• The FBM KLCI (-0.1) ended marginally lower last Friday after it managed to recover most of its intraday losses as the key index halted its winning streak of three consecutive days amid profit taking activities. Nevertheless, the key index gained 0.8% W.o.W ahead of the holiday shortened trading week. The lower liners, however, closed mostly higher as the FBM Small Cap and FBM Fledgling climbed 0.5% and 0.1% respectively, while the broader market ended mixed.

• Market breadth stayed positive as gainers outpaced losers on a ratio of 413-to-306 stocks. Traded volumes climbed 13.3% to 1.24 bln shares on rotational play amongst the lower liners.

• Amongst the biggest decliners on the FBM KLCI were KLK (-18.0 sen), BAT (- 18.0 sen), PPB Group (-12.0 sen), Telekom Malaysia (-8.0 sen) and Axiata (- 8.0 sen). Notable losers on the broader market include consumer products stocks like Heineken (-34.0 sen), Frasers & Neave (-26.0 sen) and Carlsberg (-20.0 sen). United Plantations declined 52.0 sen, while Tasek Corporation (-20.0 sen) trended lower for the third straight session.

• On the other side of the trade, notable gainers on the broader market include Allianz (+27.0 sen), Dutch Lady (+20.0 sen), Hume Industries (+19.0 sen), Lafarge (+17.0 sen) and Kimlun (+13.0 sen). On the big board, Petronas Gas (+36.0 sen), Genting Malaysia (+4.0 sen), Maxis (+4.0 sen), Hap Seng (+3.0 sen) and SapuraKencana Petroleum (+3.0 sen) were amongst the biggest advancers.

• Japanese stockmarkets recorded their fifth straight day of winning streak as the Nikkei (+0.8%) rose to one-year high after defensive stocks rose. The Hang Seng Index slipped 1.4%, dragged down by the weakness in property stocks, while the Shanghai Composite Index tanked 2.5% due to crackdown on insurance firms’ short-term shares purchase. ASEAN stockmarkets, meanwhile, ended mostly higher.

• U.S. stockmarkets ended mixed overnight as the Dow (+0.2%) recorded its sixth consecutive day of gains. On the broader market, however, the S&P 500 (-0.1%) retreated from its all-time high level as the rally in financial sector (-0.9%) took a backseat which offsets the gains in the energy sector (+0.7%) after non-OPEC members had also agreed to scale down production. The Nasdaq fell 0.6%.

• Earlier, European benchmark indices – the FTSE (-0.9%), CAC (-0.1%) and DAX (- 0.1%) all retreated from their 11-month high on concern over political instability in Italy. Notable decliners were airline stocks like Deutsche Lufthansa AG (- 1.9%), Air France (-1.8%) and International Consolidated Airlines Group (-2.0%) after oil prices rallied.

The Day Ahead

• Despite last Friday’s pause, we still think the recovery and window dressing activities are ongoing and are likely to resume over the near term as investors take advantage of the calmer market conditions to bargain hunt on selected stocks ahead of the year-end book closing. However, there still remains wariness ahead of the upcoming FOMC meeting that is likely to see an interest rate hike. Therefore, we expect the upsides to be capped amid the continuing cautiousness with investors opting for quick profit taking strategies.

• On the upside, the 1,650 level remains the main hurdle, while the 1,620 level will continue to serve as the main support level.

• We also think that the renewed following on selected lower liners and broader market stocks could sustain over the near term as retail players use the calmer market conditions to undertake some short-term trading activities.

Company Briefs

• Perisai Petroleum Teknologi Bhd is in dispute with its shareholder, Emas Offshore Ltd (EOL) over the disposal of a 51.0% stake in SJR Marine (L) Ltd to EOL.

• In accordance to the Share Sale Agreement (SSA) signed between both parties previously, Perisai said it has the right to dispose of its stake in SJR Marine to EOL for US$43.0 mln. However, the latter claimed that following the occurrence of "certain events", it has the right to terminate its agreement with Perisai.

• Subsequently, Perisai has announced that it is seeking legal advice on the matter and plans to defend and deny all allegations that support the right of EOL to terminate the SSA signed earlier.

• Ezra Holdings Ltd – the parent company of EOL currently holds about 22.5% shareholding in Perisai via EOL and another unit, while EOL is also Perisai's joint-venture partner in SJR Marine, with a 49.0% stake (The Star Online)

• Petronas Gas Bhd has announced the appointment of Datuk Anuar Taib as the group’s chairman from 1st January 2017, following the resignation of Tan Sri Shamsul Azhar Abbas.

• Currently, Datuk Anuar is the Chief Executive Officer (CEO) and Executive Bhd’s (Petronas) upstream and liquid natural gas (LNG) segment. (The Star Online)

• Malaysia Airports Holdings Bhd (MAHB) has posted a 7.3% Y.o.Y growth in passenger traffic to 9.8 mln, throughout its entire airport system in Malaysia and Turkey, from 9.1 mln in November 2015. The higher traffic was mainly attributed to improved performance by its Malaysian operations.

• International passengers reported by the group’s Malaysian airports registered a 12.1% Y.o.Y growth to 3.6 mln passengers, while domestic passengers rose by 6.0% Y.o.Y to 3.9 mln passengers.

• Meanwhile, KLIA Main Terminal’s passenger movements in November increased 32.8% Y.o.Y to 2.2 mln, although slightly offset by the fall in klia2’s passenger numbers – which fell 3.2% Y.o.Y to 2.2 mln. (The Edge Daily)

• StemLife Bhd’s unconditional take-over offer by Cordlife Group Ltd at 57.5 sen apiece has been accepted as “fair and reasonable” by the former’s independent advisor, Mercury Securities Sdn Bhd.

• Consequently, Mercury Securities and StemLife’s non-interested directors have recommended that shareholders accept the offer from Cordlife, which already holds 89.9% equity stake in Stemlife. (The Edge Daily)

• Kein Hing International Bhd’s 2QFY17 net profit plunged 40.3% Y.o.Y to RM1.8 mln, against RM3.1 mln a year ago – due to weaker sales, as well as the initial set up costs of a new factory in Vietnam. Revenue was also lower by 3.9% Y.o.Y to RM57.0 mln, from RM59.3 mln in the previous corresponding year.

• Cumulative 1HFY17 net profit lost 32.7% Y.o.Y to RM3.5 mln vs. RM5.2 mln in 1HFY16, despite revenue increasing marginally by 1.9% Y.o.Y to RM111.4 mln, in comparison to RM109.3 mln last year.

• The lower earnings were mainly due to the initial costs incurred by the new factory in Vietnam, as well as the higher forex gain reported in 1HFY16. (The Edge Daily)

• Tenaga Nasional Bhd (TNB) is planning to slash its dividend payout ratio from 40%-60% to 30%-50%, with effect from financial year ending 31st August, 2017.

• EcoWorld Development Bhd has approved the provision of financial assistance by the Employers Provident Fund (EPF) to the group’s subsidiary, Paragon Pinnacle Sdn Bhd. The RM367.0 mln loan given by EPF will be used to fund the development of the residential and commercial township as well as a business park. EcoWorld is planning to repay the full amount of the loan given in eight years after the funds have been utilised.

• Consequently, EPF will be taking up a 40.0% shareholding in Paragon - the developer of the Eco Grandeur and Eco Business Park V projects in Bandar Puncak Alam.

• EcoWorld remains optimistic of its aim to achieve RM4.0 bln worth of Malaysian sales in 2017. (The Edge Daily)  

Source: Mplus Research - 13 Dec 2016