• Stocks on Bursa Malaysia mounted a recovery on Friday as a measure of calm returned to the equity market’s following the earlier rout brought about by the heightened political crisis in the U.S. Nevertheless, the rebound was mild with the key index only managing to climb less than 0.1% for the day as the buying interest was still tentative after the earlier falls. Still, most sub-indices were positive with the ACE market index surging 2.7%, while the industrial and construction indices slipping 0.1% each.

• Market breadth turned positive with gainers beating losers on a 2-to-1 ratio, while trading volumes improved to 3.27 bln shares, some 9.4% higher than the previous day amid the mild bargain hunting activities.

• On the big board, the top gainers were Genting (+21.0 sen), Petronas Dagangan (+68.0 sen), Petronas Chemicals (+5.0 sen) and Maybank (+3.0 sen). On the broader market, the leading stocks were MPI (+48.0 sen), Bursa (+39.0 sen), Magni Tech (+35.0 sen) and SAM Engineering (+27.0 sen).

• On the losers side, Pos Malaysia retreated 20 sen, losing more than its gains a day earlier, followed by Suiwah (- 10.0 sen), Tasek Cement (-10.0 sen) and United Plantation (-10.0 sen). The main FBM KLCI declining stocks were MISC (- 4.0 sen), IJM (-7.0 sen), Hong Leong Bank (-8.0 sen) and IHH (-2.0 sen).

• Asian stocks also rebounded on Friday amid the calmer market conditions. The Nikkei recovered 0.2% despite the strengthening Yen, while Hong Kong and China shares eked-out minute gains. ASEAN indices were also broadly higher with the Jakarta Composite Index jumping nearly 2.6% following a credit ratings upgrade from S&P Global Ratings. ? U.S. stock indices found some stability after the Dow rose 0.3% and the S&P 500 gained 0.4% overnight following the release of better-than-expected employment and regional manufacturing data – alleviating the political crisis engulfing the President. The Nasdaq also resumed its uptrend, closing 0.7% higher for the day.

• European stock indices continued to decline amid the ongoing political uncertainties in the U.S., albeit the indices closed off their day’s low. The FTSE was the biggest underperformer as it slipped 0.9%, followed by the CAC (- 0.5%) and the DAX (-0.3%). Sentiments were also roiled by the Brazil-linked stocks as the country faced fresh political uncertainties. THE DAY AHEAD

• We see the rebound sustaining over the near term as there is renewed calmness after the recent pullback brought the uncertainties in the White House. The recovery in global indices will also help to provide some near term impetus for the Malaysian stockmarket to sustain its recovery.

• Still, we think the rebound is likely to remain mild for now as market participants are likely to stay hesitant amid the lingering political concerns in the U.S. We also see similar trading environment prevailing among the lower liners and broader market shares with many retail participants adopting quick profit taking strategies that will limit the gains.

• On the upside, the 1,771 level is the immediate technical resistance and if it is cleared, the 1,780 will be the next hurdle, which should remain a formidable resistance to clear. MACRO BRIEFS

• Malaysia’s 1Q2017 GDP grew 5.6% Y.o.Y, surpassing the consensus estimate of 4.8% and 4Q2016’s growth of 4.5% Y.o.Y. On a quarterly basis, growth was at 1.8%, compared to the 1.2% Q.o.Q growth in 4Q2017. The GDP growth was the fastest in two years and was driven by higher domestic demand (+7.7% Y.o.Y) with private sector expenditure (+8.2% Y.o.Y) and public sector consumption (+7.5% Y.o.Y) leading the growth.

• Sectorally, the agriculture sector (+8.3% Y.o.Y) was the biggest gainer on higher palm oil yields following the end of the El Nino weather pattern, while the manufacturing sector recorded a gain of 5.8% on higher demand for electronic & electrical peripherals as well as foodrelated products.

• The construction sector (+6.5% Y.o.Y) also saw a revival as a fresh round of infrastructure projects commenced. The services sector’s (+5.8% Y.o.Y) growth was contributed by higher wholesale and retail sub-sector in tandem with the higher consumer spending, but the mining sector’s (+1.6% Y.o.Y) growth moderated on lower crude oil production.

• Gross exports grew 21.4% during the period, largely on higher exports of electronic & electrical items (+18.4% Y.o.Y), petroleum & chemicals (+30.1% Y.o.Y) well as commodities (+27.5% Y.o.Y), but the trade surplus was narrower at RM18.9 bln as gross imports grew stronger at 27.7% Y.o.Y.

• The current account surplus also narrowed to RM25.3 bln (4Q2016: RM31.2 bln) as a consequence of the higher imports. Inflation, meanwhile, rose to 4.3% vs. 4Q2016’s 1.7% mainly on higher fuel prices that saw a strong push in the transport category’s inflation to 16.2% (4Q2016:-2.6%). ? Looking ahead, the Central Bank continues to see the Malaysian economy performing better for the rest of the year in tandem with the recovery seen in most global economies. Apart from the more sanguine external sector, domestic demand is also expected to stay firm, sustained by the steady wage and employment growth.

• Growth will be further supported by the various infrastructure developments and firmer commodity and oil & gas prices. Despite the stronger 1Q2017 performance, there remains no change to its GDP forecast for the year at 4.3%- 4.8% Y.o.Y, while the consensus estimated growth is at 4.4% Y.o.Y, also unchanged.

• Bank Negara Malaysia also expects inflation to moderate from 2Q2017 onwards as the effects of floating fuel price mechanism stabilises.

COMPANY BRIEFS

• Magnum Bhd and its wholly-owned Magnum Holdings Sdn Bhd were slapped with notices of assessment by the Inland Revenue Board (IRB), with penalties amounting to RM476.5 mln.

• The aforementioned penalties were due to a disallowance of deduction of certain interest expenses incurred for investments between 2008 and 2015. Both companies are seeking to challenge the validity and legality of the notices.

• Meanwhile, Magnum's 1Q2017 net profit plunged 55.6% Y.o.Y to RM30.6 mln, from RM68.8 mln a year ago - on lower gaming sales and weak consumer spending, while revenue was also down by 7.4% Y.o.Y to RM697.1 mln, from RM752.6 mln. (The Edge Daily) ? IHH Healthcare Bhd has disposed of its remaining 4.8% equity stake in India's Apollo Hospitals Enterprise Ltd — the second of two tranches — for INR8.198 bln (RM551.1 mln).

• The group sold about 6.1% stake in Apollo earlier this year, which boosted its 1Q2017 net profit to RM470.1 mln, from RM235.5 mln in the previous corresponding period. Revenue for the quarter also added 8.0% Y.o.Y to RM2.68 bln from RM2.48 bln, as more hospitals commenced operations. (The Star Online)

• Mitsui Co Ltd is acquiring a 10.0% stake in Axiata Group Bhd's Cambodian subsidiary, Smart Axiata Co Ltd for US$66.0 mln (RM285.5 mln), with an option to buy another 10.0% within 12 months.

• Under the agreement, Mitsui will be Axiata's strategic partner with its expertise in Internet of Things (IoT), and to help Axiata jumpstart its digital leadership in the Cambodian telco market. (The Edge Daily)

• Metronic Global Bhd has appointed Ferrier Hodgson MH Sdn Bhd as special auditor to identify any irregularities in the company's transactions.

• The audit — to be completed in two months — is also to ascertain whether its directors may have breached their fiduciary duties. In light of the special audit, Metronic's adviser Jackson Tan Ew Chew, who is a related party to a former director, has resigned from his post effective May 16, while its head of finance, Eric Boon has taken a voluntary leave of absence. (The Edge Daily)

• RAM Ratings Services Bhd said that Star Media Group Bhd's proposed disposal of its 52.5% stake in Cityneon Holdings Ltd is slightly credit negative, although there will not be immediate ratings implications.

• RAM opined that while Cityneon's sale worth RM460.0 mln will increase Star Media's cash pile, it will lose a key recurring income, though it noted Cityneon's rights to Transformers and Marvel brands would expire in 2023 and 2024, respectively. (The Edge Daily)

• Lembaga Tabung Haji has been reducing its stake in DRB-Hicom Bhd as the deadline looms to bring in a foreign partner in Proton Holdings Bhd that could potentially take up a 51.0% stake in the national carmaker.

• The pilgrims' fund disposed of 4.4 mln shares on 17th May 2017, reducing its direct interest in DRB-Hicom to 5.3% from 5.7%. (The Edge Daily)

• Top Glove Corp Bhd is buying a factory in Negeri Sembilan from A1 Glove Sdn Bhd for RM31.5 mln and another in Johor from Titi Glove Sdn Bhd for RM7.5 mln.

• The acquisitions are related-party transactions as Top Glove chairman Tan Sri Lim Wee Chai is the brother of Datuk Lim Kwee Fatt, who is a director in both A1 Glove and Titi Glove.

• The proposed acquisitions are intandem with the group's expansion plans which entail increasing its production capacity and market share. (The Edge Daily)

• Cypark Resources Bhd has secured two contracts totaling RM75.0 mln to develop two large-scale solar photovoltaic (PV) plants in Negeri Sembilan.

• The first contract is a RM53.4 mln contract from Selasih Mentari, which include the development of a 10.5 MW solar PV plant at Ladang Tanah Merah from 23th May 2017 to 16th Nov 2018.

• Meanwhile, the second contract awarded from Revenue Vantage is worth RM21.6 mln and involves the development of a 3.95 MW plant at Jelebu from 24th May 2017 to 7th September 2018. (The Edge Daily)

• Ho Hup Construction Co Bhd posted a 35.0% Y.o.Y drop in its 1Q2017 net profit to RM12.4 mln, from RM19.1 mln a year earlier. The weaker earnings were attributed to a 56.0% Y.o.Y decline in revenue to RM35.6 mln, from RM81.1 mln in 1Q2016.

• Moving forward, the group expects to see more upbeat results in 2018, following the launching of three projects with gross development value worth around RM1.6 bln towards 2H2017. Ho Hup currently has RM142.0 mln in unbilled sales. (The Star Online)

• Choo Bee Metal Industries Bhd's 1Q2017 net profit jumped over threefold to RM11.6 mln on the back of improved average selling prices, interest income and foreign exchange gains.

• Revenue, however, fell slightly by 3.4% Y.o.Y to RM97.3 mln, from RM100.7 mln in 1Q2016. (The Edge Daily)

• Ranhill Holdings Bhd's 1Q2017 net profit surged 127.0% Y.o.Y to RM15.7 mln from RM6.9 mln last year, boosted by a one-off Islamic medium-term notes premium redemption gain of RM13.3 mln.

• Revenue for the quarter, meanwhile, grew marginally by 2.0% Y.o.Y to RM352.0 mln, from RM344.8 mln a year ago. (The Star Online)  

Source: Mplus Research - 22 May 2017