Downside Risk Returns

• The FBM KLCI (+0.9%) extended its gains for the second consecutive day, supported by buying-interest in telecom and energy stocks. The lower liners – the FBM Small Cap (+0.2%) and the FBM Ace (+1.2%) pared recent losses and closed higher, with the exception of the FBM Fledgling (-0.3%) which closed in the red. Meanwhile, nine-of-ten sub-sectors on Bursa Malaysia also finished higher.

• Market breadth turned positive as winners overtook losers on a ratio of 455- to-341 stocks. Traded volumes, however, inched 0.9% lower to 1.99 bln shares as sentiments remain wary amid the ongoing global trade uncertainties.

• Energy giants like Petronas Gas (+48.0 sen) and MISC (+15.0 sen) rallied, followed by Hong Leong Financial Group (+42.0 sen), Genting (+13.0 sen) and Maxis (+13.0 sen). Meanwhile, Top Glove (+77.0 sen) recouped some of its earlier losses after tanking yesterday, while other broader market gainers include Heineken Malaysia (+44.0 sen), Fraser & Neave (+30.0 sen), Ajinomoto (+28.0 sen) and Aeon Credit (+24.0sen).

• On the flipside, Hong Leong Industries (- 36.0 sen), Dutch Lady (-34.0 sen), Panasonic Manufacturing (-20.0 sen), New Hoong Fatt (-19.0 sen) and MSM Malaysia (-15.0 sen) dragged the broader market lower. There were only two losers on the Main Board, which were Dialog (- 4.0 sen) and RHB Bank (-2.0 sen).

• Japanese equities continued its upward trajectory as the Nikkei extended its winning streak for the third-straight dayled by sharp gains in Yahoo Japan (+11.4%) after it was reported that SoftBank Group is planning increase its stake in the latter. The Shanghai Composite also gained 0.4% as investors digested the latest economic data from China. Hwever, the Hang Seng index flatlined after a volatile intraday session. Most ASEAN stocks indices notched gains on Tuesday.

• Key U.S. indices extended gains for the fourth-straight session, lifted by the strength in consumer staples and utilities-related stocks. Losses in financials-related counters capped the Dow’s (+0.6%) advance ahead of large bank earnings reporting later this week. The S&P 500 also gained 0.4%, while the Nasdaq (+0.04%) closed just above the breakeven level.

• U.K. equities eked out gains on Tuesday, amid a volatile Pound as investors digested upbeat GDP data, potentially higher interest rates and another two high-profile resignations from Prime Minister Theresa May’s cabinet. The FTSE finished with meagre gains, boosted by online grocer Ocado (+9.1%) on expectations of strong long-term growth outlook. Other European blue-chip gauge - the DAX and the CAC also rallied as investors gear up for the 2Q2018 earnings season.

The Day Ahead

• Despite the decent gains yesterday as stocks on Bursa Malaysia played catch up to the recent regional gains, we think the cautiousness is likely to return after the Trump government finalised the list of US$200 bln worth China goods that will attract fresh tariffs, pointing to an escalation of the tariff war with the latter.

• Therefore, we think the recent gains will likely attract profit taking actions as market players react to the expected heightening of market volatility over the near term. We also think the foreign selling will also continue amid the dimmer near-term market outlook. On the downside, we see the 1,680 serving as the immediate support for now, followed by the 1,670 level. The resistances, meanwhile, are at 1,690 and 1,700 levels respectively.

• Due to the increasing market volatility, we also think the broader market and lower liner shares will endure a fresh round of profit taking and selling as many retail players are likely to lock-in their recent gains and to sit-out the looming market volatility.

COMPANY BRIEF

• Pestech International Bhd has received approval from the Securities and Exchange Commission of Cambodia (SECC) to list its unit Pestech (Cambodia) PLC on the Main Board of Cambodia Securities Exchange. Pestech Cambodia would have to appoint an independent director, establish an audit committee, a risk management committee and an internal audit unit.

• The company would also have to furnish the SECC the underwriting agreement prior to obtaining the final approval from the SECC on the proposed listing. (The Star Online)

• Multi Sports Holdings Ltd has clarified that the reprimand it received from the Securities Commission Malaysia (SC) for knowingly furnishing financial statements that were false or misleading to Bursa Malaysia was related to five quarterly earnings.

• The five quarterly earnings were for 1Q2015, 2Q1205, 3Q2015, 4Q2015 and 1Q2016, which were prepared and submitted prior to the appointment of new directors on 4th October 2016. Multi Sports has reported that the new directors had also disclosed this litigation in the annual reports that were issued after their appointments. (The Edge Daily)

• Malaysia Airports Holdings Bhd’s (MAHB) number of passengers handled in June 2018 rose 9.7% Y.o.Y to 8.4 mln as the domestic passenger recorded its first growth since November 2017. This is the highest growth registered for a month in 2018.

• Overall aircraft movements also increased by 4.1% Y.o.Y, with international movements up 5.9% Y.o.Y while domestic rose 3.0% Y.o.Y in June 2018. Average load factor increased by 1.2% Y.o.Y to 75.9% in June 2018. (The Edge Daily)

• Kian Joo Can Factory Bhd and its 55.0%-owned subsidiary, Box-Pak (Malaysia) Bhd have both promoted Chee Khay Leong to the position of President and Chief Executive Officer of their respective groups effective 10th July 2018. Chee was previously the Executive Director and Chief Operating Officer in Kian Joo from June 2012 and July 2012 respectively as well as an Executive Director of Box-Pak since July 2013. (The Edge Daily)  

Source: Mplus Research - 11 Jul 2018