A Mild Rebound

• Selling pressure on the local bourse intensified yesterday as the FBM KLCI (- 1.9%) sank for the third straight session to close at its lowest level since earlyFebruary 2018. The lower liners were also not spared from the selloff as the FBM Small Cap (-6.0%), FBM Fledgling (-3.7%) and FBM ACE (-7.1%) all tumbled, while broader market was splashed in red as the technology sector (-7.0%) took the heaviest beating.

• Market breadth was undoubtedly negative as decliners trounced advancers on a ratio of 10-to-1 stocks. Traded volumes, however, jumped 73.1% to 3.28 bln shares as market participants scrambled to unwind their position amid the negative market sentiment.

• Nestle (-RM1.00) remained as the biggest index-linked decliner, followed by banking giants like Hong Leong Financial Group (- 70.0 sen), Hong Leong Bank (-68.0 sen), CIMB (-30.0 sen) and AmBank (-26.0 sen). Significant decliners on the broader market were KESM Industries (-RM3.06), Dutch Lady (-RM1.60), Petron Malaysia (- RM1.19), Heng Yuan (-RM1.00) and Inari (-RM1.00).

• On the flipside, Quality Concrete (+14.5 sen) Riverview Rubber (+8.0 sen), UMS Neiken Group (+7.5 sen), Innity Corporation (+7.0 sen) and Rapid Synergy (+7.0 sen) topped the broader market gainers list. There were only three advancers on the big board – MISC (+7.0 sen), Tenaga (+6.0 sen) and Astro (+3.0 sen).

• Japanese equities rebounded yesterday as the Nikkei added 0.1%, taking cue from the improvement in Wall Street. The Shanghai Composite (-0.2%), however, erased all its intraday gains after China retaliates on U.S. trade tariff implementations, while the Hang Seng Index slumped 2.2% to close below the 30,000 psychological level. ASEAN stockmarkets, meanwhile, closed mostly lower yesterday.
• Wall Street ended higher overnight as the Dow (+1.0%) swung into the positive territory after U.S. President Donald Trump and China officials leave the door open for trade negotiations. On a similar note, the broader market also recouped all their intraday losses as the S&P 500 rose 1.2%, while the Nasdaq surged 1.5% to close above the 7,000 psychological level.
• Earlier, European stockmarkets closed mostly lower after recovering most of their intraday losses amid signs of positive developments in U.S/China trade relations. The DAX (-0.4%) slipped below the 12,000 psychological level, while the CAC declined 0.2%. The FTSE (+0.1%), however, outperformed its peers, lifted by buying support in defensive sectors.

THE DAY AHEAD

• Yesterday’s frailty was in response to the trade war rhetoric between China and the U.S and with the parties indicating potential leeway in the tariff negotiations, we think there is room for Malaysian stocks to stage a recovery from their frail start to 2Q2018. At the same time, the recent weakness has already left many stocks oversold, paving the way for some recovery prospects.

• Still, we think any rebound will be modest given that the general market environment is broadly cautious after the recent weakness has left many market players on the sidelines. Furthermore, we see the potential selling into strength and quick profit activities to curtail the recovery prospects as market players remain wary over the timing of the next General Election. This also means that the broader market and lower liners could also see limited upside potential over the near term as retail participants may continue to avoid the market for now.
• With the key index falling below the 1,850 level to find support near its 1,810 level, the resistances are now pegged at 1,820- 1,827 levels, followed by the 1,840 level. The supports are at the 1,806 level and the 1,800 psychological level.

COMPANY BRIEF

• Lysaght Galvanized Steel Bhd reported that the CKH and LIK Family Sdn Bhd have emerged as its ultimate holding company, with an aggregate equity stake of 74.2%. CKH and LIK Family are jointlyowned by Annie Chew Meu Jong (eldest daughter of the group’s founder, Chew Kar Heing), her mother Lim Lee Kuan, her daughter Deborah Ho Mun Sook and uncle Chew Kar Hoo.

• Previously, Lysaght was 55.1%-owned by Lysaght (M) Sdn Bhd, which in turn was 51.6%-owned by Chew Bros (M) Sdn Bhd. Chew Bros was thus the ultimate holding company of Lysaght. However, CKH and LIK Family have now emerged as the ultimate holding company, following a transfer of shares in Chew Bros by the estate of Kar Heing and his widow Lim, effectively raising its stake in Chew Bros to 74.2% from 42.8%. (The Edge Daily)

• Seacera Group Bhd has aborted its plan to acquire a 70.0% shareholding in construction and civil engineering firm, Teras Sari Resources Sdn Bhd that was announced on 22th February 2018. To recap, the group previously announced that it has signed a heads of agreement to acquire shares in Teras Sari from LT Century Development Sdn Bhd and LTC Holdings Sdn Bhd for RM35.0 mln via the issuance of 35.0 mln new Seacera shares. (The Star Online)
• Bertam Alliance Bhd has been classified as an affected listed issuer under Practice Note 17 (PN17) after Bursa Malaysia rejected its application for a waiver after taking into consideration the winding-up order against its wholly-owned unit Bertam Development Sdn Bhd (BDSB), which accounts for at least 50.0% of the company’s total assets.
• Although BDSB had appealed against the winding-up order, there is no certainty that the order can be set aside in the near future. (The Edge Daily)

• Datasonic Group Bhd has announced that the pioneer status of its whollyowned unit, Datasonic Smart Solutions Sdn Bhd has been extended for another five years, thus exempting the group’s statutory income from approved activities from being taxed, from 18th May 2017 until 17th May 2022. (The Star Online)

• Hiap Teck Venture Bhd is planning to sell its 20.0% stake in Eastern Steel Sdn Bhd for RM139.3 mln to Shanxi Jianlong Industry Co Ltd. Eastern Steel is principally involved in manufacturing, selling, and dealing of steel products using blast furnace plant, but operations has been on hold since October 2015 to minimise losses due to difficult market conditions.

• The joint-venture (JV) company was owned by Hiap Teck, Orient Steel Investment Pte Ltd and Chinaco Investment Pte Ltd holding 55.0%, 40.0% and 5.0% equity shareholdings respectively.

• The disposal will see Hiap Teck’s stake reduced to 35.0%, from 55.0% via an equity and debt transfer to China-based steel producer Jianlong. The contract, which was signed on 3th April 2018, also includes the shareholders' advances made by Hiap Teck to Eastern Steel, which totalled RM625.6 mln as of 28th February 2018. (The Star Online)

• Top Glove Corp Bhd has completed the acquisition of Aspion Sdn Bhd thus, positioning itself as the world’s largest surgical glove manufacturer.

• The Aspion acquisition will add three manufacturing facilities with 75 lines and a capacity of 4.77 bln pieces of gloves annually, which will see Top Glove now operating a total of 37 factories with 618 production lines and a capacity of 57.24 bln pieces of gloves per annum. (The Star Online)

Source: Mplus Research - 5 Apr 2018