• The FBM KLCI closed marginally lower by 0.1%, dragged down by selling-pressure in banking heavyweights. The lower liners were also pressured, with the exception of the FBM ACE that gained 0.2%. Meanwhile, the broader market was mostly splashed in red yesterday amid increased profit taking activities.

• Consequently, market breadth stay negative as losers outweighed the winners on a ratio of 511-to-379. Traded volumes also fell 8.5% to 2.11 bln shares on the back of mild profit-taking activities.

• Leading the FBM KLCI decliners list were banking heavyweights like Hong Leong Financial Group (-12.0 sen), CIMB Bank (- 8.0 sen) and Hong Leong Bank (-6.0 sen), followed by BAT (-22.0 sen) and Kuala Lumpur Kepong (-8.0 sen). Broader market losers include Panasonic Manufacturing Malaysia (-56.0 sen), UMW Holdings (-27.0 sen), Aeon Credit Service (-26.0 sen), Time Dotcom (-18.0 sen) and Southern Acids (-17.0 sen).

• In contrast, Heineken Malaysia (+66.0 sen), Far East Holdings (+48.0 sen), Nestle (+32.0 sen), DKSH Holdings (+24.0 sen) and Daibochi Plastic & Packaging (+17.0 sen) were amongst the biggest gainers on the broader market. Leading the key index gainers were Petronaslinked subsidiaries – Petronas Chemicals (+9.0 sen) and Petronas Gas (+4.0 sen), while other blue chip gainers were Public Bank (+18.0 sen), Hap Seng Consolidated (+5.0 sen), and Genting Malaysia (+4.0 sen).

• Key Asian benchmark equities closed mostly up – led by the Shanghai Composite index which finished 0.5% higher amid optimism on the recovery of China’s economy, while the Hang Seng index (+0.5%) closed on an upbeat tone. The Nikkei (-0.5%) however, was dragged down by Toshiba (-3.3%) shares following a delay in reporting its financial results amid its multi-billion Dollar issue related to its nuclear unit. ASEAN stockmarkets, meanwhile, finished mostly mixed on Thursday.

• Key benchmark U.S equities declined slightly – led by selling pressure in energy stocks, following increasing U.S. crude oil inventories. The S&P 500 and Nasdaq narrowed 0.1% each, while the Dow (+0.04%) bucked the general sentiment to closed marginally higher in the green, boosted by Cisco (+2.4%) after the latter’s earnings topped analysts’ forecast.

• U.K. equities retraced slightly, weighed down by commodity and O&G-related stocks. The FTSE shed 0.3%, albeit recovering from sharp losses earlier to close in the red. Meanwhile, the DAX (- 0.3%) and CAC (-0.5%) also retreated, on the back of losses in automakers and banking heavyweights.

The Day Ahead

• While we see the general market trend remaining relatively firm amid the positive global stockmarket environment, the near term choppiness is expected to prevail longer among Bursa Malaysia stocks as market players continue their mild profit taking activities on stocks that have posted strong gains since the rally commenced in late December last year.

• Consequently, we expect the market to remain choppy and largely on a sideway trend over the near term with the 1,700 points level providing near term support, while the 1,710-1,720 levels remains the main resistances for now.

• We also see rotational buying prevalent as market players switch to laggards among the lower liners and broader market stocks. The sustained trading activities will help keep market depth on a high and will help to prolong the ongoing market uptrend. MACRO BRIEF

• Malaysia's 4Q2016 GDP expanded 4.5% Y.o.Y, exceeding economists' survey of 4.4% Y.o.Y - underpinned by the growth in manufacturing and services sector. In 4Q2016, private consumption grew by 6.2% Y.o.Y, supported by continued wage and employment growth. For 2016, however, the GDP grew at a slower pace of 4.2% Y.o.Y vs. the 5.0% Y.o.Y expansion in 2015.

• Meanwhile, the manufacturing sector improved 4.8% Y.o.Y in 4Q2016, owing to higher growth in both domestic and export-oriented industries. On seasonallyadjusted basis, the economy recorded a sustained growth of 1.4% Q.o.Q (3Q2016: +1.4% Q.o.Q).

• As at 31st January 2017, the reserves position totaled US$95.0 bln (RM426.0 bln). The international reserves remain ample and sufficient to finance 8.6 months of retained imports, significantly higher than the 3-month international threshold. (The Star Online)

Company Briefs

• DRB-Hicom Bhd's subsidiary has pulled out of a proposed large-scale solar photovoltaic plant in Tanjung Malim, Perak. The unit, RB-Hicom Environmental Services Sdn Bhd, had withdrawn from the consortium to undertake the 50 MW AC project with Malakoff Corporation Bhd. The parties were unable to reach mutual agreement on certain terms and conditions of the joint venture which will undertake the project. (The Star Online)

• JHM Consolidation Bhd is all set to produce electronic lightning modules for the aerospace and aircraft industries after it was awarded the AS9100 Quality Management System certification. The certification would enable it to diversify from automotive lighting module into the global aerospace and aircraft supply chain.

• The extension of production floor space in two buildings is currently already in progress to cope with the anticipated increase in production volume from the aerospace business unit, while an application to add job scope to include JHM qualifying as a CNC Machining Center for aerospace mechanical parts had been made. (The Star Online)

• Affin Holdings Bhd plans to undertake a corporate reorganisation exercise that would see its wholly-owned subsidiary Affin Bank Bhd take over its listing status on the Main Market of the local stock exchange.

• Affin’s shares will be exchanged with the shares of Affin Bank on a one-to-one basis. The exercise will also see Affin transferring its wholly-owned subsidiaries Affin Hwang IB and Affin Moneybrokers Sdn Bhd, as well as its 51.0%-owned joint venture AXA Affin Life Insurance Bhd and 37.1%-owned associate AXA Affin General Insurance Bhd, to Affin Bank. (The Edge Daily)

• Yong Tai Bhd intends to buy a 70.0% stake in Iconic Paragon Sdn Bhd to participate in a proposed development on two leasehold plots with a cumulative 1.1- ac. in size in Bukit Bintang, Kuala Lumpur. Both parties have jointly agreed to negotiate the terms and conditions of the share subscription agreement and are expected to finalise it within three months from 16th February 2017. (The Edge Daily)

• Destini Bhd has bought a military helicopter supply company, enabling it to get a share of the RM321.9 mln contract between the company and Malaysian Ministry of Defence (MinDef).

• Destini’s acquired Halaman Optima Sdn Bhd for RM5.5 mln. In November 2016, Halaman Optima inked a supply contract with the Malaysian government for the procurement of six Multipurpose Armed Reconnaissance Model MD530G worth RM321.9 mln to the Armed Forces. (The Edge Daily)

• British American Tobacco (Malaysia) Bhd’s (BAT Malaysia) 4Q2016 net profit increased 52.2% Y.o.Y to RM299.1 mln, due to a restructuring income of RM131.9 mln. Revenue for the quarter, however, declined 20.6% Y.o.Y to RM840.6 mln.

• For 2016, cumulative net profit fell 19.8% Y.o.Y to RM732.1 mln. Revenue for the year decreased 18.0% Y.o.Y to RM3.76 bln. A fourth interim dividend of 77 sen per share and a special dividend of 46 sen per share, payable on 23rd March 2017 was declared. (The Edge Daily)

• The Inland Revenue Board has commenced civil proceedings against a subsidiary of Mega First Corp Bhd for RM26.3 mln in tax debt. In September 2016, the subsidiary, Idaman Harmoni Sdn Bhd it had been served with a notice of assessment for conducting a transaction involving residential property PJ8, which according to the board is subject to tax. The transaction was treated by Idaman Harmoni as a capital transaction that is liable to real property gains tax in year 2004. Idaman Harmoni is a property investment company and has not disposed of any of its PJ8 properties since completion. (The Edge Daily)

• YFG Bhd has bagged a RM245.0 mln contract from Wearegold Sdn Bhd for sub-contract works involving construction of 1Malaysia People's Housing Programme (PR1MA) houses in Pedas, Rembau, Negeri Sembilan.

• The project involves the construciton and infrastructure works of the proposed development of 1,572 units of PR1MA homes. The project is expected to commence on a date to be notified in writing by Wearegold and to be completed within 24 months. (The Edge Daily)

• Taliworks Corp Bhd’s 4Q2016 net profit fell 37.5% Y.o.Y to RM32.0 mln, as the previous corresponding quarter’s earnings included an exceptional gain of RM59.6 mln from the sale of a 50% stake in Pinggiran Muhibbah. Revenue for the quarter fell 6.9% Y.o.Y to RM69.0 mln.

• For 2016, however, cumulative net profit added 47.3% Y.o.Y to RM127.5 mln. Revenue for the quarter gained 4.4% Y.o.Y to RM304.9 mln. A fourth interim dividend of two sen per share for the quarter was proposed. (The Edge Daily)  

Source: Mplus Research - 17 Feb 2017