Base Building To Sustain

• Tracking the positive developments on Wall Street overnight, coupled with the recovery in key regional indices, the FBM KLCI (+0.1%) extended its gains last Friday and allowing the key index to gain 0.2% W.o.W. The lower liners – the FBM Small Cap (-0.3%), FBM Fledgling (-0.1%) and FBM ACE (-0.3%), however, all retreated, while the broader market ended mixed.

• Market breadth remained negative as losers outnumbered gainers on a ratio of 490-to-327 stocks, while 401 counters flatlined. Traded volumes, however, added 1.9% to 1.84 bln shares as signs of bargain hunting activities emerged.

• Half of the key index constituents advanced, led by BAT (+46.0 sen), followed by Hong Leong Financial Group (+18.0 sen), RHB Bank (+13.0 sen) Sime Darby Plantations (+13.0 sen) and Public Bank (+6.0 sen). Consumer products giants like Ajinomoto (+82.0 sen), Dutch Lady (+36.0 sen) and Carlsberg (+10.0 sen) advanced, while Apex Healthcare added 28.0 sen. Acoustech added 2.0 sen after it is disposing its loss-making audio business.

• On the flipside, the biggest decliners on the broader market include Nestle (- RM2.94), Malaysian Pacific Industries (- 28.0 sen), Lafarge Malaysia (-25.0 sen) and Panasonic (-20.0 sen). Sapura Energy sank 13.5 sen after reporting a weak set of quarterly results. Meanwhile, big board decliners were Petronas Gas (- 10.0 sen), DiGi (-9.0 sen), Tenaga (-6.0 sen), KLCC (-6.0 sen) and Astro (-5.0 sen).

• Asia benchmark indices advanced last Friday as the Nikkei (+1.4%) extended its gains on stronger-than-expected 3Q2017 GDP data that expanded 0.6% Y.o.Y. The Hang Seng jumped 1.2% higher, while the Shanghai Composite gained, boosted by strong exports data. ASEAN stockmarkets, meanwhile, ended mostly higher.
• The stronger-than-expected jobs data, coupled with positive sentiments in Asian and European equities drove U.S. stockmarkets higher last Friday as the Dow added 0.3%. On the broader market, the S&P 500 and Nasdaq gained 0.6% and 0.4% respectively as technology shares advanced.
• Earlier, European benchmark indices - the FTSE (+1.0%), CAC (+0.3%) and DAX (+0.8%), all ended on a positive note after the United Kingdom and the European Union announced a breakthrough in the Brexit negotiations. Notable advancers include banking stocks like ABN Amro (+5.3%), Danske Bank (+4.6%) and Unicredit (+4.1%).

The Day Ahead

• We see the near term upsides continuing as the key index remains on a base building phase after its recent weakness. The build-up would also allow the key index to potentially set the stage for a year-end window dressing phase later in the month now that the FBM KLCI have seemingly found a base around the 1,710 and 1,720 levels.

• Still, we see the near term upsides staying on the mild side for now as market interest are still on the scant side with leads far and in between for market players to follow. Hence, the upside could be limited to the 1,725 and 1,730 levels. Support wise, the 1,720 level is the immediate support, followed by the 1,711 level.

• With the general market sentiment stabilising, there should be some renewed interest on the lower liners and broader market shares, but we continue to think that significant gains are hard to come buy as retail player are likely to adopt quick profits taking strategies and many market players already on their year-end holidays.

Company Brief

• AirAsia Bhd's Chief Executive Officer (CEO), Aireen Omar and Deputy CEO Tharumalingam Kanagalingam have relinquished their directorships in the low-cost carrier's board the 8th December 2017 to enhance corporate governance, although both will retain their Current Executive Positions as CEO and Deputy CEO respectively. Subsequently, the majority of the board will be represented by independent, NonExecutive Directors. (The Star Online)
• Fiamma Holdings Bhd is collaborating with four landowners to develop residential properties in Batu Pahat, Johor, that have a potential gross development value (GDV) of RM26.0 mln. Its 60.0%-owned unit, Pinang Sutera Sdn Bhd (PSSB) that is held under Fiamma Development Sdn Bhd, has entered into a joint-venture (JV) agreement with the four landowners, who own a quarter each of the 1.6-hectare plot of land.

• The proposed development will include thirty units of double-storey semidetached houses with an estimated buildup area of 2,800 sq. ft. each, subject to approval. (The Edge Daily)

• Bermaz Auto Bhd (BAuto) posted a 27.5% Y.o.Y decline in net profit to 2QFY19 RM22.2 mln, from RM30.6 mln last year, on lower sales and compressed margins from the clearing out of old Mazda CX-5 models. Further, a weaker Philippine peso and losses incurred by BAuto’s associate company, Mazda Malaysia Sdn Bhd (MMSB) had also dragged net profit down. Quarterly revenue, meanwhile, inched lower by 0.3% Y.o.Y to RM471.7 mln, from RM473.2 mln in the previous year, on the back of lower domestic sales volume of the Mazda2 model. (The Edge Daily)
• CCM Duopharma Biotech Bhd is partnering with Natco Pharma Ltd of India to commercialise a range of Hepatitis C products in Malaysia. The collaboration is to improve access and affordability for patients who cannot afford the high cost of treatment for Hepatitis C in the country.
• Moving forward, CCM Duopharma will consider localising the manufacturing of the Hepatitis C products through technology transfer if the volume requirements for the Malaysian market are substantial enough for local manufacturing or upon the government’s request. (The Edge Daily)

• JKG Land Bhd is partnering with ISY Holdings Sdn Bhd to jointly develop a 130-ac. leasehold land in Bukit Cherakah, Selangor into predominantly residential and commercial properties. Consequently, both parties have signed a conditional agreement for the proposed project. ISY had alienated the land from the District and Land Office of Petaling, Selangor in 2001, but the title for the land has not yet been issued by the relevant authorities. (The Edge Daily)

• Tenaga Nasional Bhd (TNB) is planning to acquire an information technology related services company from Setia Haruman Sdn Bhd, the master developer of Cyberjaya, for RM28.0 mln cash. The proposed acquisition will provide the strategic capability for TNB to further enhance its services to customers. (The Star Online)

• WCT Holdings Bhd has secured a contract worth RM211.5 mln, from Kuala Lumpur City Hall (DBKL) to undertake an elevated highway project from the interchange of Sprint Highway/Jalan Maarof to Sprint Highway/Jalan Semantan. The project is slated for commencement from 11th December 2017 and will include site clearance and demolition works, earthworks, drainage works, pavement works, road furniture and miscellaneous, elevated flyover and reinforced earth wall, retaining wall, street lighting and environmental protection works. (The Star Online)

• ManagePay Systems Bhd has inked an agreement with the Great Eastern group to provide electronic payment solutions and services to the insurer, although the value for the services was not disclosed. Both parties have signed a merchant agreement for a three-year service, in addition to a two-year renewable term. (The Edge Daily)

• Malayan United Industries Bhd's (MUI) major shareholder, Tan Sri Khoo Kay Peng will relinquish his position as CEO and be replaced by his son, Andrew Khoo Boo Yeow, effective 1st January 2018. Tan Sri Khoo, who holds 47.6% stake in the group, however, will remain as the Executive Chairman. (The Star Online)

Source: Mplus Research - 11 Dec 2017