Dour Sentiments Still Rule

• The FBM KLCI clawed back earlier losses, despite opening in the red – largely on buying-support from institutional funds in the eleventh hour. On the other hand, all the lower liners were splashed in red together with the broader market constituents, with the exception of the Finance (+0.2%) sector.

• Market breadth returned to negative as decliners gained the upper-hand against the winners at a ratio of 556-to-261 stocks. Traded volumes rose by 4.3% to 2.08 bln shares as investors continue to dispose emerging markets equities on renewed fears of a full blown U.S.-China trade war.

• Plantations-related stocks like Batu Kawan (+20.0 sen) and Genting Plantations (+20.0 sen) closed in the green, alongside other broader market constituents like New Hoong Fatt (+19.0 sen), Malaysian Pacific Industries (+16.0 sen) and Time Dotcom (+10.0 sen). Significant key-index advancers were Public Bank (+26.0 sen), Hong Leong Bank (+14.0 sen), Genting (+10.0 sen), Petronas Gas (+10.0 sen) and Tenaga Nasional (+8.0 sen).

• Nestle (-20.0 sen) led the Main Board losers, followed by Axiata (-15.0 sen), Petronas Dagangan (-14.0 sen), RHB Bank (-9.0 sen) and Hap Seng Consolidated (-7.0 sen). Other underperformers, meanwhile, include BAT (-96.0 sen), Aeon Credit (-26.0 sen), KESM Industries (-24.0 sen), Hai-O (-21.0 sen) and Sam Engineering (-17.0 sen).

• Asian stockmarkets retreated following renewed threats fired by President Donald Trump on additional US$200.0 bln worth of Chinese imports, spurring fears of an all-out trade war between the world’s two largest economies. The Nikkei (-1.2%) posted losses, despite a weaker Yen, with all but the energy and telecommunication services sectors in the red. The Shanghai Composite (-1.8%) and the Hang Seng index (-1.3%), meanwhile, suffered heavy losses amid worries of slower growth in China, rising borrowing costs, on top of the ongoing trade conflicts. The majority of the ASEAN indices also followed suit, closing in the red on Wednesday.
• Wall Street gave up all of Tuesday’s gains as investors booked profits amid escalating trade concerns, albeit slightly capped by expectations solid corporate earnings growth ahead of the earnings season. The Dow’s snapped its four-day rally, owing to losses in commoditiesrelated counters, while the S&P 500 and the Nasdaq lost 0.7% and 0.6% respectively.
• European stockmarkets retreated on Wednesday, dragged down by the weakness in mining and energy stocks following a risk-off on commodities as trade concerns takes centerstage once again. The FTSE lost 1.3% after lingering in the red for the entire intraday session, alongside both the DAX (-1.5%) and the CAC (-1.5%).

The Day Ahead

• While the key index found institutional support yesterday, the broad market conditions remain insipid, weight down by the fresh trade war concerns. Nevertheless, we do not see the buying support extending amid the increasingly dour market conditions and we see the index linked stocks seccumbing to the fresh selling pressure.

• As it is, there is increasing uncertainty over the direction of global trade with China promising to retaliate against the U.S. tariff threats that could be made worse if the tariff war prolongs. Therefore, we see the renewed selling and quick profit taking actions sending the key index back-tracking to the 1,680 support level, which is followed by the 1,670 level. On the other hand, the resistances are at 1,690 and 1,700 respectively.

• The lower liners and broader market shares will continue to be dampened by the weak buying interest amid the prevailing weak market sentiments. MACRO BRIEF

• Bank Negara Malaysia’s Monetary Policy Committee (MPC) has kept the overnight policy rate (OPR) unchanged at 3.25%, which is in line with expectations. The decision came as the degree of monetary accommodativeness is consistent with the intended policy stance.

• The MPC expects headline inflation to likely turn negative in some months and remain low in 1H2019 before trending upwards as these transitory effects lapse. Meanwhile, core inflation is expected to remain relatively stable in line with sustained domestic demand. (The Star Online)

COMPANY BRIEF

• Sentoria Group Bhd is buying 150 ac. Plot of land in Morib, Selangor from Seriemas Development Sdn Bhd for RM20.3 mln for a proposed theme park and recreation project. It plans to build a water theme park measuring 22 ac., a resort and convention centre on 38 ac., a safari park (comprising of river and night safari) spread out over 78 ac. and a boutique hotel on a 12 ac. site. The land acquisition will be financed by the term loan of RM13.5 mln and the balance of RM6.8 mln will be through internally generated funds. (The Star Online)

• Handal Resources Bhd's 51.0%-owned unit, Handal Semiflexi Sdn Bhd, has received a letter of award from Petronas Research Sdn Bhd to jointly develop subsea technology. The duration of the contract, awarded by the research and development arm of Petroliam Nasional Bhd, is a fixed period from 13th June 2018 to 12th August 2018. The contract rates to be charged for the services to be rendered will be in accordance with the payment terms and conditions as detailed in the term sheet that the service is being provided during the tenure of the contract. (The Star Online)

• MCE Holdings Bhd has secured a second contract from Proton Holdings Bhd in 2018 to supply various electronics components and mechatronic parts for new car models over a nine-year period. The contract will generate a total revenue of RM105.0 mln, while the estimated total investment cost to be incurred will be at RM800,000. The contract will commence in 4QFY19. (The Edge Daily)

• The Malaysia Competition Commission (MyCC) has proposed to fine Dagang Net Technologies Sdn Bhd, a subsidiary of Dagang NeXchange Bhd, RM17.4 mln for abusing its position as a monopoly in the provision of trade facilitation services under the National Single Window. MyCC said it has proposed to impose a financial penalty of as well as to have Dagang Net cease and desist its infringing conduct and any future conduct which may disrupt competition in the present and future market.

• Additionally, it has proposed that the directors and senior management of Dagang Net and its related companies undergo a competition law compliance program within three months of the issuance of the proposed decision. (The Edge Daily)

• G3 Global Bhd has teamed up with two American companies to venture into a car cloud platform across Asean markets as part of its expansion into the Internet of Things (IoT). G3 Global’s wholly-owned subsidiary Atilze Digital Sdn Bhd has entered into a joint venture (JV) agreement with US-based Gosuncn Welink (USA) Technology Co Ltd and Prospect Industry LLC and this would eventually lead to the incorporation of a JV company between the three parties in Malaysia.

• Under the agreement, Atilze will hold 55.0% of the JV company, while Welink and Prospect will own 30.0% and 15.0% respectively. The JV is in line with G3 Global's plans to collaborate with a leading provider of a software platform as it is needed to operate the connected car cloud platform and mobile application solutions to undertake the IoT business. (The Edge Daily)  

Source: Mplus Research - 12 Jul 2018