• The FBM KLCI (-0.2%) slipped into the red after lingering mostly in the negative territory yesterday as unabated geopolitical tensions prompted a selldown in equities in exchange for safehaven assets. The lower liners, meanwhile, were also splashed in red amid a mixed broader market.

• Market breadth was expectedly negative with decliners beating decliners on a ratio of 596-to-364 stocks. Traded volume also jumped 38.4% to 2.53 bln due to risk-off behaviour in investors amid heightened uncertainties in the global political landscape.

• Banking heavyweights which led the decliners on Tuesday were CIMB (+32.0 sen), Hong Leong Financial Group (-12.0 sen), alongside BAT (-72.0 sen), Genting Malaysia (-5.0 sen) and Maxis (-5.0 sen). Other losers include Ajinomoto (-RM1.26), UMW Holdings (-57.0 sen), Time Dotcom (-44.0 sen), Panasonic Manufacturing (- 40.0 sen) and Bursa Malaysia (-30.0 sen).

• On the flip side, broader market constituents like Nestle (+80.0 sen), Petron Malaysia (+29.0 sen), Scientex (+27.0 sen), Heineken Malaysia (+20.0 sen) and SP Setia (+19.0 sen) ended positively. Meanwhile, Petronas-linked companies like Petronas Dagangan (+44.0 sen) and Petronas Chemicals (+14.0 sen) rallied, followed by PPB Group (+12.0 sen) and Tenaga Nasional (+10.0 sen). Axiata also notched a 12.0 sen gain on news of a significant expansion plan by its subsidiary, edotco Group Sdn Bhd.

• Asian stockmarkets closed mixed on Tuesday as geopolitical uncertainties continue to dampen market sentiment. The Nikkei (-0.6%) fell for the thirdstraight session with all of its eleven sectors in the red, while the Hang Seng index flatlined. The Shanghai Composite index, meanwhile, ended with minute gains, boosted by upbeat Chinese economic data. ASEAN stockmarkets also closed mixed on Tuesday’s close.

• U.S. stockmarkets were beaten down on Tuesday – led by renewed fears of a nuclear threat following North Korea’s sixth nuclear bomb test and uncertainties in the White House due to the lack of policy progress. The Dow (-1.1%) tanked on the back of losses in United Technologies (-5.7%), after the former sealed a deal to acquire Rockwell Collins for US$23.0 bln – the largest deal in the aerospace industry. On the broader market, the S&P 500 (-0.8%) and the Nasdaq (-0.9%) erased earlier gains to close in the red.

• Key European equities fell on the back of extended profit-taking activities amid persistent tension between North Korea and Washington. The FTSE declined 0.5%, weighed down by lower-than-expected services data and a stronger Pound, while the CAC lost 0.3%. The DAX, however, beat its regional peers and close 0.2% higher – led by gains in Merck (+1.9%) and Henkel AG & Co (+1.5%).

The Day Ahead

• Global equity market sentiments are staying meek and uncertain amid the heightened geopolitical concerns, which we think will also continue to dampen interest on Malaysian stocks. The weakness in most key global equity markets overnight will also permeate to the local stockmarket, further dampening confidence in the local market.

• Under the prevailing market environment, we see more near term downside risk as most market players will retreat to the sidelines, awaiting for a clearer market direction. Consequently, the sustained market weakness could send the key index retreating back to the 1,765 and 1,760 support levels.

• The lower liners and broader market shares are also expected to see weaker following with the ongoing uncertain market environment keeping most retail participants on the sidelines.

Company Briefs

• TRC Synergy Bhd has secured a RM760.6 mln contract from Prasarana Malaysia Bhd for package TD2 of the Light Rail Transit line 3 (LRT3) from Bandar Utama to Johan Setia. TRC’s wholly-owned subsidiary, Trans Resources Corporation Sdn Bhd, had on 29th August 2017 accepted the award from Prasarana for the construction and completion of Johan Setia depot (phase 2) and associated works for construction and completion of LRT3. (The Star Online)

• UEM Edgenta Bhd has accepted the takeover offer from WSP Global Inc for the purchase of its 61.2% stake in New Zealand-based Opus International Consultancy Ltd (Opus). WSP will purchase UEM Edgenta's stake, comprising of 90.5 mln shares in Opus for NZ$1.85 a share, for a total consideration of NZ$167.4 mln (RM512.5 mln) which includes the option for Opus to declare and pay a dividend of up to seven cents a share to its shareholders.

• The proposed disposal is an opportunity for UEM Edgenta to monetise its investment upfront at a healthy premium over the current market price and will enable the company to reduce its gross gearing from 0.8x (post drawdown of Sukuk of RM300mln in April 2017) to 0.4x. (The Star Online)
   
• LBS Bina Group Bhd will be buying Gerbang Mekar Sdn Bhd, the mall owner and operator of M3 Mall in Gombak for RM105.0 mln in cash and kind to enter the retail business. Gerbang Mekar has a paid-up capital of RM2.0 mln and its mall has a market value of RM107.0 mln. (The Edge Daily)

• The Sultan of Johor, Sultan Ibrahim ibni Almarhum Sultan Iskandar has bought an additional 2.5 mln shares in 7-Eleven Malaysia Holdings Bhd between 28th August 2017 and 30th August 2017. He first emerged as second largest individual shareholder in 7-Eleven in July 2017. The recent purchase has brought his stake in the convenience store chain to 9.2%. (The Edge Daily)

• Prestariang Bhd is investing up to A$5.0 mln (RM17.0 mln) cash to subscribe in new series “A” shares in Singapore-based online learning platform developer and services provider, OpenLearning Global Pte Ltd (OGPL). With the subscription, Prestariang plans to tap into OGPL’s existing customers of 66 educational institutions. (The Edge Daily)

• Three-A Resources Bhd has proposed to sell its 50.0% stake in Three-A (Qinhuangdao) Food Industries Co Ltd (TAQ) to its 15.7% shareholder Wilmar International Ltd for RMB5.0 mln (RM3.3 mln). The related party transaction is expected to be completed in 1H2018. The sale, however, will result in a divestment loss of RM0.7 mln for Three-A. (The Edge Daily)

• Kim Hin Industry Bhd has proposed to sell its two-level office building of approximately 3,611 sq.m. in Australia to Australia-based Ouson Pty Ltd for A$8.8 mln (RM29.9 mln) cash. It intends to utilise the sale proceeds for the purchase of an uncompleted property (Melbourne Square) for A$2.9 mln and for the group’s working capital. (The Edge Daily)

• Malaysia Airport Holdings Bhd’s (MAHB) subsidiary, Malaysia Airports (Niaga) Sdn Bhd (Eraman) is partnering Alipay to provide the digital payment method in all Eraman stores nationwide.

• The service will allow Eraman’s retail outlets in KLIA, klia2, as well as Kota Kinabalu, Kuching, Penang, Langkawi International Airport and Labuan Airport to tap into some 4.5 mln Chinese tourists visiting Malaysia annually. (The Edge Daily)  

Source: Mplus Research - 6 Sept 2017