• The extended profit taking in selective index heavyweights sent the FBM KLCI (- 0.3%) lower yesterday – resulting in the key index closing at three-week low. The lower liners, however, ended mostly higher as the FBM Fledgling and FBM ACE added 0.3% and 1.2% respectively, while the Technology sector (+0.1%) bucked the negative broader market.

• Market breadth turned negative as decliners outnumbered advancers on a ratio of 526-to-452 stocks. Traded volumes fell 13.1% to 3.86 bln shares on profit taking activities.

• More than half of the key index constituents declined – Genting (-13.0 sen), Hap Seng (-7.0 sen), CIMB (-7.0 sen), PPB Group (-6.0 sen) and Hong Leong Financial Group (-6.0 sen) were among the big losers. Consumer products stocks like Panasonic (-20.0 sen), Carlsberg (-18.0 sen), Heineken (-16.0 sen) and CAB Cakaran (-15.0 sen) topped the broader market decliners list, while Tong Herr fell 20.0 sen.

• Amongst the biggest advancers on the broader marker were Ajinomoto (+76.0 sen), Nestle (+38.0 sen), MPI (+28.0 sen) and Warisan (+26.0 sen). KESM Industries (+20.0 sen) edged higher for the fourth straight session to close at fresh 10-year high level. There were only three gainers on the big board – KLK (+6.0 sen), Astro (+1.0 sen) and Westports (+1.0 sen).

• Japanese equities retreated as the Nikkei (-1.4%) fell to close at its lowest level since mid-January on fresh weakness in the U.S. Dollar against the Japanese Yen. The Hang Seng Index slipped 0.5% after its Purchasing Managers Index for March fell to 49.9, but the Shanghai Composite (+0.3%) extended its gains. ASEAN stockmarkets, meanwhile, closed mostly lower.

• Wall Street rebounded overnight as the Dow added 0.1% despite trimming its intraday gains ahead of the two-day meeting between President Donald Trump and his Chinese counterpart, Xi Jinping. On the broader market, the S&P 500 added 0.2%, supported by gains in energy sector (+0.8%) after crude oil prices closed at a one-month high.

• Despite opening lower, most European benchmark indices recovered their earlier losses to close on a positive note as the CAC and DAX added 0.6% and 0.1% each. The FTSE, however, decreased 0.4%, but managed to defend the 7,300 level. Meanwhile, the European Central Bank Chief has announced that interest rates will not be raised before the end of its mass bond-buying programme.

The Day Ahead

• There appears to be renewed weakness on the FBM KLCI after it failed to hold on to the 1,740 level yesterday as foreign investors are locking in their profits. We see this trend extending over the near term as they continue to cash out after the previous quarter’s strong gains. This could see the key index retreating back to the 1,730 level in due course, but we think the key index could first attempt to climb back above the 1,740 level.

• Still, we do not deem this trend as negative as the consolidation will allow the market to take a breather after the strong 1Q2016 gains. The consolidation will also allow the market to potentially form a fresh springboard for further gains later as the underlying market conditions are still positive with the still healthy market breadth and depth a testament of the market’s strength. Therefore, we also expect the lower liners and broader market shares to continue seeing rotational plays amid the strong interest from retail players.

Company Briefs

• E-commerce securities trading solutions provider, N2N Connect Bhd has acquired Hong Kong-based financial data and trading solutions provider AFE Solutions Ltd for US$18.6 mln (or RM82.4 mln) in a bid to expand its regional presence to Hong Kong.

• The acquisition will allow the company to combine core technologies from leaders in the field of capital and finance market, which is in-line with the group’s longterm objective to become Asia's largest one-stop service provider in the investment financial industry. (The Edge Daily)

• Pestech International Bhd‘s Cambodian unit has signed a US$100.2 mln construction contract for the development of a hydro power plant in Cambodia.

• Under the contract inked between Pestech (Cambodia) Ltd (PCL) and Alex Corp Co Ltd, the former will undertake the design, engineering, manufacturing, installation, testing and commissioning of approximately 220km of a 230kV double-circuit transmission line from Stung Tatay Hydro Power Plant to Phnom Penh. PCL will also supply, install and connect two 230kV line bays at Stung Tatay hydro power plant switchyard.

• The project will commence within three months from 6th April 2017 and is expected to be completed within 36 months. (The Star Online) ? Majuperak Holdings Bhd is selling two plots of leasehold land measuring 664.8 ac. in Kinta, Perak for RM17.7 mln cash via an open tender to Wawasan Amanjaya Sdn Bhd, which will be used for an integrated farming project. The net book value of the asset is worth RM81,817 as at 31st December 2016.

• Hong Leong Industries Bhd's subsidiary HLY Marine Sdn Bhd has been appointed the exclusive re-seller and distributor of Yamaha Marine outboard motor products in peninsular Malaysia.

• The deal between HLY Marine and Yamaha Motor Co Ltd (YMC) will see HLY Marine putting in place its 3S offerings which cover sales, service and spare parts of Yamaha Marine outboard motor products. (The Edge Daily)

• Hiap Teck Venture Bhd has decided not to extend the deadline to complete its planned share swap deal with An Steel International Co Ltd because negotiations to come to definitive agreements took too long.

• To recap, negotiations had taken more than nine months and the prolonged production suspension at its unit, Eastern Steel Sdn Bhd, was not in the best interest of the company.

• Boustead Holdings Bhd is expecting better earnings this year – largely due to the pick-up in the local economy, higher government spending and more foreign direct investments.

• The group plans to open 15 to 20 more BHPetrol stations this year and add convenient stores to its existing petrol stations to bring in more income. (The Star Online)

• Malayan Banking Bhd (Maybank) said that it is well prepared for the impact of additional provisions that will arise from the adoption of the Malaysia Financial Reporting Standard (MFRS) 9, effective from 1st January 2017.

• MFRS 9 requirements for local banks are based largely on a forward-looking expected credit loss (ECL) impairment model and a substantially reformed approach to hedge accounting.

• ECL is expected to increase the provision amount required, which will potentially reduce banks' profitability.

• JHM Consolidation Bhd was slapped with an Unusual Market Activity (UMA) query from Bursa Malaysia after its share price surged 24.0 sen or 5.8% on 6th April 2017. Over the past year, the group’s share price has soared almost 10 times from 47.0 sen. (The Edge Daily)

• KLCCP Stapled Group expects a potential impact and drag to its hotel business due to the new tourism tax bill, amid the rising cost of living and higher inflation in 2017. The new ruling and the minimum wage increase previously is also foreseen to affect the hotel industry. (The Star Online)  

Source: Mplus Research - 7 Apr 2017