A Pullback Beckons

• The FBM KLCI (+0.6%) continued its upward trajectory, lifted by buyingsupport in selected banking heavyweights. On the contrary, all the lower liners retreated, together with majority of the broader market stocks against a backdrop of potential global trade wars.

• Market breadth was still bearish as decliners outweighed advancers on a ratio of 518-to-365 stocks. Traded volumes also fell marginally by 2.5% to 2.29 bln as investors retreat to the sidelines on lingering concerns over the imposition of tariffs on Chinese goods by the U.S.

• Main Board outperformers include prominent banking players like Hong Leong Bank (+52.0 sen), Public Bank (+36.0 sen) and Maybank (+14.0 sen), followed by Nestle (+RM9.20) and PPB Group (+14.0 sen). Other gainers were Fraser & Neave (+RM1.30), BAT (+18.0 sen), Kossan Rubber (+14.0 sen), PPB Group (+14.0 sen) and Shangri-la Hotels (+14.0 sen).

• On the other hand, Globetronics (-34.0 sen), Dutch Lady (-22.0 sen), KESM Industries (-18.0 sen), Hengyuan Refining (-17.0 sen) and Aeon Credit Service (-16.0 sen) underperformed its broader market peers. Meanwhile, Petronas-linked companies like Petronas Dagangan (-16.0 sen) and Petronas Chemicals (-8.0 sen) were amongst the notable key-index losers, alongside MISC (-10.0 sen), IHH Healthcare (-7.0 sen) and Digi (-4.0 sen).

• Key regional stockmarkets were southbound amid global political uncertainties. The Nikkei (+1.0%) bucked the general sentiment, however, lifted by gains in the mining and energy sector. However, the strength in energy stocks was not enough to support the Hang Seng Index which fell 1.1% to 31,071.1 points. The Shanghai Composite also closed down by 0.5% yesterday, alongside most of ASEAN stockmarkets.
• Key U.S. bourses were splashed in red on fears of a potential U.S.-China trade war sparked panic selling on Wall Street yesterday. The Dow (-2.9%) was beaten down, closing below the 24,000 psychological level, while the Nasdaq finished 2.4% lower amid the ongoing weakness in Facebook. The S&P 500 (- 2.5%) also slipped into the negative territory, erasing its YTD gains.
• European stocks also took a beating, taking cue from the selldown in Wall Street amid rising fears of trade conflicts which could erode global economic growth. The FTSE (-1.2%) retreated after the Bank of England signalled a potential interest rate hike which could impact corporate profits. The DAX (-1.7%) and the CAC (-1.4%) also weakened on Thursday’s closing bell as investors digested weaker-than-expect Eurozone manufacturing and services data.

THE DAY AHEAD

• After five consecutive sessions of gains that was brought about by selected institutional support on key index stocks, we see the market staging a pullback over the near term in tandem with the overnight rout on Wall Street after President Trump imposed tariffs on Chinese made goods. This has raised the specter of a full blown trade war which could be detrimental to the global economic growth in due course.

• Correspondingly, the Malaysian economy will also be affected given the strong trade flows with the two countries as the higher prices will lead to reduced demand for Malaysia’s output.

• With the escalating uncertainties, we see the key index taking a steep dive, potentially back to the 1,850 support level over the near term as market players will be quick to lock-in profits. We think the above level will hold for now, but if it gives way, the next support is at the 1,840 level. Meanwhile, the key resistance is at the 1,880 level.

• On the broader market and among the lower liners stocks, market interest remains insipid and with fresh buying still elusive, the downward pressure will continue to dominate trades – potentially sending most stocks to end lower at the end of the week.

COMPANY BRIEF

• Advancecon Holdings Bhd has bagged a RM370.0 mln contract from West Coast Expressway Sdn Bhd to build part of the West Coast Expressway stretching from the Assam Jawa interchange to the Tanjung Karang interchange. Under the contract, Advancecon's scope of work includes earthworks, ground treatment works, drainage and box culverts, pavements, bridges, road furniture, erosion sediment and control plan, environmental protection and enhancement.

• The contract period is for a period of 30 months commencing from the date of site possession which will be determined later. (The Star Online)

• Eversendai Corporation Bhd is confident that its first completed liftboat, Vahana Aryan will secure a charter contract within the next two to three months as demand for liftboats is overwhelming supply worldwide. Eversendai has launched the sea trial of Vahana Aryan, which has a capacity to accommodate 200 men with a 300-tonne crane for servicing wellhead platforms in the oil and gas industry. The current mismatch of demand and supply of liftboats in the oil and gas industry also opens up an opportunity for Eversendai to command a respectable level in liftboat charter rates. (The Edge Daily)
• UMW Holdings Bhd (UMWH) has received the Securities Commission Malaysia approval for its proposed of Perpetual Sukuk Issuance Programme worth RM2.00 bln in nominal value. The issuance of the Perpetual Sukuk is expected to improve its borrowings structure by enabling the group to access the capital markets for longer tenure funding.
• Proceeds from the exercise would be used by the group to finance its debt obligations and/or capital requirements, investments, general corporate purpose and capital expenditure. (The Edge Daily)

• Ann Joo Resources Bhd has announced that holders of its Redeemable Convertible Cumulative Preference Shares (RCPS) have until 5.00pm on 11th April 2018 to submit their conversion notice form to convert the RCPS into ordinary shares. This is also to enable the ordinary shares to be entitled for the steel manufacturer's dividend of 13.0 sen a share, which will be paid on 21st May 2018. (The Edge Daily)

• Bina Puri Holdings Bhd and Titijaya Land Bhd have entered into a new joint venture to develop a residential and commercial project on an 11.2 ac. land adjacent to the monorail depot in Brickfields on 21st May 2018. (The Edge Daily)

• Muhibbah Engineering (M) Bhd’s 49.0%- owned joint-venture company has won an RM32.7 mln contract on the Light Rail Transit Line 3 (LRT3) project. Muhibbah is tasked to design, supply, install and test the noise barrier for the line that links Bandar Utama in Petaling Jaya with Klang. The construction works will start immediately and are expected to be completed by 4Q2019. (The Edge Daily)

Source: Mplus Research - 23 Mar 2018