• The FBM KLCI (-0.1%) extended its losses yesterday, dragged down by the weakness in selective banking heavyweights after enduring a choppy trading session. The lower liner, however, ended mostly higher as the FBM Fledgling and FBM ACE indices added 0.4% and 0.1% respectively, while the Industrial (+0.04%) and Industrial Products (+0.3%) sectors outperformed the negative broader market.

• Market breadth stayed negative as losers pipped gainers on a ratio of 397-to-332 stocks. Traded volumes fell 24.4% to 1.39 bln shares on uncertainties over the timing of U.S. interest rate hikes.

• Banking heavyweights like Hong Leong Financial Group (-24.0 sen), Public Bank (-10.0 sen) and CIMB (-9.0 sen) fell, despite the latter reported a strong set of quarterly earnings, while other key losers on the big board were BAT (-44.0 sen) and Axiata (-9.0 sen). Notable losers of the day were Far East Holdings (-28.0 sen), TAHPS Group (-28.0 sen) and Tasek Corporation (-18.0 sen). Ta Ann slipped 7.0 sen after announcing a weak set of quarterly earnings.

• Leading the broader market gainers higher was United Plantations (+RM1.12), followed by KESM Industries (+50.0 sen), Nestle (+42.0 sen), Amway (+26.0 sen) and Heineken (+18.0 sen). Among the biggest gainers on the FBM KLCI were AmBank (+26.0 sen), Petronas Chemicals (+10.0 sen), Maybank (+9.0 sen), Petronas Dagangan (+4.0 sen) and Sime Darby (+3.0 sen).

• The Nikkei closed relatively unchanged yesterday after the Japanese Yen weakened against the U.S. Dollar. Late buying support in the final trading hour sent the Shanghai Composite 0.1% higher, but the Hang Seng Index (-0.1%) extended its losses. ASEAN stockmarkets, meanwhile, ended mixed.

• Wall Street advanced overnight as the Dow gained 0.2%, lifted by strong economic data from both unemployment claims and inflation rate – implying of a high likelihood of interest rate hike in December. On the broader market, the S&P 500 gained 0.5%, anchored by gains in the financial sector (+1.3%), while the Nasdaq climbed 0.7%.

• Earlier, key European indices - the FTSE (+0.7%), CAC (+0.6%) and DAX (+0.2%) all rose to a 3-week high after the European Central Bank indicated further stimulus measures to spur the region growth. Meanwhile, the Eurozone’s October inflation rate rose 0.5% Y.o.Y – in line with economists’ expectations.

The Day Ahead

• We see further near term weakness on Bursa Malaysia as the Federal Reserve looks set to raise interest rates in the foreseeable future- as early as next month that could see a withdrawal of funds from emerging markets, including Malaysian stocks. Already, domestic market sentiments are reeling from the U.S. election results that have seen the Ringgit taking a battering and most stocks have yet to find a footing since.

• The continuing dour market conditions is likely to see the key index veering back to the 1,620 support level over the near term as most investors will retain a cautious stance with few investors willing to take fresh positions amid the prognosis of tighter monetary environment ahead.

• Similar conditions are also expected to prevail among the lower liners and broader market shares as most retail investors will also take a cautious stance.

Company Briefs

• YTL Corp Bhd's 1QFY17 net profit contracted 25.0% Y.o.Y to RM150.3 mln, from RM202.62 mln in 1QFY16 - dragged down by weaker contribution from most of its business segments, except the construction and hotels divisions. Meanwhile, quarterly revenue dropped 21.0% Y.o.Y to RM3.49 bln, from RM4.45 bln.

• Gas Malaysia Bhd saw its 3Q2016 net profit jump 28.1% Y.o.Y to RM43.2 mln compared to RM33.7 mln a year ago - led by higher sales, while revenue gained 19.2% Y.o.Y to RM1.07 bln, from RM895.5 mln last year.

• Meanwhile, the aggregate 9M2016 net profit climbed 18.4% Y.o.Y to RM113.6 mln vs. RM95.9 mln in 9M2015, mainly due to lower finance costs and improved revenue, which was 22.4% Y.o.Y higher at RM3.0 bln, in comparison to RM2.45 bln in the previous corresponding period.

• Tambun Indah Land Bhd's 3Q2016 net profit rose by 6.1% Y.o.Y to RM25.2 mln, from RM23.8 mln in the previous corresponding year, attributed to higher other income and lower administrative expenses. Revenue however slipped marginally by 0.9% Y.o.Y to RM85.4 mln, from RM86.2 mln in 3Q2015. The group has also declared a single-tier interim dividend of three sen per share, payable on 16th February, 2017.

• Meanwhile, cumulative 9M2016 net profit grew 9.4% Y.o.Y to RM77.4 mln, from RM70.8 mln in 9M2015, on the back of improved margins and a slight increase in revenue from RM276.6 mln last year to RM279.1 mln.

• Ann Joo Resources Bhd made a turnaround after recording a 3Q2016 net profit of RM22.9 mln vs. a net loss of RM82.3 mln previously. This marks its third profitable quarter in a row - mainly due to recovery in the selling price of various steel products and better cost structure. Revenue, meanwhile, declined a marginal 0.5% Y.o.Y to RM323.7 mln from RM325.5 mln in 3Q2015.

• Malaysian Resources Corp Bhd (MRCB) is disposing a one-acre plot of land to Mass Rapid Transit Corp Sdn Bhd for RM180.0 mln due to concerns over its proximity to the construction of the MRT Line 2. MRCB was in the early stage of developing a block of serviced apartments on the land before it received a notice that the alignment of the MRT Line 2 will cross the site directly below the land.

• The land which is below the proposed MRT Line 2 is expected to connect the Conlay and Tun Razak Exchange stations.

• The plot's net book value stood at RM65.7 mln at 31st December 2015. The sale is expected to reap an estimated after-tax gain of RM38.1 mln to the group, which should improve its FY16 earnings.

• Guocoland (Malaysia) Bhd's 1QFY17 net profit plunged more than 98.0% Y.o.Y to RM265,000 against RM21.3 mln a year earlier as a fair value gain of RM16.7 mln was recognized in the previous year, while revenue also tanked 24.4% Y.o.Y to RM53.5 mln, from RM70.8 mln in the previous corresponding quarter.

• Eastern & Oriental Bhd (E&O), which has proposed to launch an estimated RM205.0 mln worth of properties in the next three months, saw the weaker Ringgit weighed on its 2QFY17 earnings. Net profit plunged 84.3% Y.o.Y to RM3.8 mln, from RM24.5 mln a year earlier, while revenue was lower by 7.5% Y.o.Y to RM79.3 mln, from RM85.7 mln last year.

• Cumulative 1HFY17 net profit also slumped 85.2% Y.o.Y to RM7.1 mln from RM47.7 mln in 1HFY16 - contributed by a weaker share of result from its associate and an unrealised foreign exchange loss of RM15.2 mln, although revenue advanced 56.9% Y.o.Y to RM242.6 mln, from RM154.6 mln.

• Moving forward, the group plans to launch the Seri Tanjung Pinang project in Penang which includes a 29-unit Amaris Terraces By-The-Sea and the 32- unit Ariza Seafront terraced homes with standard unit built-ups of 5,262 sq. ft . and 3,800 sq ft, respectively.  

Source: Mplus Research - 18 Nov 2016