• The FBM KLCI (-0.9%) extended its losses after resuming trading following the Chinese New Year break as the key index traded in the negative territory throughout the trading session. The lower liners, however, trended mostly higher as the FBM Small Cap and FBM ACE gained 0.2% and 0.04% respectively, while the Technology sector (+0.3%) outperformed the negative broader market.

• Market breadth turned negative as decliners edged advancers by a ratio of 367-to-354 stocks. Traded volumes rose 10.0% with 1.16 bln shares exchanging hands.

• BAT (-RM1.14) topped the key index decliners list followed by Sime Darby (- 32.0 sen), Tenaga (-20.0 sen), Genting (- 20.0 sen) and MISC (-16.0 sen). Among the biggest decliners on the broader market include Panasonic (-58.0 sen), Genting Plantations (-18.0 sen), Perusahaan Sadur Timah (-18.0 sen), Alliance Financial Group (-13.0 sen) and SAM Engineering (-10.0 sen).

• On the flipside, United Plantations (+66.0 sen), MBM Resources (+37.0 sen), Batu Kawan (+22.0 sen), MNRB (+21.0 sen) and Frasers & Neave (+18.0 sen) topped the broader market gainers lists. On the FBM KLCI, PPB Group (+20.0 sen), Maxis (+19.0 sen), Petronas Dagangan (+16.0 sen), KLCC (+15.0 sen) and KLK (+6.0 sen) were amongst the biggest advancers.

• Japanese stockmarkets rebounded as the Nikkei rose 0.6% after the recent Japanese Yen appreciation against the U.S. Dollars slowed, coupled with stronger performance of steel companies. The Hang Seng Index managed to recover most of its intraday losses before closing 0.2% lower, tracking the weakness across global stockmarkets in recent days, while the Shanghai Composite will only resume trading on Friday. ASEAN shares, meanwhile, closed mixed.

• U.S. stockmarkets rebounded overnight as the Dow (+0.1%) halted a streak of four consecutive sessions of losses after the U.S. Federal Reserve left its key benchmark interest rate unchanged, coupled with stronger-than-expected manufacturing data. On the broader market, the S&P 500 added 0.03%, lifted by gains in technology and healthcare sectors, while the Nasdaq closed 0.5% higher.

• Earlier, European benchmark indices – the FTSE (+0.1%), CAC (+1.0%), and DAX (+1.1%) jumped as the U.S. Dollar strengthened from its two-month low against the Euro ahead of the Federal Reserve monetary policy meeting. Adding to the positive sentiment was the Eurozone’s Manufacturing PMI for January 2017 rising to its highest level since April 2011 at 55.2.

The Day Ahead

• After Monday’s hefty losses, we think the FBM KLCI will attempt to find stability as more market players return from their Chinese New Year break. At the same time, the minor recovery in overseas bourses could also aid the key index’s near term recovery as the general global market sentiments remain mostly on the positive side.

• With the FBM KLCI holding at around the 1,670 level, the market could perk up to retest the 1,680 level over the near term. The 1,670 level is the immediate support, while further down there is firm support at the 1,650 level.

• While the index heavyweights faltered over the past two sessions, most lower liners and broader market shares have remained firm and we expect this trend to continue as we expect market breadth and depth to improve as more retail players return MACRO BREIF

• Malaysia's Producer Price Index (PPI) for December 2016 surged 6.5% Y.o.Y, mainly due to a higher cost of production in agriculture, forestry and fishing index that recorded a 34.5% Y.o.Y jump, while mining index increased 11.6% Y.o.Y.

• The PPI rose 3.6% M.o.M in December 2016, anchored by a 19.3% M.o.M growth in mining index. (The Star Online)

Company Briefs

• Hua Yang Bhd is expecting its northern region’s property projects to contribute up to 30.0% to its FY18 revenue. The group also plans to generate up to RM100.0 mln in sales revenue for FY17 from its projects in the northern region, including two developments in Seri Iskandar, Perak.

• Further, its maiden project in Penang - the Meritus Residensi in Prai, is projected to generate sales revenue of RM40.0 mln to RM50.0 mln in FY17, and up to RM100.0 mln in FY18.

• The Meritus Residensi project, with a gross development value (GDV) of RM220.0 mln, saw a 34.0% take-up rate since its soft launching in November last year and the take-up is expected to rise to 50.0% by the end of March. (The Edge Daily)

• EKA Noodles Bhd has announced that the requisition for the extraordinary general meeting (EGM) on 6th February 2017 has been withdrawn, although the reasons for the withdrawal was undisclosed.

• The group had received a letter today from shareholders Law Chong Kai, Fong Yit Meng and Vibrant Class Sdn Bhd notifying the company of the withdrawal of the EGM notice and its related resolutions.

• To recap, the group had, on the 9th January 2017, agreed to the EGM but had engaged legal advice on the notice, which it claimed was "invalid and "irregular". (The Edge Daily)

• Petronas Dagangan Bhd’s plan to sell off its equity interest in Vietnam-based Thang Long LPG Company Ltd has hit a roadblock after Totalgaz Vietnam LLC decided to terminate the sales and purchase agreement on 31st January 2017. The reason for the termination was not disclosed, although it is not expected to have any material effect on Petronas Dagangan’s financial position.

• Despite failing to sell off Thang Long, Petronas managed to sell another unit, Petronas (Vietnam) Co Ltd, to Totalgaz Vietnam. (The Star Online)

• Esthetics International Group Bhd (EIG) has signed a distribution agreement with Frostbland Pty Ltd for the right to sell and distribute Clinelle skin care products in Australia, New Zealand and the South Pacific Islands.

• The five-year contract, which will start from 1st March 2017 and will be valid until 28th February, 2022 was signed between EIG Pharma Asia Sdn Bhd (EIGP) and Frostbland with the option to renew for another five years until 28th February 2027.

• Frostbland is one of the leading players in marketing and distributing skincare and beauty products through the Fast Moving Consumer Goods (FMCG) channel throughout Australia, New Zealand and the South Pacific Islands. (The Edge Daily)

• CME Group Bhd’s associate, CME Properties (Australia) Pty Ltd (CMEPA) has agreed to pay more than AUD3.7 mln (RM12.4 mln) in settlement to Prime Capital Securities Pty Ltd by 31st July this year, after both parties signed a deed of forbearance.

• The deed is not expected to have a significant impact on the company as the settlement amount has been provided and accounted for in the financial year ended 31st December 2015 and 2016.

• To recap, Prime Capital issued a winding-up application to CMEPA in August 2016 for failing to repay A$2.5 mln mortgage loan meant for a mixeduse development in Mandurah, West Australia.

• CMEPA subsequently received A$2.11 mln in settlement from its partner for the development project, Raurk No 11 Pty Ltd, for spending the loan without CMEPA’s approval. (The Edge Daily)

• DRB-Hicom Bhd is planning to dispose its loss-making emergency roadside assistance business, Multi Automotive Service and Assist Sdn Bhd (MASA) for RM1.00 to Vikneswaran Suppiah - the operation manager of MASA as part of the internal restructuring plans of its auto units.

• The sum was arrived based on a willing buyer-willing seller basis after considering the unaudited shareholders’ deficit of RM180,000 as at 31st December 2016 and net loss of RM660,000 in MASA for its 9M2016.
   
• The sale is also in-line with DRB-Hicom’s plan to streamline its operations by divesting insignificant businesses and to focus on its core businesses.

• Meanwhile, as part of its internal reorganisation, DRB-Hicom has purchased Oriental Summit Industries Sdn Bhd (OSI) for RM23.9 mln from Hicom Holdings Bhd (HHB). The acquisition would allow the streamlining of common manufacturing activities undertaken by the group and OSI.

• The group is also selling its 100.0% shareholding in DRB-Hicom Leasing Sdn Bhd (DLSB) to DRB-Hicom EZ-Drive Sdn Bhd for RM15.0 mln, which will be financed by the issuance of new shares in EZ-Drive - the franchise holder of the AVIS car rental brand in Malaysia. (The Star Online)

• The majority of the Shell Refining Co (Federation of Malaya) Bhd’s (SRC) shareholders have rejected the unconditional takeover offer of RM1.92 per share from Malaysian Hengyuan International Ltd (MHIL).

• MHIL is owned by China's Shandong Hengyuan Petrochemical Co Ltd, which bought a 51.0% stake in SRC from Shell Overseas Holdings Ltd at RM1.92 in December last year. The unconditional offer for the rest of the stake it does not own was made on the 9th January 2017. (The Edge Daily)  

Source: Mplus Research - 2 Feb 2017