• The FBM KLCI (+0.2%) halted a streak of five consecutive sessions of decline, lifted by the robust 3Q2017 GDP data that expanded 6.2% Y.o.Y. Despite that, the key index fell 1.2% W.o.W, dragged down by the earlier weakness. The lower liners – the FBM Small Cap (+0.5%), FBM Fledgling (+0.2%) and FBM ACE (+1.0%), all rebounded, while the broader market ended mixed.

• Market breadth turned positive as advancers pipped decliners on a ratio of 418-to-408 stocks. Traded volumes, however, fell 9.4% to 2.21 bln shares as investors opt to wait for fresh leads.

• Genting (+28.0 sen) anchored the FBM KLCI advancers list, followed by Axiata (+10.0 sen), KLCC (+10.0 sen), Wesports (+9.0 sen), CIMB (+8.0 sen) and RHB Bank (+8.0 sen). Notable gainers on the broader market were KESM Industries (+24.0 sen), Petron Malaysia (+20.0 sen), United Plantations (+20.0 sen) and Grand Hoover (+19.0 sen). Kejuruteraan Asastera added 5.0 sen on its debut on Bursa Malaysia.

• In contrast, amongst the biggest decliners on the broader market were Nestle (-RM1.60), MPI (-60.0 sen), Allianz (-40.0 sen), Sungei Bagan Rubber (-29.0 sen) and LPI Capital (-12.0 sen). Key losers on the big board include Petronas Gas (-54.0 sen), Hong Leong Financial Group (-12.0 sen), MISC (-10.0 sen), PPB Group (-6.0 sen) and Public Bank (-6.0 sen).

• Japanese equities extended their gains last Friday as the Nikkei added 0.2% after Prime Minister Shinzo Abe pledged to eliminate the country’s deflation situation through tax reforms and deregulation. The Hang Seng (+0.6%) closed at a fresh ten-year high level at 29,199.04 pts, but the Shanghai Composite (-0.5%) recorded its fourth straight session of decline. ASEAN stockmarkets, meanwhile, closed mostly higher.

• U.S stockmarkets registered their second consecutive weekly losing streak as the Dow fell 0.5% last Friday, dragged down by lingering concerns over the tax reform plan. On the broader market, the S&P 500 slipped 0.3% on weakness in utilities and technology sectors that fell 0.7% each, while the Nasdaq finished 0.2% lower.

• Earlier, European benchmark indices – the FTSE (-0.1%), CAC (-0.3%) and DAX (- 0.4%) all gave up their intraday gains to close in the negative territory, weighed by a stronger Euro currency against the U.S. Dollar. Investors are also eyeing on the meeting between European Union leaders and British Prime Minister Theresa May to on the Brexit fees.

The Day Ahead

• Although the FBM KLCI managed a break its downward streak with last Friday’s gains, the general market condition is still morbid with most market players still largely on a cautious mood. Nevertheless, we see the near term gains extending as the market continue to adjust from its bout of oversold and some of the bargain hunting activities persisting.

• Under the current market environment, we see the upsides continuing to be mild with the gains likely to be capped at around the 1,725 and 1,730 levels. The buying will still be selective and quick profit taking activities will temper the market’s gains, in our view. In the meantime, the 1,720 level will serve as the near term support level, followed by the key support level at 1,700 points level.

• On the broader market and among the lower liners, there should also be further near term plays as retail players adopt hit-and-run tactics on selected stocks. However, the gains will also be curtailed by the quick profit taking activities.

Macro Brief

• Malaysia's economy, as measured by gross domestic product (GDP), expanded 6.2% Y.o.Y in 3Q2017, driven by domestic demand, particularly in the private sector spending.

• On a seasonally-adjusted basis, the economy grew by 1.8% Q.o.Q. Meanwhile, headline inflation moderated to 3.8%, mainly due to lower transport inflation.

Comments

• Once again, the data exceeded economist estimates, this time it the forecast was for a 5.8% Y.o.Y growth. Domestic demand strength continues to beat expectations that are fueled by a strong trend in consumer spending. At the same time, the external sector is also humming that augmenting the overall positivity in the Malaysian economy.

• Going into the final quarter of the year, the upbeat tone is expected to persist with the combination of export and domestic growth to continue spurring the country’s economy, riding on the sustained global economy recovery.

• However, inflation is again likely to erode some of the growth as the higher fuel cost of late could dampen some of the domestic spending.

• Given the strength of the economy YTD, the Malaysia GDP should exceed the official forecast of 5.0%-5.5% for the year.

Company Brief

• Newly- ACE Market listed electrical and mechanical engineering firm Kejuruteraan Asastera Bhd (KAB) aims to reach an orderbook value of RM250.0 mln by end-2017.

• Currently, its orderbook stands at RM210.0 mln, which is expected to last till 2019 and the group is also tendering for projects worth RM250.0 mln. (The Edge Daily)

• MRCB-Quill REIT’s (MQReit) 3Q2017 net profit rose 38.1% to RM21.4 mln from RM15.2 mln a year earlier, in-tandem with higher revenue, which was 36.7% Y.o.Y higher at RM44.9 mln, from RM32.8 mln in the same quarter last year.

• Meanwhile, cumulative 9M2017 net profit also gained 45.1% Y.o.Y to RM66.6 mln, from RM45.9 mln, while revenue grew 38.1% Y.o.Y to RM135.1 mln against RM97.8 mln previously. (The Edge Daily)

• Tenaga Nasional Bhd (TNB) is inked a joint-venture (JV) agreement to build a 4MW mini hydropower station in Sungai Tersat, Kuala Berang, Terengganu. The group also aims to seek further potential sites for small hydropower development in Malaysia, subject to obtaining a favourable Feed-in Tariff (FiT) scheme.

• TNB signed a shareholders' agreement with Metrosphere Sdn Bhd to form the JV, which will be 49.0%-owned by TNB, while the remainder is held by the latter. The hydropower station is scheduled to be completed by the end of 2019 and will raise TNB's small hydropower installed capacity from 18. MW to 22.0MW. (The Star Online)

• Far East Holdings Bhd registered a 27.0% Y.o.Y fall in its 3Q2017 net profit to RM50.4 mln in, from RM69.4 mln, dragged down by higher operating expenses and lower share of profit from associates, while revenue for the quarter rose 44.3% Y.o.Y to RM143.3 mln, from RM99.4 mln in 3Q2016.

• For its cumulative 9M2017, net profit added 26.0% Y.o.Y to RM107.9 mln, from RM85.4 mln, while revenue grew 40.0% Y.o.Y to RM336.2 mln, from RM240.1 mln. Subsequently, Far East has also declared a single interim dividend of 10.0 sen per share, payable on 19th December, 2017. (The Star Online)

• IOI Corp Bhd's 1QFY18 net profit jumped 3.4x to RM360.0 mln from RM104.8 mln in the previous corresponding period – helped by net foreign currency translation gain on foreign currency denominated borrowings and lower fair value loss on derivative financial instruments from its resource-based manufacturing segment. Revenue, however, shrunk 5.3% Y.o.Y to RM2.21 bln, from RM2.33 bln previously. (The Star Online)

• OSK Ventures International Bhd (OSKVI) recorded a 3Q2017 net loss of RM15.1 mln, from a net profit of RM5.5 mln a year ago, mainly due to lower income earned and net fair value loss on its financial instruments, although revenue more than doubled to RM22.8 mln, from RM9.6 mln last year.

• The cumulative 9M2017’s net profit, however, jumped more than nine times to RM29.2 mln, from RM3.07 mln in 9M2016, while revenue almost tripled to RM74.0 mln from RM27.2 mln in the same period a year earlier. (The Edge Daily)

• Heng Huat Resources Group Bhd has reported a fire incident at its production plant in Gua Musang, Kelantan, but assured that the assets are covered by insurance. Consequently, Heng Huat expects its operations to fully resume within two weeks. (The Star Online)

• GuocoLand (Malaysia) Bhd‘s 70.0%- owned Guoman Hotel & Resort Holdings Sdn Bhd (GNHR) is selling its equity interests in PD Resort Sdn Bhd and JB Parade Sdn Bhd to its Singaporean counterpart for RM223.9 mln cash. (The Edge Daily)  

Source: Mplus Research - 20 Nov 2017