Still A Wretched Environment

• The FBM KLCI extended its losing streak with more than half of its constituents closing in the red as the tit-for-tat trade dispute between Washington and Beijing send investors scuffling out of emerging markets in exchange for safe-haven assets. All of the lower liners also retreated amid a mostly negative broader market.

• Market breadth was bearish as losers overwhelmed the winners on a ratio of 673-to-226 stocks. Traded volumes, however, jumped by 20.9% to 2.31 bln on heavy selling-pressure amid the risk-off sentiment.

• Significant blue-chip decliners were banking stocks like Public Bank (-64.0 sen), Hong Leong Financial Group (-56.0 sen) and Maybank (-27.0 sen), followed by Petronas Dagangan (-34.0 sen) and PPB Group (-28.0 sen). United Plantations (-66.0 sen), Panasonic Manufacturing (-62.0 sen), KESM Industries (-46.0 sen), Allianz Malaysia (- 30.0 sen) and Sam Engineering (-27.0 sen) weighed on the broader market.

• Meanwhile, broader market counters which bucked the generally bearish sentiment were Heineken Malaysia (+46.0 sen), Chin Teck Plantations (+25.0 sen), Apex Healthcare (+22.0 sen), Dutch Lady (+20.0 sen) and Hong Leong Industries (+16.0 sen). Meanwhile, IOI Corporation (+5.0 sen) was the only survivor among the broad decline in the local stockmarket yesterday.

• Mainland Chinese stockmarkets took a beating as the U.S.-China trade conflict intensified after President Donald Trump upped the ante by threatening to slap more tariffs on US$200.0 bln worth of Chinese imports. The Shanghai Composite index (-3.8%) closed at record low last seen in June 2016, while the Hang Seng erased 2.8%, closing at 29,468.2 points. The Nikkei also closed in the red, pressured by strengthening Yen as investors fled to safe haven assets. Unsurprisingly, most of the ASEAN stockmarkets were also on a downward spiral on Tuesday.

• Major U.S. benchmark indices continued to see selling pressure on Tuesday, amid rising bond yields and weakness in exporters which operates in China. The Dow (-1.2%) recorded its longest losing streak since March last year, dragged down by Boeing (-3.8%). On the broader market, the S&P 500 and the Nasdaq fell 0.4% and 0.3% respectively, in-tandem with losses in chipmakers amid worries of increased regulatory scrutiny and heightened hostility from Beijing following the recent trade scuffle.

• Tracking the bearish sentiments in global stockmarkets, European equities finished broadly in the negative territory amid rising risk aversion on renewed concerns of a potential trade war. Mining companies pulled the FTSE 0.4% lower. Meanwhile, Germany’s DAX and France’s CAC also narrowed 1.2% and 1.1% respectively amid the ongoing geopolitical uncertainties.

The Day Ahead

• There appears to be little reprieve for global stocks amid the heightened possibility of a trade war that could curtail global trade and potentially sent many economies into a tailspin in due course. As a result, market sentiments are taking a severe beating with many investors switching to safe haven assets.

• We think the above trend is likely to persist as anxieties over the trade war possibility will continue to dampen market interest, albeit many stocks are already oversold. Unless the trade war concerns dissipate, we expect the market to remain volatile with the downside bias remaining. On the FBM KLCI, the 1,700 points level is now in play after the 1,720 level failed to hold. Still, we see further near term weakness on Malaysian stocks as foreign investors are still trimming their shareholding with the selling topping RM7.0 bln since the May 9 election.

• If the 1,700 level fails to hold, the next support is at the 1,691. The other resistance above the 1,720 level is at 1,735. Meanwhile, we also see the lower liners and broader market shares enduring another round of volatile trade amid the ongoing wretched market condition.

COMPANY BRIEF

• Top Glove Corporation Bhd’s 3QFY18 net profit rose 51.3% Y.o.Y to RM117.6 mln after sales volume rose to a record high stemming from demand growth, particularly from Asia. Revenue for the quarter climbed 26.6% Y.o.Y to RM1.10 bln.

• For 9MFY18, cumulative net profit added 41.8% Y.o.Y to RM332.0 mln. Revenue for the period grew 19.6% Y.o.Y to RM3.00 bln. An interim dividend of 7.0 sen per share was declared (The Star Online)

• Lay Hong Bhd has allocated RM39.0 mln as capital expenditure for FY19 and is to be utilised to increase broiler production. The integrated livestock farming company planned to increase broiler production capacity to 2.0 mln birds monthly, from the current 1.2 mln. (Bernama)

• GSB Group Bhd has appointed Datin Toh Siew Chuon as Executive Chairman of the company, replacing Loy Kwee Keow who has been redesignated as NonExecutive Director.

• Datin Toh is the executive director of Kerjaya Prospek Group Bhd. She is also the spouse of Datuk Tee Eng Ho and sister-in-law of Tee Eng Seng, who are both controlling shareholders of Javawana Sdn Bhd, the major shareholder of GSB. Toh holds an indirect interest of 40.6% in the company via Javawana. (The Edge Daily)

• PRG Holdings Bhd is in talks to extend the deadline for the proposed purchase of healthcare services provider Roopi Medical Centre Sdn Bhd for RM7.3 mln and related properties from Linecom Corp Sdn Bhd for RM11.0 mln cash. The conditions precedent under the share sale agreement (SSA) and sales and purchase agreement (SPA) have not been fulfilled within the stipulated period that ends on 19th June 2018. (The Edge Daily)

• The founder and Chief Executive Officer of private equity firm Creador Sdn Bhd, Brahmal Vasudevan has emerged as Gabungan AQRS Bhd’s substantial shareholder. Brahmal has acquired an indirect stake of 178,700 shares, bringing its total shareholding in the property and construction player to 5.1% or 23.1 mln shares. (The Edge Daily)

• Press Metal Aluminium Holdings Bhd is on the hunt for acquisitions to meet growing capacity needs as its smelting operations are now running at full capacity. Press Metal's acquisition target could be either downstream or upstream players, but unlikely that they target companies are local. The group has various fundraising options available to it and has engaged with international financial institutions for when the opportunities arise. (The Edge Daily)

• AirAsia Group Bhd has refuted the allegations made in the Indian Central Bureau of Investigation's (CBI) first information report (FIR), saying they are "baseless, unsupported and unjustified".

• It was reported that the Indian police had on 29th May 2018 filed a case against, among others, AirAsia Group, the airline’s Group Chief Executive Officer (CEO) Tan Sri Tony Fernandes, Deputy Group CEO Tharumalingam Kanagalingam (Bo Lingam) and its domestic entity AirAsia India Pte Ltd, over allegations of corruption and breaking rules in obtaining a flying licence. (The Edge Daily)  

Source: Mplus Research - 20 Jun 2018