Bargain Hunting To Lift Market

• The FBM KLCI (-0.7%) started off the week on a dour note as the key index gapped down and subsequently took a beating to close 13.45 pts lower at 1,842.62 pts yesterday. The lower liners – the FBM Small (-1.9%), FBM Fledgling (-2.0%) and FBM ACE (-2.0%) all closed sharply lower, while only the Consumer Products (+0.2%) managed to close in the green on the broader market.

• Market breadth remains deprived as losers hammered winners on a ratio of 963-to-172 stocks. Traded volumes, however, rose 2.7% to 2.62 bln shares as the selling pressure intensified.

• Two-thirds of the key index components were in the red, led Hong Leong Bank (- 80.0 sen), followed by Press Metal (-50.0 sen), Petronas Dagangan (-36.0 sen), Telekom Malaysia (-18.0 sen) and KLCC (- 18.0 sen). Amongst the biggest decliners on the broader market were Heng Yuan (- RM1.80), Petron Malaysia (-80.0 sen), Tasek Corporation (-44.0 sen), MPI (-36.0 sen) and Bursa (-34.0 sen).

• Consumer Products stocks like Dutch Lady (+98.0 sen), BAT (+36.0 sen) and Carlsberg (+10.0 sen) anchored the broader market winners list, while Gamuda and Genting Plantations added 16.0 sen each. On the big board, Nestle (+RM2.00) remain as the biggest gainer, followed by Petronas Gas (+20.0 sen), KLK (+8.0 sen), Axiata (+4.0 sen) and Petronas Chemicals (+2.0 sen).

• Asia benchmark indices trended mostly lower yesterday as the Nikkei (-0.7%) retreated for the fourth straight session after the Nikkei Services PMI eased to 51.7 in February 2018 (from 51.9 in January 2018). The Hang Seng Index (- 2.3%) sank to below the 30,000 psychological level, dragged down by the weakness in financial (-2.3%) and property (-2.1%) sectors. ASEAN stockmarkets, meanwhile, closed mostly in the negative territory.
• U.S. stockmarkets reversed their intraday losses overnight as the Dow (+1.4%) recovered all its previous session losses after investors expect a less severe impact on President Donald Trump’s tariff implementation on steel and aluminium import. On the broader market, the S&P 500 gained 1.1% with all 11 major sectors closing in the green, while the Nasdaq finished 1.0% higher.
• European benchmark indices rebounded as investors shrugged off the political uncertainty in Italy. The FTSE and CAC climbed 0.7% and 0.6% each. Meanwhile, the DAX (+1.5%) recaptured the 12,000 psychological level after Chancellor Angela Merkel secured a fourth term after nearly six months of political deadlock.

THE DAY AHEAD

• Yesterday’s market rout was more severe than initially thought with the 1,850 level giving way on the back of more pronounced selling by foreign funds. As it is, foreign funds are continuing to lockin profits from their early year gains after the latest round of earnings reports saw many misses than hits, thereby leaving stock valuations tethering on the fairly valued side.

• Still, the recovery on most global indices overnight will provide some reprieve on local stocks and we see a positive trend on Malaysian stocks over the near term. Whilst we think the index-linked stocks could fare better on bargain hunting after yesterday’s weakness, the lower liners and broader market shares may fare lessthan-stellar as we still think the retail players will still be apprehensive about re-entering the market in a big way. Therefore, the recovery among the lower liners and broader market shares may be more muted.
• Meanwhile, we see the key index rechallenging the 1,850 level and if it gives way, the next resistance is at 1,860. The supports, meanwhile, are at the 1,820- 1,830 levels.

COMPANY BRIEF

• IOI Corp Bhd has declared a special dividend of 11.5 sen per share, together with an interim dividend of 4.5 sen per share, which is payable on 30th March 2018.This follows its strong 2QFY18 results reported earlier. (The Edge Daily)

• AirAsia Bhd has denied news that its Group Chief Executive Officer, Tan Sri Tony Fernandes will be resigning from the group to venture into the financial technology sector. The group also added that Fernandes remains committed to AirAsia and will continue to oversee its strategic direction and business operations. (The Star Online)

• YFG Bhd has secured a RM5.4 mln subcontract to install electrical systems for an office building in Ipoh. The project encompassed the supply of materials, labour, tools equipment including delivery, installation and testing & commissioning for execution of electrical system, installation of extra low voltage installation, and information and communication technology services. The project is expected to be completed in 16 months. (The Edge Daily)

• LBS Bina Group Bhd has inked a Heads of Agreement (HoA) with NWP Holdings Bhd to jointly-undertake a development project relating to the transformation of Zhuhai International Circuit (ZIC) in China, in which LBS has a 60.0% equity stake. LBS is also planning to subscribe 1.1 bln NWP shares (or 73.7% of equity stake), for a cash consideration of RM93.5 mln. The purchase price is at a 35.0% discount against NWP's closing price of 13.0 sen on 2nd March, 2018. (The Edge Daily)
• Lii Hen Industries Bhd is acquiring a plot of agricultural land in Muar for RM6.3 mln as part of its factory expansion plan. The 9.6 ac. land will be purchase from four individuals and the acquisition is expected to be completed within four months from the date of the S&P agreement. (The Star Online)
• Globetronics Technology Bhd is planning a one-to-two share split, followed by a bonus issue on the basis of one bonus share-for-every six split Globetronics shares. Consequently, the aforementioned proposals will increase Globetronics' issued share capital to between RM179.6 mln (or 666.3 mln shares) and RM206.0 mln (or 676.6 mln shares), subject to its outstanding employees' share option scheme options. Currently, the group’s issued share capital is RM155.8 mln (or 285.6 mln shares). (The Edge Daily)

• Prestar Resources Bhd is proposing to acquire an 8,304 sq. m. leasehold land in Shah Alam with buildings on-site for RM19.3 mln to expand its material handling equipment trading and services business. The group has signed an agreement with Skyhub Technologies Bhd for the acquisition

• The 99-year leasehold land is located in Kampung Melayu Subang and has a market value of RM20.0 mln based on an independent third-party valuation. (The Star Online)

Source: Mplus Research - 6 Mar 2018