• The FBM KLCI (+0.2%) closed on a positive note, albeit coming off its intraday high amid profit-taking activities in selected heavyweights after their recent rally. The lower liners also climbed higher – led by the FBM Ace (+1.5%), with the exception of the construction (- 0.01%) and mining (-2.4%) sectors.

• Market breadth remained upbeat as winners beat losers on a ratio of 546-to- 421 stocks. Traded volume soared 20.8% to 6.02 bln shares, amid buying-interest in the lower liners.

• Main Board outperformers include Hap Seng Consolidated (+13.0 sen), Hong Leong Bank (+12.0 sen), Axiata (+11.0 sen), Petronas Gas (+10.0 sen) and MISC (+8.0 sen). Semicon counters like KESM Industries (+60.0 sen) and Malaysian Pacific Industries (+40.0 sen) rallied, followed by Nestle (+56.0 sen), Dutch Lady (+48.0 sen) and Lafarge Malaysia (+41.0 sen).

• Meanwhile, F&N (-34.0 sen), Riverview Rubber Estates (-19.0 sen), Aeon Credit Service (-12.0 sen), Malton (-12.0 sen) and Sam Engineering & Equipment (-9.0 sen) underperformed the broader market. Key-index losers were BAT (-20.0 sen), Petronas Dagangan (-14.0 sen), KLCC (- 11.0 sen), PPB Group (-8.0 sen) and Westports (-6.0 sen).

• Asian equities finished mixed, amid rising fears of U.S. trade protectionism. The Shanghai Composite index rose 0.4%, boosted by gains in the energy sector (+2.1%), while the Hang Seng ended 0.8% to 24,502.0 points. The Japanese stockmarkets were closed for Vernal Equinox Day celebrations. ASEAN stockmarkets also closed mixed on Monday’s close. ? Wall Street closed mostly in the red, amid the lack of clarity in President Donald Trump’s tax reform proposals. The Dow (- 0.04%) finished marginally lower and the S&P 500 narrowed 0.2%, dragged down by financial-related stocks. The Nasdaq (+0.01%), meanwhile, closed unchanged.

• Key benchmark European indices finished mostly on a downward bias, dragged down by declining O&G stocks. However, the FTSE bucked the general weak sentiment – rising 0.1% after the U.K. government announced that it will officially begin the process of exiting the European Union from 29th March. On the other hand, France’s CAC lost 0.3%, ahead of its Presidential debate, while the DAX declined 0.4% - led by losses in Deutsche Bank (-3.8%).

The Day Ahead

• The FBM KLCI continues to defy expectations as it continues to push higher amid the strong return of foreign funds on the index heavyweights. The buying interest also extended to the broader market and this was readily captured in the surging trading volumes, which has topped the 6.0 bln mark. The runup has also left the key index severely overbought and a consolidation is already due. Already, the upsides are more measured as the key index has closed below its intraday high – a sign that the upsides could be tapering.

• Therefore, we think that the market’s ascend is likely to slow and retracement is in the offing over the near term, albeit the general market environment is still broadly positive. We continue to think a consolidation is healthy as it would allow the gains to be digested and the market to take a breather. A consolidation could see the key index retracing back to the 1,740 level, while the 1,770 level is the main resistance for now.

• Similarly, we think the lower liners and broader market shares are due for a pullback and this could see profit taking activities hastening over the near term.

Company Briefs

• IOI Properties Group Bhd’s (IOI Prop) renounceable rights issue, aimed at raising funds to repay bank borrowings totalling RM1.52 bln, has been oversubscribed by 37.5%. The rights shares are issued at RM1.38 apiece. The total proceeds received from the valid acceptances and excess applications amounted to RM2.08 bln.

• IOI Prop, which in November 2016 successfully tendered for a 1.1-ha parcel of leasehold land in Singapore for S$2.57 bln (RM8.14 bln), would utilise the proceeds from this rights issue to repay the group’s borrowings and/or the borrowings to be obtained to fund the tender consideration. (The Star Online)

• IJM Corporation Bhd has set up a vehicle to invest up to 74.0% in a highway concessionaire in India. The vehicle, IJM Dewas (Mauritius) would take the stake in Dewas Bypass Tollway Pte Ltd which will carry out the project to widen and upgrade the 19.8km Dewas bypass road in Madhya Pradesh, India.

• Dewas Bypass Tollway Pte Ltd was formed by IJM last month with an initial share capital of 1.0 mln shares of 10 rupees each. The concession agreement for the project was expected to be executed on 27th February 2017. (The Star Online)

• Olympia Industries Bhd is in talks with CIMB Group Bhd to dispose of its equity interest in Jupiter Securities Sdn Bhd in a deal worth more than RM50.0 mln as part of a larger corporate exercise to facilitate the latter’s joint venture (JV) with China Galaxy.

• CIMB was looking at acquiring Jupiter Securities mainly to get an additional licence for its stock broking business that would eventually be merged with China Galaxy Securities as part of a wider exercise to expand its reach and reduce cost. Back in October 2016, CIMB Group has entered into a strategic partnership with China Galaxy International Financial Holdings Ltd, a wholly-owned subsidiary of China Galaxy Securities Co Ltd, in the cash equities business comprising institutional and retail brokerage, equities research and associated securities businesses. (The Star Online)

• Boustead Holdings Bhd has secured a RM1.17 bln contract from the Defence Ministry for the supply of four units of littoral mission ships (LMS). The contract will be implemented over four years effective from the date of signing of the LOA.

• The Littoral Mission Ships would be designed by Partner Shipyard and the first two vessels would be built and delivered in China in 2019 and 2020 respectively, whilst the remaining two vessels would be built and delivered in Malaysia in 2021. (The Star Online)

• George Kent Malaysia Bhd’s 4QFY17 net profit surged 114.4% Y.o.Y to RM42.2 mln, on improved gross profit as it incurred lower cost of sales and higher unrealised gain on foreign exchange of RM1.9 mln. Revenue for the quarter, however, slipped 28.8% Y.o.Y to RM189.1 mln.

• For FY17, cumulative net profit jumped 102.5% Y.o.Y to RM101.4 mln. Revenue for the year climbed 11.7% Y.o.Y to RM599.0 mln. A final dividend of five sen per share was declared. (The Edge Daily)

• Tiong Nam Logistics Holdings Bhd has set up a new unit in China to expand its logistics business. Tiong Nam's venture into China came after it was reported that Chinese e-commerce giant Alibaba Group Holding Ltd plans to set up a regional distribution hub in Malaysia to cater its fast-growing business in the region. (The Edge Daily)

• LKL International Bhd’s 3QFY17 net profit declined 48.5% Y.o.Y to RM1.2 mln, mainly on lower sales of medical supplies. Revenue for the quarter slipped 37.7% Y.o.Y to RM7.3 mln.

• For 9MFY17, cumulative net profit grew 3.4% Y.o.Y to RM4.3 mln. Revenue for the period, however, fell marginally by 0.1% Y.o.Y to RM27.8 mln. (The Edge Daily)

• DBE Gurney Resources Bhd has announced that Singapore-based asset management firm, Advance Capital Partners Pte Ltd has become its substantial shareholder, owning a 6.2% stake. Advance Capital raised its stakes with an additional 35.7 mln shares on 14th March 2017 following the conversion of Redeemable Convertible Notes it owned. (The Edge Daily)

• Loss-making Iris Corp Bhd has announced a corporate restructuring plan which includes refocusing its core business to trusted identification solutions as well as raising additional funds via private placement exercise and divesting non-core businesses that include property development, education and a waste-to-energy plant. These noncore businesses are all currently loss making. (The Edge Daily)  

Source: Mplus Research - 21 Mar 2017