Near Term Outlook Still Frail

• The absence of follow-through buying support from its previous session sent the FBM KLCI to linger in the negative territory for the entire trading session before closing 0.6% lower yesterday after Bank Negara has kept the Overnight Policy Rate (OPR) unchanged at 3.25%. The FBM Small (-2.3%) fell to its lowest level since February 2017, while both the FBM Fledgling (-1.7%) and FBM ACE (- 3.0%) sank as well. The broader market was splashed in red with the Technology sector (-3.3%) taking the heaviest beating.

• Market breadth was undoubtedly negative as losers hammered gainers on a ratio of 6-to-1 stocks. Traded volumes, however, gained 12.3% to 3.11 bln shares as selling pressure escalated.
• More than two-thirds of the key index components were in the red – dragged down by Petronas Dagangan (-52.0 sen), Press Metal (-2.0 sen), Petronas Gas (- 22.0 sen), KLCC (-19.0 sen) and PPB Group (-16.0 sen). Petrochemical refineries like Heng Yuan (-RM1.00) and Petron Malaysia (-70.0 sen) topped the broader market decliners list, followed by Kossan (-48.0 sen), Top Glove (-35.0 sen) and Ajinomoto (-34.0 sen).
• Breweries companies like Carlsberg (+50.0 sen) and Heineken (+16.0 sen) remained as the broader market biggest gainers, while Scientex and Toyo Ink climbed 16.0 sen and 8.5 sen each. Eita Resources added 5.0 sen after bagging three contracts for the Light Rail Transit Line 3 project. There were only three advancers on the big board – Genting Malaysia (+4.0 sen), Astro (+1.0 sen) and Axiata (+1.0 sen).

• Asia benchmark indices reversed their intraday gains as the Nikkei (-0.8%) retreated after the Japanese Yen appreciated to its highest level in 16- months against the Greenback. The Hang Seng Index slipped 1.0%, while the Shanghai Composite closed 0.6% lower on concerns over U.S. trade policies after the resignation of Gary Cohn, a strong White House advocate for free trade. ASEAN stockmarkets, meanwhile, closed in the red.
• U.S. stockmarkets retreated overnight as the Dow fell 0.3% after trimming most of its intraday losses as concern over potential trade war eased. On the broader market, the S&P 500 declined 0.1%, dragged down by the consumer staples sector (-0.9%), but the Nasdaq finished 0.3% higher.
• Earlier, European benchmark indices – the FTSE (+0.2%), CAC (+0.3%) and DAX (+1.1%) all advanced for the third straight session after recovering their intraday losses. Market sentiment was cheered by the European Union proposal to impose duties on U.S. bourbon, peanut butter, cranberries and orange juice should President Donald Trump imposes tariffs on steel and aluminium.

THE DAY AHEAD

• The prognosis for a mild recovery yesterday was dashed by the weakerthan-expected market sentiments that are also leaving stocks on Bursa Malaysia on the wayside. The immediate market outlook remains dour as sentiments are likely to stay frail amid the threat of a looming trade war that could also scupper any quick recovery hopes.

• Still, we think the key index could be attempting to find a base after its recent weakness that has also left it on the frail side. Any recovery will be mild as market players are still wary of the market’s near term direction, while the downside risk still looms large as the weak market sentiments could still prod further selling as more market participants retreat to the sidelines until calmness returns.
• Consequently, we think the mixed-tolower market environment will remain a feature for longer with the 1,820-1,830 levels potentially coming into play. On the upside, there are resistances at the 1,840-1,850 levels.

COMPANY BRIEF

• Malayan Banking Bhd (Maybank) said the Monetary Authority of Singapore (MAS) has approved an application for its wholly-owned subsidiary Maybank Asset Management Group Bhd (MAMG) to acquire the entire shareholding in Singapore Unit Trusts Ltd (SUTL).

• The group has also received approvals for the proposed subscription by Permodalan Nasional Bhd (PNB) of 8.3 mln shares (or a 20.0% equity stake in MAMG). It said the approval by MAS is subject to the regulator being informed promptly when the proposals are effected. (The Edge Daily)

• JAKS Resources Bhd has decided to complete Tower A of the Pacific Star project in Petaling Jaya by 30th June 2018 as requested by Star Media Group Bhd. Tower A is one of two office towers in the Pacific Star project, which include three residential blocks and related developments with a gross development value of RM1.1 bln. (The Edge Daily)

• Taliworks Corp Bhd is being sued by Tenaga Nasional Bhd for a total of RM35.7 mln after receiving two writs of summons for outstanding payments of electricity bills. The first suit was for the outstanding sum of RM8.0 mln and the second for RM27.7 mln, both as at 31st January, 2018. Consequently, both cases have been fixed for case management on 2th April 2018 and 19th April, 2018 respectively. (The Edge Daily)
• SCH Group Bhd plans to diversify into the fertiliser business, a month after diversifying into the event equipment supply and rental activity. The group is acquiring an 83.3% equity interest in PK Fertilizers (Sarawak) Sdn Bhd for RM19.1 mln, from PK Fertilizers Sdn Bhd.
• The proposed acquisition will be paid in cash amounting to RM11.5 mln and the issuance of 40.0 mln new SCH shares at 19.0 sen per share. (The Edge Daily)

• Omesti Bhd has sold its 6.6% equity stake (or 90.0 mln shares) in Diversified Gateway Solutions Bhd for RM10.8 mln in the open market, from 21st December 2017 up until yesterday.

• The shares were sold at an average price of 10.0 sen-14.0 sen per share and are expected to reap a cumulative profit of RM4.2 mln. Net proceeds from the disposals will be used to pare down the group’s borrowings and for working capital purposes. (The Edge Daily)

• Atta Global Bhd is purchasing a property firm, Sungguh Gemilang Development Sdn Bhd for RM1.2 mln. The latter owns a 76,423 sq. ft. land in Penang which is intended to be developed into a mixed development project.

• The proposed acquisition includes the assumption of liabilities of RM10.9 mln, bringing the total consideration to RM12.0 mln. The group also said that the land was valued at RM12.5 mln, based on a valuation exercise by a valuer. (The Star Online)

• Hibiscus Petroleum Bhd's joint-venture (JV) in Australia has been granted a five-year renewal term ending 6th March 2023 for the VIC/P57 exploration at the Gippsland Basin.

• The JV company consists of Hibiscus’s indirect wholly-owned subsidiaries Carnarvon Hibiscus Pty Ltd and Gippsland Hibiscus Pty Ltd, as well as 3D Oil Ltd in which Hibiscus also owns a 13.0% equity stake, resulting in an effective interest of about 78.3% in VIC/P57. (The Star Online)

Source: Mplus Research - 8 Mar 2018