More Near Term Gains Before Tariff Imposition

• The FBM KLCI (+0.5%) bucked the negative performance across its regional peers on bargain hunting activities on selected heavyweights. The lower liners – FBM Small Cap (+0.3%), FBM Fledgling (+0.6%) and FBM ACE (+1.3%), all advanced, while the Plantations sector (- 0.1%) underperformed the positive broader market.

• Market breadth turned positive as advancers overcame decliners on a ratio of 497-to-322 stocks. Traded volumes, however, fell 4.6% to 2.04 bln shares as selling pressure amongst the lower liners subsides.

• Telekom (+23.0 sen) topped the key index advancers list, followed by Hong Leong Bank (+20.0 sen), Axiata (+17.0 sen), KLK (+14.0 sen) and Nestle (+10.0 sen). Consumer products stocks like Heineken (+60.0 sen), Dutch Lady (+30.0 sen) and BAT (+20.0 sen) advanced, Allianz closed 20.0 sen higher, while Pasdec rose 2.0 sen after receiving a mandatory takeover offer from its substantial shareholder.

• In contrast, significant losers on the broader market include MPI (-16.0 sen), Khind Holdings (-12.0 sen), MPI (-34.0 sen), Dutch Lady (-28.0 sen) and Allianz (- 18.0 sen). There were only four decliners on the FBM KLCI – IOI Corporation (-4.0 sen), Tenaga (-4.0 sen), Maxis (-2.0 sen) and Public Bank (-2.0 sen).

• Asian benchmark indices trended lower as the deadline of trade tariff looms. The Nikkei (-0.3%) recorded its third straight session of losses, while the Hang Seng Index sank 1.1% on weakness in energy and real estate shares. The Shanghai Composite ended 1.0% lower despite the Yuan rebounding from its 11-month low against the Greenback. ASEAN stockmarkets, meanwhile, ended mixed yesterday.

• European benchmark indices ended mostly lower as the FTSE and DAX fell 0.3% each after the IHS Markit Composite PMI in June 2018 stood at 54.9, bringing 2Q2018 reading to 54.7 - the weakest since 4Q2016. The CAC, however, gained 0.1% after enduring a choppy trading session, lifted by gains in healthcare, energy and utilities sector. Wall Street was closed for the Independence Day public holiday.

The Day Ahead

• The Malaysian stockmarket bucked the weak regional market trend to make decent gains yesterday. The uptrend was also partly the result of the abating foreign selling that provided room for the key index to make the long awaited rebound as it allowed the bargain hunting activities to take precedent.

• However, the gains could just be a reprieve before the uncertainties creep in again towards the end of the week when the U.S. starts its tariff imposition on US$34 bln worth of Chinese goods. Still, we think there could be further near term recovery for now as the temporary lull could provide some leeway for further bargain hunting activities.

• This continuing uptrend could allow the key index to retest the 1,690-1,700 points level, albeit we think the FBM KLCI could find the 1,700 points level a significant barrier to clear as we expect quick profit taking actions will limit the gains. On the downside, there is support at the 1,680 level, followed by the 1,674 level.

• The lower liners and broader market shares are making little headway due to the lack of positive leads, However, the heavy selling on the stocks seems to have abated and this could allow the FBM Small Cap and Fledgling indices to find some measure of support and to potentially build-up a base after their hefty falls over the past few months.

COMPANY BRIEF

• Serba Dinamik Holdings Bhd is planning to explore new territories in Central Asia, with hopes of securing some projects in new countries in the region this financial year. The group expects potential projects to be from Central Asia and is currently exploring Turkmenistan, Uzbekistan and Kazakhstan.

• Serba Dinamik aims to achieve a target order book of RM7.5 bln by year-end, and has an order book of RM6.6 bln that is expected to last for the next three years. (The Edge Daily)

• Xian Leng Holdings Bhd‘s Independent and Non-Executive Director, Lee Kian Hu has been re-designated as the group’s Independent and Non-Executive Chairman following the retirement of Augustine TK James yesterday. (The Edge Daily)

• SCGM Bhd is planning to sell off three of its properties in Johor to raise funds to pare down its bank borrowings. The group is looking for prospective buyers for the properties in Kulai, Johor, but did not specify the total price of the two freehold plots and one leasehold land that are on sale. The properties comprise industrial and agricultural land, as well as a factory and warehouse. (The Edge Daily)

• Bank Negara Malaysia (BNM) has agreed to mediate more sustainable financing terms between Main Market-listed Perdana Petroleum Bhd and its financiers.

• The group had received approval from BNM's corporate debt restructuring committee (CDRC) to help renegotiate with its specific financiers, financing facilities on terms that can be sustained in the face of this challenging period for the oil and gas industry.

• If successful, it will enable the company to be better positioned to raise new financing and capital in the future and ensure its operations to easily sustain its underlying viability, going forward. Perdana Petroleum is also required to submit a proposed debt restructuring scheme within 60 days as part of the approval. (The Star Online)

• Shareholders of TA Global Bhd could potentially receive a mandatory general offer (MGO) from Datuk Tony Tiah Thee Kian if his shareholding in TA Enterprise Bhd crosses the 50.0% mark.

• This comes as TA Enterprise Bhd holds 60.2% equity stake in TA Global, in which Tiah and persons acting in concert (PACs) controls another 15.3%. Currently, the latter also collectively owns about 33.1% equity stake in TA Enterprise.

• To recap, TA Enterprise has received a supplemental notice from Tiah on his takeover offer on 2th July 2018, stating that in the event that his offer turns unconditional, it would trigger an obligation to undertake another MGO for TA Global shares, for an offer price of 31.0 sen per share. Meanwhile, the offer price represents the volume weighted average price of TA Global's share price for the last 20 market days prior to the date of the notice. (The Star Online)

• MNRB Holdings Bhd’s President and Group Chief Executive Officer, Mohd Din Merican has resigned as NonIndependent Executive Director effective 1st July 2018 although he remains as the company's president and group CEO.

• This follows the BNM's Policy Document on Corporate Governance which states that there should only be one Executive Director on the Board of a financial holding company/financial institution and there should also be a minority of common directors on the Board of a financial institution or its affiliates. Mohd Din was previously the CEO of Etiqa Insurance Bhd. (The Edge Daily)

• China Automobile Parts Holdings Ltd (CAP) is expected to finalise its audited financial statements by mid-August and issue its outstanding 2017 annual report by 31st August 2018, after failing to meet the deadline on 30th June 2018.

• To recap, the issuance of 2017 annual report was delayed because its Malaysia-based financial personnel left at the end of June last year and the group has been facing difficulties in hiring qualified financial personnel, in view of the trading suspension on its securities at Bursa Malaysia, and the negative impact that fell upon the company. (The Edge Daily)

• JMR Conglomeration Bhd has expanded its landbank in Seberang Perai Tengah, Penang through subscription of an additional 4.5 mln new shares in its subsidiary TAG Steel Holdings Sdn Bhd (TSH) for RM4.5 mln.

• TSH currently owns a 26,657 sq. m. piece of freehold land in Seberang Perai Tengah, near the Autocity, Juru, which is expected to be developed into a mixed development project.
• The acquisition is in-line with its strategy to acquire and expand its existing landbank in strategic locations with high development value, to sustain its business as a property developer. (The Edge Daily)  

Source: Mplus Research - 5 Jul 2018