• After chalking in 2.1% W.o.W gains last week, profit taking activities in telco heavyweights sent the FBM KLCI 0.5% lower yesterday after the key index traded largely in the negative territory in yesterday’s trading session. The lower liners, however, ended mostly higher as the FBM Small Cap and FBM ACE added 0.3% and 0.7% respectively, while the broader market ended mixed.

• Market breadth turned negative as losers outnumbered gainers on a ratio of 422- to-375 stocks. Traded volumes fell 8.3% to 1.80 bln shares as profit taking activities took precedent.

• Leading the FBM KLCI decliners list were telco heavyweights like Maxis (-19.0 sen) and Axiata (-18.0 sen), followed by RHB Bank (-12.0 sen), Sime Darby (-10.0 sen) and Petronas Gas (-10.0 sen). Consumer products stocks like Nestle (-76.0 sen), Dutch Lady (-30.0 sen) and Ajinomoto (- 24.0 sen) topped the broader market decliners list while United Plantations and Lafarge declined 60.0 sen and 25.0 sen respectively.

• In contrast, LPI Capital (+28.0 sen), Malaysia Smelting Corporation (+22.0 sen), SHELL (+18.0 sen) and A&M (+16.0 sen) were amongst the biggest gainers on the broader market. GFM Services gained 8.5 sen on its debut on Bursa Malaysia. Leading the key index gainers were BAT (+12.0 sen), AmBank (+5.0 sen), IJM (+3.0 sen), CIMB (+2.0 sen) and Genting Malaysia (+2.0 sen).

• Japanese stockmarkets were closed for its foreign exchange reserves falling for the sixth straight month, the Shanghai Composite (+0.5%) recouped all its previous session losses, while the Hang Seng Index (+0.2%) extended its gains for the third straight session, taking cue from the positive developments on Wall Street. ASEAN stockmarkets, meanwhile, ended mixed. ? U.S. stockmarkets started off the week on a dour note as the Dow fell 0.4% overnight on weakness in crude oil prices amid an uptick in US drilling activities. On the broader market, the S&P 500 slipped 0.4%, also dragged down by the energy sector (-1.5%), but the Nasdaq added 0.2%.

• Key European benchmark indices closed mostly lower as the CAC and DAX fell 0.5% and 0.3% respectively after the latter saw the Industrial Production data rose less than expected in November 2016. The FTSE, however, rose 0.4% to register winning streak to its tenth consecutive day after the British Pound slid against the Greenback that sent exporters higher.

The Day Ahead

• Yesterday’s consolidation came earlierthan-anticipated as we expected the market to retest the 1,680 level first before staging a pullback. Nevertheless, we deem the consolidation as healthy as it would allow the market to take a breather after the steep gains over the past few days. At the same time, it would also allow the gains to be digested.

• Looking ahead, we think the profit taking activities could extend further which could bring the key index back to the 1,660 level before mounting another uptick. The weakness in many global indices overnight is also likely to prompt the continuing profit taking activities among the index-linked stocks.

• Meanwhile, we think there is still a hive of activities among the lower liners and broader market shares as retail players continue to shuffle their short-term portfolio and this will help to shore up market breadth over the near term - an important barometer of investors’ interest in equities.

Company Briefs

• Hovid Bhd has halted all manufacturing activities at its Perak facilities following the revocation of its manufacturing licenses by the Health Ministry – due to a compliance issue.

• To recap, the group announced a recall of its Ternolol 50mg film-coated tablets manufactured in April 2016 due to a labelling mix-up. (The Star Online)

• Sumatec Resources Bhd's creditors have aborted three collateralised loans extended to the company and are demanding that the company repay RM72.3 mln within 14 days from the date the termination and demand notice that was issued on 5th January 2017.

• The debt is being called up by Malaysian Trustees Bhd (MTB), trustees to the three lenders — Kerisma Bhd, Capone Bhd and Prima Uno Bhd.

• Sumatec's solicitors is in the opinion that the company is not obliged to pay the sum owing under the facilities, given that a provision under the settlement agreement (SA) inked with the creditors in 2013 stated that the appropriate remedy for the bondholders is to instruct MTB to pursue RM17.0 mln from three entities for the breach of the SA, namely Hoe Leong Corp Ltd, Setinggi Holdings Ltd and/or Hoe Leong's nominee.

• The solicitors added that the bondholders should pursue Semua International Sdn Bhd for any remaining dividend payment stipulated in the 2013 SA with Semua International Sdn Bhd. (The Edge Daily

• SapuraKencana Petroleum Bhd has secured contracts with an aggregate value of about RM1.34 bln (US$300.0 mln) for its construction and drilling business segments. ? Under its engineering and construction segment, SapuraKencana Subsea Services Sdn Bhd and SapuraKencana GeoSciences Sdn Bhd have been each awarded a contract by Petronas Carigali Sdn Bhd for the provision of underwater services, while SapuraKencana GeoSciences' is for the provision of soil investigation services.

• SapuraKencana TL Offshore Sdn Bhd has clinched a contract from Hyundai Heavy Industries for the provision of offshore installation work of a BNCPP-B jacket, foundation piles and bridge structure between BNCPP-B and BNG-B.

• Meanwhile, SapuraKencana Drilling Sdn Bhd has accepted a contract by Brunei Shell Petroleum Sdn Bhd for the provision of its Tender Assist Drilling Rig SKD Alliance. It is slated to commence in April 2018 for a period of five years with an option to extend for an additional five years. (The Star Online)

• Eurospan Holdings Bhd posted a 2QFY17 net loss of RM895,000, from a net profit of RM1.1 mln in the corresponding period – led by a lower revenue, which fell 6.0% Y.o.Y to RM13.2 mln and fair value loss on derivatives of RM1.1 mln.

• Similarly, the group also recorded a cumulative 1HFY17 net loss of RM316,000 vs. a net profit of RM731,000 in 1HFY16, while revenue dropped 11.1% Y.o.Y to RM26.3 mln, from RM29.6 mln last year. (The Edge Daily)

• Jaycorp Bhd's 60.0%-owned unit, Jaycorp Engineering & Construction Sdn Bhd (JECSB) has been awarded a two-year contract for the construction of a sevenstorey shop-cum-office at Likas Bay in Kota Kinabalu, Sabah, worth RM16.8 mln.

• The group said that the Spinnaker SOVO Suite project will not have a material impact on its FY17 earnings. (The Edge Daily)

• Sime Darby Bhd is expected to benefit from the proposed third port development in Selangor, in Carey Island. The 20-year project is seen as the next massive port industrial city project in the Klang Valley, with infrastructure investments of more than RM200.0 bln and will include the development of an integrated port and related infrastructure, industrial parks and free trade zones, commercial and residential buildings. (The Star Online)

• Dataprep Holdings Bhd was slapped with an Unusual Market Activity (UMA) query from Bursa after the group's share price surged some 63.0% since its closing of 13.5 sen on 30th December, 2016. ? The company, however, said that it was not aware of any corporate development, rumour, report or any explanation which could account for the recent unusual trading activity of its shares. (The Edge Daily)  

Source: Mplus Research - 10 Jan 2017