Market Stays Overbought

• Despite a volatile intra-day session, the FBM KLCI extended its gains – led by the follow-through buying support in selected heavyweights. The lower liners also rebounded after retreating over the last few days. The majority of the broader market sectors finished on an upward bias, with the exception of the Consumer Products, Trading/Services and Mining sub-sectors.

• Market breadth turned positive as winners overturned losers on a ratio of 449-to-432 stocks. Traded volumes, however, fell 14.1% to 2.33 bln shares as investors adopt a wait-and-see approach amid rising trade confrontations.

• Petronas Gas (+46.0 sen) emerged as the FBM KLCI’s biggest advancer, followed by Malaysia Airports (+23.0 sen), Digi (+17.0 sen), Public Bank (+14.0 sen) and Genting Malaysia (+13.0 sen). Notable advancers on the broader market were Perusahaan Sadur Timah (+36.0 sen) after posting strong quarterly earnings, followed by Malaysia Pacific Industries (+22.0 sen), Chin Teck Plantations (+20.0 sen), Far East Holdings (+20.0 sen) and Suiwah (+19.0 sen).

• In contrast, among the biggest losers on the broader market include Ajinomoto (- 30.0 sen), Amway (-13.0 sen) Harrisons (- 10.0 sen), IGB (-9.0 sen) and Oriental Holdings (-9.0 sen). Meanwhile, Tenaga Nasional (-38.0 sen), Nestle (-30.0 sen), IOI Corporation (-8.0 sen), Telekom Malaysia (-6.0 sen) and Genting (-4.0 sen) topped the big board decliners list.

• Chinese stockmarkets were mostly in the negative territory, following the weakness in Yuan after President Donald Trump increased the proposed import tariffs on $200.0 bln worth of Chinese goods to 25.0%, from 10.0% previously, potentially undermining the China’s pledge to support economic growth. The Shanghai Composite (-1.8%) sunk into the red, alongside the Hang Seng Index (- 0.9%). On the bright side, the Nikkei logged gains to close above the 22,700.0 psychological level, while the majority of ASEAN stockmarkets continue to strengthened.

• Wall Street were mostly lower on Wednesday’s close, weighed down by the weakness in energy and industrial stocks, in-tandem with renewed concerns on the ongoing U.S.-Sino trade spat. The Dow (- 0.3%) descended into the red, albeit slightly offset by the strong gains in Apple after reporting stronger-thanexpected quarterly earnings. The S&P500 also narrowed by 0.1%, but the Nasdaq (+0.5%) bucked the general market direction to close higher.

• U.K. stockmarkets finished the session with losses as investors digested a fresh wave of corporate results and losses in mining-related counters. The FTSE (- 1.2%) was in the red, dragged down by giant retailer Next (-7.1%) and losses in blue-chip miners like Rio Tinto on worries of weaker demand from China, in-tandem with the rising global trade conflicts. Meanwhile, the DAX and the CAC also followed suit, closing 0.5% and 0.2% respectively lower.

The Day Ahead

• Once again, a late lift on selected index heavyweights helped to haul the key index to a positive close, prolonging the FBM KLCI’s overbought streak. At the same time, buying support from foreign funds also helped to shore up the market.

• Despite yesterday’s positive close, the key index is ripe for a pullback as there is renewed uncertainties over U.S’ tariff plans with another US$16 bln worth of China goods subject to tariffs soon, countering the news that the two countries were keen on negotiating a solution. Therefore, we think the market could turn increasingly cautious with the above uncertainties sapping investor confidence.

• Back home, there remains few positive catalysts for now, as market players await for more corporate result releases over the coming month to gauge the strength and quality of Malaysian corporate earnings. The resistances are at 1,790 and 1,800, while the supports are at 1,780 and 1,770 respectively.

• The lower liners and broader market shares are showing some signs of stabilisation, but their near term outlook remains insipid amid the lack of leads and following from market players. Therefore, we think the indifferent trend will continue to dominate trades and leave a directionless pattern for now.

COMPANY BRIEF

• DRB-Hicom Bhd is selling its entire stake in Alam Flora Sdn Bhd to Malakoff Corp Bhd for RM944.6 mln. Proceeds from the disposal will be utilise to repay debts totalling RM500.0 mln and the rest as working capital for Proton.

• Alama Flora has a 22 year concession, expiring on 1st September 2033, to collect solid waste and garbage in Pahang, Kuala Lumpur and Putrajaya. It reported a pretax profit of RM99.7 mln in FY18 (31st March 2018). (The Star Online)

• Utusan Melayu (M) Bhd has defaulted on a RM2.9 mln loan that was supposed to be settled on 31st July 2018.  Utusan intends to submit a proposal to restructure the term loan facilities with Affin Islamic Bank Bhd. In the meantime, the company is working towards restructuring all its loan facilities in line with its business transformation plan. (The Star Online)

• Borneo Aqua Harvest Bhd has successfully commissioned its gold processing plant and yielded its maiden gold dore bar from its mining project in Tawau, Sabah. To recap, in June 2013 it had teamed up with Southsea Gold Sdn Bhd to mine for various minerals and commercialisation of such minerals on a 200 ac. site in Bukit Mantri, Tawau. (The Star Online)

• Boustead Plantations Bhd is acquiring 17 pieces of oil palm plantation land totalling 4,915.3 ha. in Sabah, together with a palm oil mill and buildings, machineries and vehicles for RM397.0 mln cash, from 12 parties. It intends to fund the acquisition through internal funds and borrowings.

• The move is to replace some of the group’s plantation lands in Peninsular Malaysia, which were disposed of in recent years, with sizable plantation lands in Sabah at a lower cost. The proposed acquisition is expected to help the group form a large business unit in Sandakan, which allows the group to further expand its market presence in the state. (The Edge Daily)

• LKL International Bhd has bagged a RM6.2 mln contract from Selgate Rawang Hospital Sdn Bhd to supply beds and medical equipment for a hospital to be constructed in Rawang. The contract shall start after completion of the construction of the private medical hospital, which is expected to be in 4Q2019. (The Edge Daily)

• Malaysia Marine and Heavy Engineering Holdings Bhd’s (MHB) 2Q2018 net loss widened to RM49.5 mln, from net loss of RM13.7 mln recorded in the previous corresponding quarter as its heavy engineering segment registered additional cost provisions, whilst the marine segment slipped into the red, after it incurred additional costs on conversion works. Revenue for the quarter declined 13.3% Y.o.Y to RM223.0 mln.

• For 1H2018, cumulative net loss widened to RM74.8 mln, from RM30.3 mln in the same period last year. Revenue for the period fell 16.6% Y.o.Y to RM411.3 mln. (The Edge Daily)

• Ann Joo Resources Bhd has been ordered by the Arbitration Tribunal in China to pay a remaining sum of US$3.2 mln under a contract with Tangshan Iron & Steel International Engineering Technology Co Ltd. This follows a two-year legal battle involving claims and counter-claims by the two companies, in relation to a contract where Tangshan is tasked to “Design, Supply, Install, Construct, Supervise, Train, Test and Commission a Blast Furnace Complex comprising Blast Furnace and Auxiliaries, a Sinter Plant and a Raw Material Yard” for Ann Joo in Penang in 2008. (The Edge Daily)

• Poly Glass Fibre (M) Bhd has reported that a fire broke out at its warehouse in Prai, Penang on 30th July 2018, which did not cause any uncontrolled emissions or harm to people. The company is unable to ascertain the cause of the fire or estimate the full impact and consequences of the incident, but is working closely with its insurance adjuster. (The Edge Daily)

• Apex Equity Holdings Bhd is seeking a validation order from the High Court, to regularise its share buy-back exercises done between the years of 2005 and 2017. The validity of such share buy-back exercises is questionable as the company’s Memorandum and Articles of Association does not provide the company with the requisite authority to undertake share buy-back exercises. (The Edge Daily)  

Source: Mplus Research - 2 Aug 2018