More Downside Pressure

• The FBM KLCI (-0.6%) erased the previous day’s gains and closed in the red on Friday on escalating fears of rising trade protectionism by the U.S. and China. The key-index, however, added 1.0% W.o.W for the week on the back of strong foreign buying-support. The lower liners remained lackluster, while most of the broader market constituents were painted red with the exception of the Consumer Products (+0.9%) and Construction (+0.2%) sub-sectors.

• Market breadth was grim as losers continued to outrun winners by more than four-fold. Traded volumes also narrowed by 8.6% to 2.09 bln, in-tandem with the broad selldown in global equities.

• Hong Leong-affiliated companies like Hong Leong Bank (-50.0 sen) and Hong Leong Financial Group (-20.0 sen) led the blue chip gauge lower, alongside Hap Seng Consolidated (-22.0 sen), KLCC (- 22.0 sen) and Genting Malaysia (-14.0 sen). Some of the notable broader market laggards, meanwhile, include Panasonic Manufacturing (-44.0 sen), Hengyuan Refining (-43.0 sen), Petron Malaysia (- 35.0 sen), KESM Industries (-30.0 sen) and UMW Holdings (-30.0 sen).

• Sin stocks like Heineken Malaysia (+62.0 sen) and BAT (+16.0 sen) opposed the general sentiment on Friday, closing higher together with Kossan Rubber (+12.0 sen), Scientex (+12.0 sen) and Hartalega (+11.0 sen). Meanwhile, the only four key-index members which finished higher was Nestle (RM8.20), Sime Darby Plantations (+4.0 sen), IOI Corporation (+3.0 sen) and IHH Healthcare (+1.0 sen).

• Key regional equities were beaten down last Friday, in-tandem with a global selldown amid rising global trade conflicts. The Nikkei fell 4.5% to 20,617.9 points, dragged down by losses in materials-related stocks. The Hang Seng Index (-2.5%) and the Shanghai Composite (-3.4%) also retreated, while all the ASEAN stockmarkets were painted in red.
• Wall Street continued to trade on a downward bias, driven by risk-off sentiments on heightened potential of global trade wars. The Dow (-1.8%) extended its losses for the third consecutive session with all of its constituents but Boeing (+0.4%) and Nike (+0.3%) in the red. Meanwhile, the Nasdaq (-2.1%) and the S&P 500 (-2.4%) also finished sharply lower.
• Earlier, major European indices retreated for the third-straight day as investors dumped risky assets in view of rising U.S.-China tensions after Washington unveiled its plan to impose tariffs on US$50.0 bln worth of Chinese imports. The FTSE dropped 0.4%, dragged down by losses in Smiths Group, after the latter reported softer-than-expected quarterly results. The DAX and the CAC also follow suit, losing 1.7% and 1.4% respectively on Friday’s closing bell.

THE DAY AHEAD

• The immediate market outlook remains dour after last Friday’s weakness and the continuing weakness in global equity indices. Therefore, there could be followthrough selling over the near term as the Malaysia economy’s growth risk has risen amid the threat of a trade war between the U.S. and China that could also affect the demand for Malaysian made goods as well.

• On the downside, the 1,850 level remains the key support for now, with the 1,860 level serving as the intermediate support. Meanwhile, the 1,870 and 1,880 levels are the near term resistances.
• There will be no quick reprieve for the lower liners and broader market shares amid the broadly negative market undertone. Consequently, the downside bias remains in play with stocks in the FBM Small Cap, Mesdaq and FBM Fledgling indices likely to ease further in the near term as retail players continue to stay on the sidelines.

COMPANY BRIEF

• Hai-O Enterprise Bhd’s 3QFY18 net profit rose 25.3% Y.o.Y to RM19.3 mln, lifted by exceptional performance of its wholesale division. Revenue for the quarter, however, fell 3.8% Y.o.Y to RM103.1 mln.

• For 9MFY18, cumulative net profit grew 42.8% Y.o.Y to RM58.6 mln. Revenue for the period climbed 22.9% Y.o.Y to RM351.1 mln.(The Star Online)

• Gamuda Bhd‘s 2QFY18 net profit added 25.0% Y.o.Y to RM224.0. Revenue for the quarter gained 17.1% Y.o.Y to RM1.00 bln.

• For 1HFY18, cumulative net profit improved 24.7% Y.o.Y to RM441.8 mln. Revenue for the period increased 30.1% Y.o.Y to RM1.77 bln. (Bernama)

• Lay Hong Bhd is investing in a new pasteurised liquid eggs processing facility in Iskandar Halal Park in Pasir Gudang, Johor, to cater to demand from the southern region and Singapore as well as to address logistical costs. Lay Hong will be investing some RM16.6 mln to set up the facility. The investment includes the RM5.2 mln it has spent to buy a semi-detached factory in the halal park, to be converted into the said facility. (The Edge Daily)

• Melati Ehsan Holdings Bhd has obtained a money-lending license from the Housing and Local Government Ministry. The new business includes that of money-lending, financial agents and financiers in general. The license, renewable every two years and is valid until 14th March 2020. (The Edge Daily)

• Pesona Metro Holdings Bhd has secured a contract worth RM216.4 mln to build 1,260 affordable apartment units in Bukit Jalil. The contract was awarded by GDP Architects Sdn Bhd, which is 68.0% owned by Chin May Yong, who is the spouse of Pesona Metro's major shareholder and NonExecutive Director, Wie Hock Kiong.

• The project comprises two 42-storey apartment buildings and an eight-floor carpark lot. The duration of the project is 32 months commencing 1st July 2018. (The Edge Daily)

• Astino Bhd’s 2QFY18 net profit tumbled 32.5% Y.o.Y to RM8.2 mln, owing to higher allowance for the diminution in value of inventories. Revenue for the quarter, however, improved 7.8% Y.o.Y to RM144.3 mln.

• For 1HFY18, cumulative net profit was flat at RM17.7 mln. Revenue for the period, however, added 14.5% Y.o.Y to RM283.1 mln. (The Edge Daily)

Source: Mplus Research - 26 Mar 2018