• Tracking the positive developments on global stockmarkets, gains in selective banking heavyweights sent the FBM KLCI 0.8% higher last Friday as the key index reversed all its weekly losses to close 0.3% W.o.W higher. The lower liners – the FBM Small Cap (+0.9%), FBM Fledgling (+0.9%) and FBM ACE (+3.0%), all ended higher, while the Mining sector (-0.8%) was the sole underperformer on the broader market.

• Market breadth turned positive as advancers outpaced decliners on a ratio of 3-to-1 stocks. Trading volumes rose by 10.7% to 2.46 bln shares on bargain hunting activities.

• More than two-thirds the key index components advanced, led by Hong Leong Bank (+48.0 sen), followed by Hong Leong Financial Group (+40.0 sen), Sime Darby (+28.0 sen), Petronas Gas (+26.0 sen) and PPB Group (+22.0 sen). Among the biggest gainers on the broader market were Dutch Lady (+48.0 sen), JHM Consolidated (+34.0 sen), Allianz (+30.0 sen) and KESM Industries (+30.0 sen). 7-Eleven Malaysia added 6.0 sen after scrapping its proposed rights issue exercise.

• Consumer products stocks like Nestle (- 64.0 sen), Ajinomoto (-26.0 sen) and Heineken Malaysia (-10.0 sen) continued to underperform, while PLB Engineering and Southern Acids fell 10.0 sen each. RHB Bank and Ambank shed 20.0 sen and 12.0 sen respectively after announcing a potential merger while other big board losers were BAT (-30.0 sen), Genting Malaysia (-3.0 sen) and Petronas Dagangan (-2.0 sen).

• Asian equities advanced as the Nikkei (+1.6%) extended its gains to close above the 20,000 psychological level for the first time since August 2015. The Hang Seng Index rose 0.4% on gains in casino operators after Macau reported a 24.0% Y.o.Y increase in gambling revenues in May 2017, while the Shanghai Composite (+0.1%) chalked up modest gains. ASEAN stock indices closed mostly positive.

• U.S stockmarkets ended at record high levels as banking stocks rallied. The positive sentiment was also supported by the stronger-than-expected jobs and manufacturing data. The Dow added 0.7% while both the S&P 500 and Nasdaq closed 0.8% higher each.

• European stockmarkets were boosted by the strong Eurozone Markit Manufacturing PMI data for May that rose to 57 - the highest level since April 2011. The FTSE gained 0.3% as investors continue to eye the upcoming election this Thursday. The CAC (+0.7%) snapped a streak of five sessions of decline, while the DAX gained 0.5%.

The Day Ahead

• With global markets still tipping higher amid the string of positive economic data, we expect the Malaysian stockmarket to also maintain its positive streak as the market undertone continues to strengthen and this is likely to see renewed interest in local equities.

• As it is, interest in the Malaysian stockmarket has waned over the past two weeks with many retail players closing out their positions. The renewed positivity is expected to encourage fresh buying, particularly after many lower liners and broader market shares have consolidation over the past two weeks and some value is emerging.

• The sustained buying could see the key index retesting the 1,780 resistance level again, albeit we maintain our view that the level will be a formidable level to breach as it requires much stronger catalysts with valuations already toppish.

Company Briefs

• Stone Master Corp Bhd has announced that it has secured an interim injunction blocking its largest shareholder from giving effect to its extraordinary general meeting held on Tuesday that passed resolutions removing two top executives and appointing eight new directors.

• Stone Master said the ex-parte order, initiated by one party in the boardroom feud, was issued by the High Court on 2th June 2017. Consequently, the inter parties hearing involving both parties in the dispute will be held on 7th June 2017.

• The said order also restrains Datuk Karen Lee Fong Yin, a 22.3% shareholder of the group, and parties acting in concert with her, from entering or causing any disturbance to Stone Master’s office. (The Edge Online)

• Wintoni Group Bhd has announced that Chong Seng Foo has withdrawn from the directorship nomination due to personal reasons. To recap, the Practice Note 17 company had received a requisition from two shareholders of the company to convene an EGM, which seeks to replace three board members on 15th May, 2017.

• HIL Industries Bhd is proposing a bonus issue of about 55.7 mln shares with free detachable warrants. The proposed bonus issue will be on the basis of one bonus share, together with one warrant, for every five existing shares held. The warrants will be convertible to HIL shares on a one-for-one basis, within a 10-year period from the date of issuance. (The Edge Online) ? Sabah Shell Petroleum Co Ltd has filed a statement of defence and counterclaim against MISC Bhd's wholly-owned subsidiary GumusutKakap Semi-Floating Production System (L) Ltd (GKL), seeking US$583.0 mln (RM2.5 bln) in claims.

• Sabah Shell has refuted GKL's earlier claims and is counterclaiming against the company for alleged defective work, alleged limited functionality of the Gumusut-Kakap Semi-Floating Production System (Semi-FPS), liquidated damages and a refund of the full amount paid to GKL under the adjudication decision rendered in the adjudication proceeding.

• To recap, GKL was awarded US$255.0 mln in February 2017, after it obtained an adjudication decision in its favour in its case against Sabah Shell. GKL initiated the legal action last September after it fell into contractual disputes with Sabah Shell over outstanding additional lease rates, payment for completed variation works and other associated costs for the construction of the Semi-FPS, which is for crude oil production. (The Star Online)

• S&P Global Ratings said its rating on RHB Bank Bhd (BBB+/Stable/A-2; axA+/axA-1) has not been immediately affected by the bank’s proposed merger with AMMB Holdings Bhd.

• Accordingly, any rating impact from the potential merger between the two parties will depend on the final terms, including the structure of the merger, pricing, and financial profile of the surviving entity.

• Bank Negara Malaysia has given the green light for the negotiations of terms between both lenders to commence on 1st June 2017. Both parties have an exclusivity agreement until 30th August this year to negotiate the deal, which RHB expressed it hopes could be done at a one-time book value (BV).

• S&P has also pointed out that RHB’s acquisition of AMMB, the country’s sixth biggest lender by asset size, will not improve RHB’s ranking at fourth place. However, with the combined assets of RM368.0 bln, the merged entity will significantly close the gap with third-largest Public Bank Bhd, which has assets of RM390.0 bln. (The Edge Online)  

Source: Mplus Research - 5 Jun 2017