government had approved the development of the Green Technology Park Pekan, a 375 ac. land in Pekan on 21st October 2016 and the group signed a Memorandum of Agreement (MoA) with China Nuclear Industry Huaxing Construction Co Ltd to jointly-develop and manage Phase 2 and Phase 3 of the technology park and other ancillary facilities on 1st November 2016. (The Edge Daily)

• Tenaga Nasional Bhd has completed the acquisition of a 30.0% equity stake in Indian power company, GMR Energy Ltd worth US$300.0 mln. The acquisition marked Tenaga’s entry into India’s rapidly-expanding power sector, with the compounded annual growth rate of demand for electricity growing 6.0% to 7.0%.

• The group is planning to finance the project via a combination of internal funds and external debt. (The Star Online)  

Source: Mplus Research - 7 Nov 2016