Set For A Recovery

• The FBM KLCI (-0.4%) extended its losses yesterday as s selloff in selected index heavyweights escalated after U.S. equities were pressured overnight. Selling activities intensified amongst the lower liners – the FBM Small Cap (-1.5%), FBM Fledgling (-1.2%) and FBM ACE (- 2.5%) as they all extended their losses, while only the Finance sector (+0.1%) outperforming the negative broader market.

• Market breadth stayed negative as decliners overpowered advancers ratio of 3-to-1 stocks. Traded volumes slipped 8.8% to 1.98 bln shares as market participants retreated to the sidelines, spooked by the negative market sentiments.

• Half of the key index components were in the red, led by Nestle (-RM4.60), followed by Tenaga (-34.0 sen), DIGI (-7.0 sen), Astro (-7.0 sen) and Genting Malaysia (- 5.0 sen). Amongst the biggest decliners on the broader market include KESM Industries (-96.0 sen), Chin Teck Plantations (-40.0 sen), Petron Malaysia (-31.0 sen), Heng Yuan (-27.0 sen) and Inari (-27.0 sen).

• Once again, Far East Holdings (+44.0 sen) emerge as the broader market’s biggest winner, followed by Malaysia Airport Holdings (+12.0 sen), Alliance Bank (+9.0 sen), Shangri-La (+9.0 sen) and Sunsuria (+9.0 sen). Meanwhile, Public Bank (+6.0 sen), Telekom (+6.0 sen) IHH (+3.0 sen), Hap Seng Consolidated (+2.0 sen) and Hong Leong Financial Group (+2.0 sen) topped the big board advancers list.

• Asia benchmark indices closed mostly lower yesterday as the Nikkei (-0.5%) edged lower after recouping most of its intraday losses. The Shanghai Composite (-0.8%) also extended its losses after banking regulator has started inspecting loans to large clients. The Hang Seng Index (+0.3%), however, managed to outperformed its regional peers after recovering all its intraday losses. ASEAN stockmarkets, meanwhile, closed mostly lower yesterday.
• U.S. stockmarkets rebounded as the Dow rallied 1.7% overnight on speculation that President Donald Trump’s policies will not severely disrupt global trade and economic growth. On the broader market, the S&P 500 (+ 1.3%) recovered above the 2,600 psychological level, while the Nasdaq gained 1.0%
• Earlier, European stockmarkets – the FTSE (-0.4%), CAC (-0.3%) and DAX (- 0.8%), all trended lower are coming off their intraday low. Market sentiment was dented by the selloff in technology shares, coupled with the sluggish economic data where the Eurozone's IHS Markit Manufacturing for March 2018 fell to 8-month low to 56.6.

THE DAY AHEAD

• After a frail start to 2Q2018, we think stocks on Bursa Malaysia could stage a rebound over the near term as it takes cue from the overnight recovery on Wall Street.

• While a rebound in on the cards, we think the process could still be tentative as there remains considerable wariness over the mid-to-long term market outlook that is likely to result in many market players remaining on the sidelines until a more definitive market trend is established. At the same time, market players are also awaiting for the announcement for the next General Election to be called and market players are likely to stay cautious for now.

• Although the lower liners and broader market shares are beaten down, there are still few signs of a meaningful recovery as yet with many retail players staying on the sidelines. Therefore, we see any near term recovery to be mild amid the few available leads to encourage fresh buying.
• With the key index finding support at the 1,850 level, the next targets are at 1,860 and 1,870 levels. The support, meanwhile, is at the 1,840 level.

COMPANY BRIEF

• Vertice Bhd (previously Voir Holdings Bhd) has clinched sub-contract job worth RM218.5 mln in relation to upgrading works of the federal road from Gambang, Pahang, to Segamat, Johor. The contract was secured from Kumpulan Liziz Sdn Bhd, the main sub-contractor for the upgrading of the federal road known as Federal Road 12 (FR12) which was awarded by the Public Works Department.

• Vertice is responsible for the coordination, inspection, testing, commissioning as well as obtaining final approval for works completed on the proposed upgrading works of FR12 and the 13-month contract will commence from 9th April 2018 until 30th April 2019.

• Tien Wah Press Holdings Bhd is planning to seek shareholders' approval to provide financial assistance of up to RM250.0 mln to a joint-venture company (JVco) and to diversify its business into property development and investment. The JVco Lum Chang Tien Wah Property Sdn Bhd (LCTWP) was established by Tien Wah and Lum Chang Holdings Ltd (LCH) on a 50:50 ownership basis to undertake the proposed redevelopment of its factory site along Jalan Semangat in Petaling Jaya into a mixed-use commercial project.
• Subsequently, Tien Wah has proposed to provide the aid in two ways, firstly in the form of cash advances to subscribe for up to RM100.0 mln worth of the LCTWP’s shares and secondly to provide guarantee, indemnities and collaterals for the LCTWP to obtain banking facilities of up to RM150.0 mln — which is in proportion to Tien Wah's stake in LCTWP.
• Bina Puri Holdings Bhd will collaborate with Sabah state investment arm, Warisan Harta Sabah Sdn Bhd to build two small hydropower sites in Tuaran and Kota Belud, Sabah. The group has signed a Memorandum of Understanding (MoU) with Warisan Harta Sabah on 29th March 2018 to work together on the proposed development of the hydropower sites, which are expected to have capacity of 5.0 megawatts (MW) and 3.5 MW respectively.

• MyEG Services Bhd has entered into a preliminary agreement with Johor's state investment firm, Johor Corp to explore the possibility of buying or leasing a piece of land located within the state's Muar Furniture Park. Both parties have entered into a MoU which will facilitate the discussion of the terms and conditions of the proposed option to purchase or lease a piece of land situated in Muar Furniture Park.

• Lee Swee Kiat Group Bhd has proposed to adopt a dividend payout policy of not less than 30.0% of its net profit starting from 2017. The payout will be in the form of cash or share dividend in equivalent market value.

• The Court of Appeal has allowed the main contractor for the Penang International Airport 2010 and 2011 upgrading works, Syarikat Pembinaan Anggerik Sdn Bhd (SPASB), to continue its legal action in relation to a RM44.0 mln claim against Malaysia Airports Holdings Bhd (MAHB).

• To recap, SPASB filed a suit against MAHB last April for a sum of RM44.0 mln and other claims on damages and interest, in respect of losses and damages pertaining to development and upgrading works at the Penang airport.

• UMW Holdings Bhd (UMWH) said that it is not certain that it will extend the proposed mandatory offer for all the remaining MBM Resources Bhd (MBMR) shares it does not already own. The group also said that an announcement will be made when there are material developments relating to the proposed MBMR acquisition.

Source: Mplus Research - 4 Apr 2018