• Despite experiencing some selling pressure in the first hour of the trading bell, quick recovery on buying support in Tenaga lifted the FBM KLCI 0.2% higher to record its’ third straight session of gains yesterday. The lower liners, however, ended mostly lower as the FBM Small Cap and FBM Fledgling fell 0.1% and 0.2% respectively. The broader market also ended mostly negative with the Construction sector (-0.8%) taking the heaviest beating.

• Market breadth turned negative as decliners ahead of advancers on a ratio of 547-to-342 stocks. Trading volumes was 7.1% lower at 2.30 bln shares, owing to the mostly negative market sentiment.

• Tenaga (+38.0 sen) led the key index advancers list, followed by BAT (+26.0 sen), Hong Leong Bank (+8.0 sen), KLK (+6.0 sen) and IHH (+5.0 sen). Technology stocks – MPI (+34.0 sen), Globetronics (+22.0 sen) and KESM Industries (+16.0 sen) continues to rally, while Manulife and Mudajaya added 20.0 sen and 14.0 sen respectively.

• Significant losers on the broader market include United Plantations (-22.0 sen), Kossan (-21.0 sen), Rapid Synergy (-20.0 sen), Lafarge Malaysia (-18.0 sen) and Serba Dinamik (-17.0 sen). On the big board, Petronas Gas (-26.0 sen), Hong Leong Financial Group (-10.0 sen), AmBank (-10.0 sen), Westports (-8.0 sen), and Genting Malaysia (-4.0 sen) were the biggest losers.

• Japanese equities extended their losses as the Nikkei (-1.0%) slipped below the 20,000 psychological mark again as sentiment were dampened by the stronger Japanese Yen against the U.S. Dollar and flattish real wages growth. The Shanghai Composite grew 0.3%, while the Hang Seng Index added 0.5% lower after both indices erased their intraday losses. ASEAN stock indices ended mixed.

• U.S. stockmarket fell for the second day on political instability ahead of former FBI Director James Comey's testimony on Donald Trump presidential campaign The Dow fell 0.2%, while both the S&P 500 and Nasdaq declined 0.3% each as the former was dragged down by the weakness in consumer discretionary stocks.

• European benchmark indices - the FTSE (-0.01%), CAC (-0.7%) and DAX (-1.0%), all ended in the red - weighed down by the rift in the Middle East between Qatar and its several neighbouring countries. Spain’s troubled bank, Banco Popular (- 6.2%) fell to record low on the possibility of being wound up by regulators if it could not secure a buyer to beef up its capital requirements.

The Day Ahead

• Despite yesterday’s market gains, we continue to think that the FBM KLCI is stretched after shooting past the 1,790 level, leaving its 2017 PER at nearly 17.0x, which is above its historical average of around 16.0x. Therefore, we continue to think that the key index has overshot its near term market and a consolidation remains due to adjust from overbought.

• In addition, the high market valuations is leaving fewer compelling buys and many more market participants are retreating to the sidelines, particularly among the retail players, and this is seeing reduced traded volumes.

• Hence, we think the FBM KLCI may undergo a meaningful pullback over the near term with the 1,780 level to serve as the main support for now, while the psychological 1,800 points level wis the near term resistance.

Company Briefs

• Felda Global Ventures Holdings Bhd (FGV) has announced that its four officials, including its CEO Datuk Zakaria Arshad and CFO Ahmad Tifli Mohd Talha is on indefinite leave of absence, following allegations of improprieties by FGV’s external auditors, PwC Malaysia, in relation to dealings between its subsidiary Delima Oil Sdn Bhd and a longtime Afghan-based customer, Safitex.

• The company noted that FGV is conducting an internal investigation, while the MACC said it will also carry out its own investigation. (The Star Online)

• XOX Bhd has clarified that Water Beaute World Bhd and WBW Global Sdn Bhd do not hold any shares in the company based on its latest available record of depositors as at 24th May 2017.

• Concurrently, its Managing Director Datuk Chai Woon Chet has also clarified that he is not associated or involved with Water Beaute World and WBW Global, which are allegedly involved in get-richquick and fake online investment schemes. (The Edge Daily)

• The High Court has ruled that Ire-Tex Corp Bhd‘s extraordinary general meeting (EGM) called by its major shareholder, Elite Cosmo Group Ltd is null and void.

• The court dismissed the originating summons which aims to remove and restraint its directors, Mak Lin Kum, Felix Chin Wui Choong, Ahmad Amryn Abd Malek and Chairman Datuk Seri Mohd Shariff Omar and instead allowed the suit against Elite Cosmo, Raja Hizad Kamarulzaman and Hamdan Mohd Nor. (The Edge Daily)

• China Galaxy Securities Co Ltd is acquiring a 50.0% equity stake in CIMB Group Holdings Bhd's international stockbroking business, CIMB Securities International Pte Ltd for S$167.0 mln (RM515.0 mln). The price was set based on a multiple of 1.3x of CIMB Securities International’s consolidated net asset value of S$256.9 mln as at 31st December 2015. CIMB expects the sale to be completed by 4Q17. (The Star Online)

• Frontken Corp Bhd is planning to buy an 11.4% equity stake in Ares Green Tech Corp (AGTC) for RM13.3 mln, raising its shareholding in the Taiwanese company to 84.6%. Subsequently, the group will fund the purchase via internally-generated funds. (The Edge Daily)

• Bintai Kinden Corp Bhd has secured a US$17.5 mln (RM74.5 mln) deal in Myanmar to undertake air-conditioning and fire protection installation work for two developments in Bahan township in Yangon — Somerset Serviced Apartment and 68 Residence. The project is expected to be completed by July next year. (The Star Online)

• Malaysian Resources Corp Bhd (MRCB) is tendering for projects worth RM6.0 bln as part of its exercise to replenish its order book for 2017. Meanwhile, the group’s current orderbook stood at RM7.04 bln, of which RM5.36 bln has yet to be billed. (The Star Online)

• Chin Hin Group Bhd is proposing a private placement of up to 10.0% its share capital to raise some RM61.2 mln to reduce it bank borrowings and expand capacity. The company expects the proposed private placement to be completed by the 3Q2017. (The Edge Daily)  

Source: Mplus Research - 7 Jun 2017