• The FBM KLCI was down by 0.8% to 1658.8 points – as selling pressure persisted in selected heavyweights, amid the lacklustre in regional equities. The lower liners declined – led by the FBM Ace (-1.4%), while shares on the broader market tanked.

• Market breadth was tepid as decliners beat gainers by more than two-fold. Meanwhile, traded volumes lost 19.1% to 1.79 bln shares, as investors look forward to U.S. President-elect Donald Trump’s inauguration for hints of his economic policies.

• Key index decliners were Petronas Gas (- 42.0 sen), BAT (-16.0 sen), Maxis (-14.0 sen) and CIMB (-10.0 sen), while Maybank fell 27.0 sen after Felda announced its plans to disposed of its shareholding in Maybank to raise up to US$63.0 mln. Broader market losers include United Plantations (-38.0 sen), Only World Group Holdings (-28.0 sen) Lafarge Malaysia (- 19.0 sen), Calsberg (-12.0 sen) and LPI Capital (-12.0 sen).

• On the other side of the trade, advancers were Apex Healthcare (+28.0 sen), MagniTech Industries (+18.0 sen), MB World Group (+14.0 sen), Hong Leong Industries (+12.0 sen) and Allianz Malaysia (+10.0 sen). Only three Main Board counters advanced on Monday - Genting (+12.0 sen), Astro (+6.0 sen) and Telekom Malaysia (+2.0 sen).

• Regional stockmarkets weakened on Monday, on renewed worries of Britain’s exit from the European Union ahead of Theresa May’s speech on Tuesday. The Nikkei retraced 1.0% as the stronger Yen weighed on export-related counters. The Shanghai Composite also finished lower by 0.3%, amid a slowdown in China’s economy, while Hang Seng Index fell 1.0% to 22,718.2 points. ASEAN stockmarkets closed broadly in the negative territory.

• U.S. stockmarkets were closed for the Martin Luther King Jr. Day’s celebration public holiday.

• Key benchmark European indices were splashed in red, mainly dragged down by the losses in financials-related and auto stocks. The FTSE (-0.2%) tanked alongside the lower Pound, which hit a three-month low. The CAC shed 0.8%, while the DAX lost 0.6% - led by losses in Deutsche Bank (-3.3%) and Volkswagen (- 2.4%).

The Day Ahead

• The renewed selling pressure on the local bourse came in tandem with weakness across general stockmarkets. The negative sentiment was stemmed by US policy uncertainty ahead of Donald Trump inauguration coupled with concern over potential Britain’s “hard” exit from the European Union.

• As the cautiousness still permeating, we think stocks on Bursa Malaysia could continue to head lower over the near term. Plantation stocks could also see some weakness after the Malaysian Palm Oil Board has decided to increase export tax to 7.5% from February 2017.

• With the downside pressure remaining, the key index could re-test the 1,650 level over the near term. Any recovery, however, will be capped at the 1,680 level. In the meantime, we also think that the lower liners could further volatility after chalking in some substantial gains since early December 2016.

Company Briefs

• HIL Industries Bhd is acquiring two companies that have approved proposed property development projects in Selangor with combined gross development value (GDV) of RM375.2 mln. HIL’s unit AMJ Construction Sdn Bhd was acquiring 100.0% equity interest in Show Piece Sdn Bhd for RM49.0 mln and 99.0% in A&M Concrete Products Sdn Bhd for RM22.0 mln from the family of HIL’s chairman Tan Sri Ng Boon Thong @ Ng Thian Hock.

• At present, the HIL group has two ongoing projects including the development of cluster semi-detached homes and link houses in the Kota Kemuning area, namely Kemuning Greenhills and Kemuning Hijauan 2. (The Star Online)

• Perak Transit Bhd’s subsidiary The Combined Bus Services Sdn Bhd has received a two-year licence from the Land Public Transport Commission (SPAD) for the operations at Terminal Aman Jaya, Ipoh’s only gazetted express bus terminal. SPAD had approved the registration of 99.9%-owned Combined Bus Services as a terminal operator under the authority and granted it the terminal licence starting from 1st January 2017. (The Star Online)

• AirAsia X Bhd has reported that it will focus on China expansion with special one-way all-in-fares from RM199 for its four-times-a-week direct flights from Kuala Lumpur to Wuhan. Wuhan is the capital city of Hubei province in Central China. China will remain as a crucial market for the budget airline, due to the geographical segment's positive growth. (The Edge Daily)

• Felda Global Ventures Holdings (FGV) Bhd has clarified that there has been no discussion on the matter of privatisation of the plantation behemoth. FGV has not received any proposal from the other shareholders on the purported privatisation.

• Separately, Felda is working on disposing part of its stake in Malayan Banking Bhd (Maybank) at RM8.00 to RM8.05 apiece in a move to raise up to US$63.1 mln (RM281.8 mln). Based on Maybank's financial year ended 31st December 2015 annual report, Felda was listed as the fifth largest shareholder with a 1.9% stake in the banking group as at 10th February 2016.

• Felda has been under heavy scrutiny of late due to its intention to buy a 37.0% stake in Indonesia's PT Eagle High Plantations Tbk for US$505.4 mln (RM2.26 bln). The acquisition came at a time when Felda has reported two consecutive fiscal years of losses after the public listing of FGV in June 2012. (The Edge Daily)

• Tex Cycle Technology (M) Bhd had on 28th July 2016, via its solicitors, issued a statement of claim against FACT System (Malaysia) Sdn Bhd. The parties had tried for mediation on 7th December 2016 but did not reach a settlement. The case management was held on 10th January 2017 to update the court on mediation and trial of this matter has been fixed on 7th April 2017 and 14th April 2017.

• Tex Cycle claims that FACT System had breached a contract in respect of the successful implementation of the FACT system pursuant to the former's requirement for the implementation on goods and services tax (GST) within the GST deadline and in accordance with its service requirements.

• Tex Cycle is claiming for damages of RM1.1 mln, refund of the contract sum, interest and any other cost which the court deems fit and proper to grant. (The Edge Daily)

• Mudajaya Group Bhd’s decision in an adjudication process will have a negative impact of RM98.4 mln on its earnings for the year ended 31st December 2016, as the amount has been recognised as revenue in prior years.

• The group's wholly-owned subsidiary, Mudajaya Corporation Bhd (MCB), had commenced adjudication proceedings against CMC Machipex Sdn Bhd in October 2015 for a principal sum of RM175.3 mln together with late payment interest and cost.

• MCB sought payment claim for work done and due to non-payment by CMC. CMC admitted some of the claims and in turn made a counter claim in the form of a set-off in the amount of RM61.8 mln. (The Edge Daily)  

Source: Mplus Research - 17 Jan 2017