Consolidation May Continue

• The local bourse halted a nine-day winning streak to close 0.3% lower last Friday. Still, gains over the earlier part of the week lifted the FBM KLCI 1.9% W.o.W. The FBM Small Cap (+0.6%) and the FBM ACE (+0.3%) managed to stretch their gains, but the FBM Fledgling slipped 0.1%. Meanwhile, most of the broader market stocks closed mostly lower.

• Market breadth turned negative as decliners edged advancers on a ratio of 481-to-411 stocks. Traded volumes fell 17.4% to 2.89 bln shares on signs of profit taking activities.

• Half of the key index constituents fell, dragged down by Tenaga (-10.0 sen), Digi (-9.0 sen), Telekom (-9.0 sen), Axiata (- 6.0 sen) and Petronas Chemicals (-6.0 sen). Consumer products stock like Heineken (-64.0 sen), Fraser & Neve (- 30.0 sen), Padini (-15.0 sen) and Carlsberg (-10.0 sen) fell, while Batu Kawan slipped 20.0 sen.

• In contrast, MPI (+24.0 sen), Latitude Tree (+23.0 sen), PMB Technology (+20.0 sen) and Harisson Holdings (+15.0 sen) advanced on the broader market. Nova Wellness jumped 21.0 sen after making its debut on Bursa Malaysia. Meanwhile, Nestle (+20.0 sen), Press Metal (+9.0 sen), RHB Bank (+6.0 sen), KLCC (+4.0 sen) and Public Bank (+4.0 sen) topped the big board advancers list.

• Japanese stockmarkets extended their losses as the Nikkei fell 0.3% after erasing all its intraday gains on the appreciation of Japanese Yen against the Greenback. Both The Shanghai Composite and the Hang Seng index, however, recouped their previous session losses after rising 2.1% and 0.8% respectively after the former was boosted by optimism over regulators possibly loosening rules on financial products. ASEAN stockmarkets, meanwhile, closed mostly higher last Friday.

• U.S stockmarkets ended marginally lower last Friday as the Dow fell 0.03% amid the lingering concerns over President Donald Trump’s move on tariff with its international counterparts. The S&P 500 declined 0.1% on weakness in real estate sector (-0.9%), while the Nasdaq finished 0.1% lower as well.

• Earlier European equities – the FTSE (- 0.1%), CAC (-0.4%) and DAX (-1.0%), all extended their losses after Claudio Borghi, the Italy’s budget committee chief has announced that Italy would exit the euro sooner or later. The weakness also was compounded with the appreciation of the Euro Currency against the Greenback.

The Day Ahead

• The key index underwent a mild consolidation at the end of last week which we think is still unfolding and may extend to the start of the week. The pullback was insignificant in our view and the overbought position still prevails as a result, thus pointing to further near term consolidation.

• We see the continuing near term pullback as healthy as it would allow the key index to take a breather after its streak of gains. This could allow the key index to build up a firmer base, albeit we still see the broad market environment remaining on the cautious side amid the ongoing trade dispute between the U.S. and China.

• At the same time, local leads are still scant to provide sustainable catalysts for a prolonged uptrend. On the downside, we see the key index finding immediate support at the 1,750 level, followed by the 1,740 level. The resistances, meanwhile, are at 1,764 and 1,770 respectively.

• The recent gains are also leaving the lower liners and broader market shares at the toppish range, but there are still few signs of an impending pullback as yet, thus we think the recent recovery could prolong for now.

COMPANY BRIEF

• Gamuda Bhd’s 40.0% associate, Syarikat Pengeluar Air Selangor Holdings Sdn Bhd (Splash) has aborted its claims against Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) in order to facilitate negotiations on the disposal of Splash with the Selangor state government, while Syabas has also discontinued its counter-claim against Splash.

• To recap, Gamuda had initiated legal proceedings against Syabas on 9th April 2018 for the recovery of RM4.22 bln outstanding receivables owed by Syabas to Splash together with interest and costs. In return, Syabas has filed its defence and counter claim on 26th April 2018.

• As the concession holder of the Sungai Selangor Water Supply Scheme Phase 1 and 3, Splash is awaiting the offer from the Selangor State government on the takeover of its water assets and operations. (The Edge Daily)

• Iskandar Waterfront City Bhd (IWCity) announced that its parent, Iskandar Waterfront Holdings Sdn Bhd (IWH) did not submit a fresh bid for projects related to the development of Bandar Malaysia, which has a gross development value (GDV) that was previously estimated to be RM160.0 bln.
• Special officer to the Finance Minister Tony Pua Kiam Wee had disclosed that the government’s request for tender proposals for the development of Bandar Malaysia, following the termination of an earlier agreement with IWC and its partner, had not yielded any suitors. (The Star Online)

• BIMB Holdings Bhd's (BIMB) Chief Executive Officer (CEO), Khairul Kamarudin has resigned with immediate effect due to personal reasons. He has also concurrently relinquished his position as the CEO of Bank Islam Malaysia Bhd, a wholly-owned subsidiary of BIMB.

• At the bank level, Mohd Muazzam Mohamed has been appointed as acting CEO, and will form a Board Executive Committee to oversee the day-to-day operations of the company.. (The Star Online)

• Salcon Bhd's indirect 60.0%-owned subsidiary, Envitech Sdn Bhd has secured a contract worth RM9.95 mln from Seriemas Development Sdn Bhd to construct a sewage treatment plant in Kuala Langat, Selangor. The 15-month contract is expected to commence on 23th October 2017, with no option for renewal. (The Edge Daily)

• Cabnet Holdings Bhd has secured a contract from Country Garden Pacificview Sdn Bhd for RM12.2 mln, in relation to the provision of extra low voltage works for nine 40-storey blocks of serviced apartments (4,033 units) located in Forest City, Mukim Tanjung Kupang, Johor. The contract is scheduled to be completed by 3th April 2019. (The Edge Daily)

• Sunway Construction Group Bhd (SunCon) and Sunway REIT Management Sdn Bhd have mutually agreed to revise the provisional contract sum of an ongoing project — Sunway Carnival Mall — in Penang from RM274.0 mln to RM286.0 mln due to additional scope of works. The additional work involves enhancing the design of the external façade of the building, civil and infrastructure works and other related works and services.

• To recap, SunCon was appointed the project delivery partner for the expansion of a nine-storey commercial development to the existing Sunway Carnival Mall in Penang in February. The contract is expected to run for 32 months from March 2018. (The Edge Daily)

• Media Chinese International Ltd is to dispose of its equity interests in its two companies, mainly Beijing OMG Advertising Company Ltd and Beijing Time Resources Technology Consulting Ltd (Beijing TRT), which operates magazine operations in mainland China. Media Chinese has a 73.0% equity stake in Hong Kong Stock Exchange-listed One Media Group Ltd, whose indirect whollyowned subsidiary is Media2U Company.

• The group said Beijing OMG Advertising and Beijing TRT have been loss making for the past three years and they will be sold to the purchaser at a consideration equal to the aggregate value of their net tangible assets, which were not disclosed. The disposal will streamline One Media’s corporate structure and is also in line with its revised business strategy in the mainland China market. (The Edge Daily)  

Source: Mplus Research - 23 Jul 2018