Sustained Gains As Trade Spat Concerns Ease

• After enduring a volatile trading session, the FBM KLCI (+0.1%) recorded its third straight session of gains, lifted by the eleventh hour buying support in selected index heavyweights. The lower liner, however, ended mostly lower as the FBM Fledgling and FBM ACE fell 0.2% each, while the REITs sector (-0.1%) underperformed the mostly positive broader market.

• Market breadth turned negative as decliners pipped advancers on a ratio of 452-to-405 stocks. Traded volumes rose 6.7% to 2.17 bln shares on rotational play amongst the lower liners.

• More than half of the key index constituents advanced, led by Nestle (+30.0 sen), followed by Petronas Dagangan (+10.0 sen), Petronas Gas (+10.0 sen), MISC (+9.0 sen) and Hong Leong Financial Group (+8.0 sen). Among the biggest gainers on the broader market were Carlsberg (+38.0 sen), BAT (+32.0 sen), KESM Industries (+20.0 sen), Muda Holdings (+12.0 sen) and Top Glove (+12.0 sen).

• Notable decliners on the broader market were Allianz (-16.0 sen), Heineken (-30.0 sen), UMS Holdings (-20.0 sen), Aeon Credit (-14.0 sen) and Tasek Corporation (-8.0 sen). Key losers on the local bourse were Axiata (-10.0 sen), Public Bank (-8.0 sen), Airport (-4.0 sen), Telekom (-4.0 sen) and Hartalega (-3.0 sen).

• Asian benchmark indices continue to underperform as investors braced for the U.S. tariff imposition on Chinese products. The Nikkei slipped 0.8%, while the Shanghai Composite declined 0.9% to close at its lowest level since March 2016. The Hang Seng Index fell 0.2% after erasing all its intraday gains on weakness in materials and services shares. ASEAN stockmarkets, meanwhile, ended mostly lower yesterday.

• Wall Street advanced overnight as the Dow climbed 0.8%, boosted by the strength in technology shares that overshadowed the concern of tariff implementation in China’s export. On the broader market, the S&P 500 rose 0.9% with ten of the eleven major sectors in the green, while the Nasdaq (+1.1%) closed above the 7,500 psychological level.

• Earlier, European benchmark indices – the FTSE (+0.4%), CAC (+0.9%) and DAX (+1.2%), all advanced after the European Union attempts to work out a tariff deal on automobiles with U.S., Japan and South Korea. Gains were also underpinned by strong Germany’s factory orders that rose 2.6% M.o.M - the first monthly improvement since December 2017.

The Day Ahead

• Despite the generally indifferent market undertone, selected buying helped to shore up the key index at the close yesterday – but still leaves us unconvinced on the market’s strength as the buying was not broad based. However, we think that there will still be near term upsides, helped by selective buying of index-linked stocks as the foreign selldown continues to dwindle. The overnight gains on key global stock indices will also provide some impetus.

• At the same time, market sentiments are somewhat more positive despite the onset of the tariffs imposed on China goods that will also be reciprocated by tariffs on U.S. goods starting today. The mild positivity is due to the expectation that that fallout from the trade spat will be limited. Therefore, the near term positivity should continue to provide some near term impetus for further market gains, potentially to the 1,700 points level which we continue to think is a major hurdle for the key index to clear. Beyond that, the next resistance is at 1,710 level. The supports, meanwhile, are at 1,690 and 1,680 respectively.

• Meanwhile, the broader market shares could also head higher as market players take advantage of the near term upsides to undertake trading activities, but we also think the gains will be limited due to quick profit taking activities.

COMPANY BRIEF

• Wah Seong Corp Bhd has inked a distributorship agreement with Switzerland-based Ammann BauAusrűstung AG's to be an exclusive dealer for the sales and services of its construction products within West Malaysia.

• The agreement with Ammann is distribute products including Pavers, Heavy Compaction and Light Compaction, for an indefinite period until the agreement is terminated by either party.

• Ammann Group is a world-leading Swiss supplier of mixing plants and machines and in providing services to the construction industry with core expertise in road building and transportation infrastructure. (The Star Online)

• Vertice Bhd is considering venturing into the smart hotel business, which will be "unmanned" and "cashless", via a strategic partnership with a local company Smuzcity Bhd.

• Both parties have inked a Memorandum of Understanding (MoU) on 5th July 2018 to pave the way for Vertice and Smuzcity to collaborate for opportunities for qualified real properties to be considered for a structured smart hotel chain business.

• Under the deal, Vertice will provide its knowledge and experience in the construction industry to contribute towards works for the design, construction and renovation for the chain of hotels. (The Star Online)

• Avillion Bhd was awarded a 10-year hotel management contract by Bintang Kencana Sdn Bhd to manage and provide direct day-to-day operation of an upcoming 153-room hotel in Bandar Baru Uda, Johor Bahru. The hotel management agreement is in-line with the group's strategy to grow the chain of Avillion-managed hotels, and it also comes with a five-year renewal option.

• Subsequently, Avillion will start to manage and operate the hotel after construction of the facility has been completed and all required business licences are secured. (The Edge Daily)

• Malayan Banking Bhd (Maybank) has signed a strategic partnership with Credit Guarantee Corporation Malaysia Bhd (CGC) to provide up to RM2.0 bln of financing to small and medium sized enterprises (SMEs) via the latter's portfolio guarantee (PG) scheme.

• This will be the largest fund ever to be provided in the CGC PG scheme in an effort to support local SMEs in growing their businesses further.

• Under the Maybank-CGC PG scheme, SMEs can apply for either Islamic or conventional financing facilities from Maybank, from a minimum of RM50,000 up to a maximum of RM1.5 mln and for a fixed tenure of up to seven years. CGC will also guarantee 70.0% of the principal financing amount. (The Edge Daily)

• Sime Darby Property Bhd has sold as much as 90.0% of its new launches within one week, indicating resilient demand for both its residential and commercial products despite the soft property market.

• The aforementioned launched include the final phase of its landed home series in Denai Alam situated at the heart of City of Elmina (or Semanea Hills), which comprises a total of 162 units as well as commercial units at 3 Avenue in Bandar Bukit Raja. The Semanea Hills superlink homes were 90.0% sold last weekend, while the semi-detached units were 73.0% sold, resulting in the combined take-up rate of 50.0% across the entire Elmina Green development.

• Meanwhile, on the commercial front, about 80.0% of its new commercial units at 3 Avenue were bought within a week of their launch on 9th June, 2018. (The Edge Daily)

• Kumpulan Powernet Bhd has appointed Parti Gerakan Rakyat Malaysia secretary general Datuk Liang Teck Meng as its Managing director (MD) on 5th July 2018, replacing Woo Wai Mun, who has resigned after three years at the helm due to other business and personal commitments.

• To recap, the latter joined Kumpulan Powernet in August 2015 and was once the Group's Executive Chairman, before he was subsequently re-designated as MD in 2016. He has a 3.7% equity stake in the group. (The Edge Daily)  

Source: Mplus Research - 6 Jul 2018