Profit Taking May Set In

• The FBM KLCI (+1.6%) staged a sharp rebound, halting a four-day losing streak, lifted by window dressing activities for 1H2018. Still, the key index declined 0.2% and consequently fell 9.2% Q.o.Q in 2Q2018. The lower liners – the FBM Small Cap (+0.3%), FBM Fledgling (+0.4%) and FBM ACE (+0.2%), all rebounded, while only the Mining sector (-0.9%) underperformed the broader market.

• Market breadth turned positive as advancers outnumbered decliners on a ratio of 474-to-345 stocks. Traded volumes jumped 42.9% to 2.23 bln shares, boosted by the positive market sentiment.

• Tenaga (+98.0 sen) topped the FBM KLCI winners list after securing a tariff increase, followed by KLCC (+54.0 sen), Public Bank (+36.0 sen), Hartalega (+31.0 sen) and Press Metal (+20.0 sen). Top Glove (+84.0 sen) closed at a fresh record high level, while other notable advancers on the broader market include Aeon Credit (+50.0 sen), BAT (+40.0 sen), KESM Industries (+38.0 sen) and Hartalega (+31.0 sen).

• Meanwhile, among the biggest decliners on the broader market were DKSH (-48.0 sen), Allianz (-2.0 sen), Shangri-La (-17.0 sen), Chin Teck Plantations (-17.0 sen) and UMW Holdings (-13.0 sen). There were only five decliners on the FBM KLCI – Petronas Gas (-22.0 sen), Axiata (-17.0 sen), CIMB (-5.0 sen), Genting Malaysia (- 2.0 sen) and Sime Darby Plantations (-2.0 sen).

• Asia benchmark indices rebounded as the Nikkei rose 0.2%, taking cue from the positive developments on Wall Street overnight. The Shanghai Composite (+2.2%) snapped a four-day losing streak to re-claim the 2,800 psychological level, while the Hang Seng Index closed 1.6% higher, lifted by gains in consumer and technology shares. ASEAN stockmarkets, meanwhile, ended mostly higher on the final trading day of 2Q2018.

• U.S stockmarkets extended their gains to trim their weekly losses as the Dow rose 0.2%, supported by upbeat commodity prices. On the broader market, the S&P 500 climbed 0.1%, lifted by the energy sector (+0.7%), while the Nasdaq finished 0.1% higher.

• Earlier, European benchmark indices – the FTSE (+0.3%), CAC (+0.9%) and DAX (+1.1%), all recovered most of their previous session losses after the European Union struck a deal on migration. The positive sentiment was also boosted by the strong Eurozone’s inflation data in June 2018 at 2.0% – giving credence to the potential end of the stimulus program by the European Central Bank by end 2018.

The Day Ahead

• Last Friday’s recovery was much stronger-than-expected as the strength of half-year window dressing activities lifted the key index back above the 1,680 level, albeit the 1,700 points level still proved to be a significant hurdle to cross.

• As it is, much of Friday’s gains on the index heavyweights were promoted by local institutions with foreign funds still significant net sellers for the day. Under the prevailing environment, we see little follow-through buying interest amid the ongoing selldown by foreign funds that are likely to prompt further selling-intostrength as well as profit taking activities by local funds that could also dampen market at the start of the week.

• The pullback could send the key index back to the 1,680 support level, while further below, the other support is at the 1,665 level. The main resistance is at 1,700, followed by 1,710 level.

• The broader market environment is also likely to drift as the general market condition is still largely cautious and investor participation is mostly on the low side, thus providing little impetus for the market to make significant headway.

COMPANY BRIEF

• Malaysia Airports Holdings Bhd‘s (MAHB) Acting Managing Director, Raja Azmi Raja Nazuddin said that the government has given its "approval in principle" to revenue sharing terms in managing airports under the new operating agreement (OA) with the airport operator. Both parties are still working on finalising the terms under the new OA, and Ministry of Transport will assist in facilitating the progress.

• Currently, the operating agreement stated revenue sharing increases a quarterly basis point or 0.25% per year. It is still applicable until the terms of the new operating agreement is finalised, while the current revenue sharing rate is slightly above 11.0%. (The Edge Daily)

• Sapura Energy Bhd and its joint-venture (JV) consortium partners, DEA Deutsche Erdoel Mexico and Premier Oil, have inked a production sharing contract (PSC) for Block 30 with Comision Nacional De Hidrocarburos of Mexico (CNH). Block 30, which is located within the Sureste Basin, is a proven and prolific hydrocarbon province in the Gulf of Mexico.

• Further, the group has also posted a net loss for the third consecutive quarter, after announcing a 1QFY19 net loss of RM135.7 mln, from a net profit of RM27.5 mln in the same quarter last year, mainly due to losses in its drilling business on slower-than-anticipated recovery.

• Meanwhile, softer earnings contribution from its engineering and construction (E&C) and exploration and production (E&P) segments also weighed on Sapura Energy’s bottomline. Revenue for the quarter also declined 40.0% Y.o.Y to RM1.05 bln, from RM1.77 bln previously. (The Star Online)

• MBM Resources Bhd has announced the appointment of its 51.5%-owned subsidiary Daihatsu (Malaysia) Sdn Bhd’s Managing Director, Dr Muhammad Iqbal Shaharom as the group's President and Chief Executive Officer, effective on 2nd July,2018. Dr Muhammad will be replacing Nor Hadi Daud who has retired on 30th June, 2018 after holding the post since 1st March, 2017.

• To recap, Dr Muhammad was previously appointed as MBM’s trading VicePresident on 16th January,2018 and has previously served in various capacities in top management positions in DRB-Hicom Bhd, Chery Automobile and Naza Group. (The Edge Daily)

• Parkson Holdings Bhd's 68.0 %-owned unit, Parkson Retail Asia Limited, which is listed on the Singapore Exchange, has appointed Chang Chae Young as the CEO for its newly formed Indochina Operations. The latter has considerable experience in brand management and retail operations after working in South Korea, New York, Hong Kong and China for over 20 years.

• Following Chang’s appointment, Loh Chai Hoon, who is currently CEO of Vietnam, Cambodia and Myanmar operations, will be re-designated as CEO of Vietnam Operations. (The Edge Daily)

• Green Packet Bhd is planning to undertake a capital reduction exercise to reduce its share capital by RM455.5 mln to offset accumulated losses of RM455.5 mln as at 31st December, 2017. The group’s issued share capital, meanwhile, is at RM155.9 mln, comprising 758.7 mln shares and the share premium stood at RM412.8 mln as at 11th June 2018.

• The exercise aims to rationalise the group’s balance sheet by eliminating the entire accumulated losses via the cancellation of issued share capital, which is in line with the group’s strategies to turn around its business.

• The group also said this will enable it to pay dividends out of its retained earnings in future, when Green Packet returns to profitability. (The Edge Daily)

• Kelington Group Bhd’s 94.0%-owned subsidiary, Ace Gases Sdn Bhd, has inked a RM25.0 mln project financing facility agreement with Malaysia Debt Ventures Bhd (MDV), whereby the latter will provide the financing facility to partly fund the group’s expansion in the manufacturing of liquid carbon dioxide (CO2), which includes the purchase of equipment and construction of a new manufacturing plant in Kerteh, Terengganu.

• The fresh funds will finance the group’s expansion in the industrial gas business as accelerates the construction of Kelington’s liquid CO2 plant which will commence production in 2H2019. (The Star Online)  

Source: Mplus Research - 2 Jul 2018