• Despite the positive close on most Asian stockmarkets, the FBM KLCI (-0.1%) capped earlier gains and finished marginally lower ahead of U.S. Presidentelect Donald Trump’s inauguration. The lower liners retreated – led by the FBM Ace (-0.5%) alongside an equally depressed broader market. The consumer products (+0.2%) and the plantations (+0.02%) sectors, however, bucked the negative sentiment to close in the green.

• Market breadth remains stale as decliners outrun gainers by a ratio of 428 -to-331 stocks. Traded volumes plunged 15.5% to 1.58 bln as investors retreated from the stockmarkets ahead of the weekend.

• Key-index decliners were BAT (-68.0 sen), Hap Seng (-15.0 sen) and MISC (-7.0 sen). Hong Leong-affiliated companies like Hong Leong Financial Group (-20.0 sen) and Hong Leong Bank (-16.0 sen) also retreated on Friday. Broader market losers were UMWOG (-15.5 sen), Malaysia Airports (-10.0 sen), Ajinomoto (-10.0 sen), Allianz Malaysia (-10.0 sen) and Lafarge Malaysia (-10.0 sen).

• Significant gainers were UMW Holdings (+46.0 sen), Warisan TC Holdings (+25.0 sen), Nestle (+22.0 sen), Negeri Sembilan Oil Palms (+14.0 sen) and United U-li Corporation (+14.0 sen). Meanwhile, advancers on the Main Board – Telekom Malaysia (+3.0 sen), Westports Holdings (+3.0 sen), Axiata (+2.0 sen), CIMB (+2.0 sen) and Kuala Lumpur Kepong (+2.0 sen) propped the key index up.

• Key regional benchmark indices finished mostly in green, following upbeat economic data from China. The Shanghai Composite Index (+0.7%) rose on Friday amid thin trading ahead of Donald Trump’s inauguration, while the Nikkei rose 0.3% – fueled by gains in the energy (+1.2%) and telecommunication services (+1.0%) sectors. The Hang Seng index, however, lost 0.7% to 22885.9 points. ASEAN stockmarkets finished mixed.

• Wall Street traded higher on Friday amid expectations of a protectionist stance under Donald Trump’s administration. The Dow (+0.5%) snapped five-straight day of losses to close in green, while the S&P 500 gained 0.3% - led by telecommunications and materialsrelated counters. The Nasdaq also rose 0.3% to close above the 5,555.0 psychological level.

• Earlier, European equities finished largely unchanged, as investors wait for greater clarity on Donald Trump’s upcoming economic policies. Retailers like Associated British Foods (-2.4%), Tesco (- 2.1%) and J Sainsbury (-2.0%) weighed on the FTSE (-0.1%), after British retail sales fell by 1.9% in December. The CAC rose 0.2%, while the DAX was up 0.3%, buoyed by gains in the banking sector.

The Day Ahead

• We think the indifferent market conditions will persist over the near term as investors are likely to close out their short-term positions ahead of the Lunar New Year. Therefore, we expect profit taking activities to increase, while bargain hunting activities might wane as the buying interest thins ahead of the upcoming festivities.

• Despite the increased cautiousness and profit taking, we think the market to remain well supported as investors await for the economic stimuluses promised by President Trump and this will continue to keep the global markets on a high that will also permeate to the local stockmarket. Hence, the downside risk is limited to the 1,650 level for the near term, in our view. Concurrently, the near term upsides could be capped at around the 1,680 level.

• The upcoming week might see market depth dwindling among the lower liners and broader market shares as retail players retreat to the sidelines ahead of the Lunar New Year, but the phenomenon should be temporary as the general market sentiments is still positive for now.

Company Briefs

• Iris Corp Bhd’s Deputy Managing Director Datuk Hamdan Mohd Hassan was arrested by the Malaysian Anti-Corruption Commission (MACC) over an e-passport project in Republic of Guinea. Hamdan had been alleged to have abused his power and to have been involved in corrupt practices in the e-passport project for the government of Guinea.

• To recap, Iris had signed a 15-year contract with the government of Guinea for the implementation of the e-passport facility in that country. Pending the finalisation of the investigations, Hamdan’s executive powers are suspended and his present duties and responsibilities as acting Chief Executive Officer of Iris will be taken over by the current Chief Operating Officer, Choong Choo Hock. (The Star Online)

• Nakamichi Corp Bhd will team up with Aktau Transit LLP and Aktau’s parent company, Caspian Oil Project LLP (COP) to undertake an oil and gas (O&G) project in Kazakhstan.

• The Practice Note 17 company has signed an investment agreement with Aktau Transit and COP on 19th January 2017 to jointly monitor and oversee the exploration, development and production activities of Aktau Transit’s two oilfields as part of its plan to regularise its financial position.

• Under the deal, Nakamichi will have to fork out US$60.0 mln (RM266.8 mln) to Aktau Transit for upcoming and historical capital expenditures at the oilfields as well as US$86.0 mln (RM382.4 mln) in refundable performance deposit, to be offset against a performance bonus payable by Nakamichi to Aktau Transit of US$3.40 per barrel of oil produced.

• Nakamichi will be entitled to 90.0% of the distributed profit. NOGSB, meanwhile, will be paid an agent fee of 15.0% of the total amount of the capital and operational expenditures paid by NOGSB on behalf of Aktau Transit or paid by Aktau Transit.

• To fund the project, Nakamichi is proposing a financial regularisation scheme that includes a special issue of shares and a rights issue with warrants that will raise gross proceeds of RM725.6 mln. Nakamichi will also reduce its existing paid-up share capital by cancelling 95 sen from its shares’ existing par value of RM1.00. This will give rise to a credit of RM52.6 mln which will be used to reduce its accumulated losses. The board also proposes to reduce the company’s share premium account, which stood at RM38.5 mln as at 30th September 2016.

• Following the above exercise, Nakamichi proposes to issue up to 24.9 mln special issue shares at 10 sen each to Barisan Bonanza Sdn Bhd, whose shareholders are Melewar Industrial Group Bhd and MAA Group Bhd Executive Chairman Tunku Yaacob Khyra and his brother, Tunku Yahaya @ Yahya Tunku Abdullah.

• After that exercise, Nakamichi will undertake a renounceable rights issue of 7.23 bln rights shares together with 3.62 bln warrants at an issue price of 10 sen per rights share based on 90 rights shares for an existing Nakamichi share held together with a free warrant for every two rights shares subscribed at an entitlement date to be decided later. (The Star Online)

• Uzma Bhd has embarked on a joint venture with China-based Aerosun Corp, its subsidiary Aerosun Hong Kong Co (Aerosun HK) Ltd as well as one individual by the name of Gameladha Nasiriffin Arifin for the provision of engineering, procurement, construction, installation and commission of nonmetallic pipes in Malaysia. A joint venture company was created under the name of Aerosun Uzma Malaysia Sdn Bhd.

• Uzma will be subscribing to a total of 240,000 shares, which represents 48.0% of the fully paid-up capital in Aerosun Uzma, while the remaining 49.0% will be subscribed by Aerosun HK and 3.0% by Gameladha Nasiriffin. (The Edge Daily)

• The Store Corp Bhd’s shares will be suspended in February 2017, paving way for a privatisation exercise after the Group Managing Director, Tan Sri Tang Yeam Soon’s family vehicle TYS Consolidated Sdn Bhd (TYS) managed to procure more than 90.0% of the issued and paid-up share capital acceptance to its takeover offer.

• TYS controls 90.3% stake or 61.9 mln shares in the listed entity as of 20th January 2017. In view that TYS does not intend to maintain The Store’s listing status on the Main Market of Bursa Malaysia, the bourse will suspend trading of shares in the counter upon expiry of five market days from 31st January 2017. (The Edge Daily)

• Dancomech Holdings Bhd has proposed the subdivision of every one of its 40 sen shares into two 20 sen shares, to be followed with an issue of free warrants. The share split is aimed at boosting the trading liquidity of its shares, which would also result in a downward adjustment to the market price that might appeal to investors.

• Meanwhile, the warrants is to allow shareholders to participate in convertible securities, strengthen the group’s capital base and fund its working capital requirements without incurring cost compared with bank borrowings and improves its gearing.

• The company has fixed the warrant exercise price at 30 sen, representing a discount of 41.8 sen or 58.2% to the theoretical ex-price after the proposed share split. The full exercise of the warrants would raise RM44.7 mln. (The Edge Daily)  

Source: Mplus Research - 23 Jan 2017