Profit Taking To Extend

• The FBM KLCI (-0.6%) ended on a downward bias, in-tandem with the negative sentiment spilled over from offshore stockmarkets. The lower liners also reversed Wednesday’s gains, closing in the red alongside the entire broader market as the threat of a trade war escalated.

• Market breadth was bearish as losers more than doubled winners, while traded volumes narrowed by 10.3% to 2.09 bln shares amid a risk-off sentiment.

• Main Board underperformers include Nestle (-40.0 sen), Hong Leong Financial Group (-28.0 sen), Petronas Dagangan (- 26.0 sen), Petronas Gas (-20.0 sen) and MISC (-18.0 sen). Other decliners were sin-stocks like Carlsberg (-28.0 sen), Heineken Malaysia (-24.0 sen) and BAT (- 14.0 sen), followed by United Plantations (-32.0 sen) and IHH Healthcare (-12.0 sen).

• Broader market advancers, meanwhile, include KESM Industries (+30.0 sen), Seni Jaya Corporation (+28.0 sen), Panasonic Manufacturing (+12.0 sen), Ajinomoto (+10.0 sen) and Hong Leong Industries (+10.0 sen). There were only three gainers on the Main Board, mainly Malaysia Airport (+8.0 sen), Hong Leong Bank (+6.0 sen) and Sime Darby (+1.0 sen).

• Key regional benchmark indices retreated on Thursday – due to the heightened risk aversion amid escalating U.S.-China trade tensions and the vaccine safety scandal which has plagued the biopharmaceutical sector in China recently. The Nikkei (- 1.0%) closed lower, weighed down by the losses in the telecommunication services and energy sector, while Shanghai Composite and the Hang Seng Index ended lower by 2.0% and 2.2% respectively. ASEAN equities also closed on a downbeat tone yesterday.

• Major U.S. indices finished broadly in the positive territory, boosted by the record rally in Apple, which made the iPhone maker the first U.S. company to breach US$1.0 trl market capitalisation. Consequently, tech-dominated indices like the S&P500 and the Nasdaq finished higher by 0.5% and 1.2% respectively. However, upsides was capped as the Dow (-0.03), weighed down by the decline in industrial blue-chips like Boeing and DowDuPont.

• European equities extended another round of losses as investors digested higher interest rates by the Bank of England, while the earnings season gets underway. The FTSE fell by 1.0% after lingering in the red for the entire trading session on Thursday, along the CAC (- 0.7%). The DAX, (-1.5%) also weakened, hit by disappointing earnings updates from Siemens.

The Day Ahead

• The renewed threat of a full blown trade war took its toll on Malaysian stocks yesterday and with the issue still weighing on sentiments, we think the pullback is likely to extend to the last trading day of the week.

• Apart from the trade war concerns, the FBM KLCI is already due for a consolidation as it was on an extended overbought streak, thus already due for a pullback after the key index gained more than 7.0% over the past month. At the same time, the recent recovery on other Emerging Market stocks is also approaching the tail-end, thus likely to spillover to Bursa Malaysia stocks as well with profit taking likely to continue over the near term.

• With the 1,780 now becoming the near term resistance, the supports are placed at 1,770 and 1,760 respectively. The other resistance is at 1,790.

• The lower liners and broader market shares also succumbed to the weaker market sentiments yesterday and their still toppish conditions could also prompt further profit taking activities that could result in the many stocks ending the week on a softer note.

COMPANY BRIEF

• Unisem (M) Bhd’s 2Q2018 net profit fell 26.0% Y.o.Y to RM31.1 mln, dragged down by unfavourable exchange rates and lower margin as a result of a change in product mix. Revenue for the quarter declined 6.2% Y.o.Y to RM343.2 mln.

• For 1H2018, cumulative net profit sank 57.2% Y.o.Y to RM37.2 mln. Revenue for the period slipped 8.4% Y.o.Y to RM664.8 mln. (The Star Online)

• Shah Hakim @ Shahzanmin Zain has resigned as the Chief Executive Officer (CEO) of oil and gas services company Scomi Group Bhd to focus on other business commitments. He has a direct stake comprising 1.9 mln shares or 0.2% and indirect stake of 88.7 mln shares or 8.1%. He currently also sits on the boards of Scomi Energy Services Bhd, Scomi Engineering Bhd and KMCOB Capital Bhd. Sammy Tse Kwok Fai will take over as the new CEO of the company. (The Star Online)

• Fraser & Neave Holdings Bhd’s 3QY18 net profit rose 50.6% Y.o.Y to RM104.5 mln, on positive contributions from Malaysia and Thailand. Revenue for the quarter, however, declined marginally by 1.0% Y.o.Y to RM1.03 bln.

• For 9MFY18, cumulative net profit was flat at RM303.9 mln. Revenue for the period decreased 0.6% Y.o.Y to RM3.11 bln. (The Edge Daily)

• Omesti Bhd has teamed up with Singapore-based ViewQwest Group to collaborate in the network services and communications infrastructure space to provide improved Internet service for customers in Malaysia. The partnership also includes ultra-high speed internet connectivity, 24-7 customer service and next-generation firewall protection. (The Edge Daily)

• Toyo Ink Group Bhd has proposed the issuance of 53.5 mln free warrants on the basis of one warrant-for-every two shares held, on an entitlement date to be announced later. The exercise price of the warrant has been fixed at RM1.50, representing a premium of 61.3% to the theoretical ex-price of 85.2 sen per Toyo Ink share after the proposed free warrants issue, calculated based on the five day volume weighted average market price of Toyo Ink shares up to 31st July 2018, of 52.82 sen. Should the warrants be fully exercised, the gross proceeds will come up to RM80.3 mln. (The Edge Daily)

• Kronologi Asia Bhd plans to raise up to RM22.8 mln via a placement of up to 10.0% of its shares to third-party investors to be identified later. The proceeds, derived from an illustrative price of 63 sen per share for the issuance of up to 36.3 mln new shares, would enable Kronologi to expand its business, without incurring interest costs or service principal repayments, as compared to bank borrowings.

• From the total proceeds, RM10.0 mln will be used for managed services cum transnational infrastructure equipment and RM8.0 mln will be used for future business development and expansion; RM4.3 mln will be set aside for working capital, while the balance RM0.5 mln will be used to defray estimated expenses related to the proposed exercise. (The Edge Daily)  

Source: Mplus Research - 3 Aug 2018