Pullback To Continue

• The FBM KLCI (-1.2%) took a beating, snapping a four-day winning streak to close below the 1,800 psychological level after lingering in the negative territory for the entire trading session yesterday. The weakness stemmed from the extended weakness in Turkish Lira against the Greenback. The lower liners – FBM Small Cap (-1.1%), FBM Fledgling (-0.4%) and FBM ACE (-1.5%) all erased their previous session gains, while the broader market were splashed in red.

• Market breadth stayed negative as decliners thumped advancers on a ratio of 764-to-213 stocks. Traded volumes fell 5.6% to 2.07 bln shares as investors opt to stay at the sidelines amid the negative market sentiment.

• Almost all the 30 key index components retreated, with Malaysia Airport Holdings (-53.0 sen) taking the heaviest beating, followed by IHH (-30.0 sen), Petronas Gas (-24.0 sen), Tenaga (-22.0 sen) and Petronas Dagangan (-16.0 sen). Among the biggest decliners on the broader market were Far East Holdings (-50.0 sen), KESM Industries (-40.0 sen), Heineken (-30.0 sen), Heng Yuan (-27.0 sen) and Carlsberg (-20.0 sen).

• In contrast, notable advancers on the broader market include SAM Engineering & Equipment (+31.0 sen), Edaran (+26.0 sen), Fraser & Neave (+21.0 sen), SLP Resources (+16.0 sen) and Aturmaju (+12.5 sen). Meanwhile, PPB Group (+6.0 sen) was the sole winner on the FBM KLCI.

• Asia benchmark indices were under pressure from the extended depreciation of the Turkish Lira. The Nikkei tumbled 2.0% after the safe-haven Japanese Yen appreciated against the Greenback. The Hang Seng Index slipped 1.5% to close below the 28,000 psychological level, while the Shanghai Composite ended 0.3% lower. ASEAN stockmarkets, meanwhile, closed in the red yesterday.

• U.S. stockmarkets extended their losses after erasing all their intraday gains overnight with the Dow falling 0.5% as the ongoing economic uncertainty in Turkey continues to dampen investors’ sentiment on riskier assets. On the broader market, the S&P 500 (-0.4%) recorded its fourth straight session of decline, while the Nasdaq closed 0.3% lower.

• Earlier, European benchmark indices – the FTSE (-0.3%), CAC (-0.04%) and DAX (-0.5%) all extended their losses. The weakness was due to the mounting concerns over Turkey's financial stability that could spread to the Eurozone's banking sector after the Turkish central pledged to supply all the liquidity banks require as a move to provide support to the recent slump in the Turkish Lira.

The Day Ahead

• The Turkish Lira crisis has pushed Malaysia stocks to a long overdue adjustment from overbought after its streak of gains that saw the key index jump more than 8.0% in a span of a month. Even after yeterday’s steep losses, we think there remains further downside pressure as the ongoing concerns over the Turkish currency’s weakness could weigh on other Emerging Markets and could promp further flight to safety.

• As a consequence, we see further unwinding of winning positions among Bursa Malaysia stocks that is likely to send the key index lower again. Many stocks are still tethering in the overbought region after their recent gains and remains most vulnerable to the ongoing market uncertainties. We think the continuing profit taking activities could send the key index to the 1,780 support level that is followed by the 1,770 level. The resistances are at 1,790 and 1,800 respectively.

• Similarly, we see the lower liners and broader market shares consolidating further amid the ongoing global equity market uncertainties. Just like the key index, many over the broader market shares are also due for an adjustment from overbought and we see further unwinding of winning positions over the near term.

COMPANY BRIEF

• Guan Chong Bhd posted a record net profit after its 2Q2018 net profit nearly doubled to RM43.0 mln, from RM22.9 mln in the previous corresponding year on improved margins, although revenue only rose marginally by 1.9% Y.o.Y to RM491.6 mln, from RM482.0 mln previously.

• For cumulative 1H2018, its net profit spiked 187.6% Y.o.Y to RM82.4 mln, from RM28.6 mln in 1H2017 boosted by increased economies of scale. Revenue, however, narrowed by 9.2% Y.o.Y to RM1.01 bln, from RM1.11 bln last year due to lower ASPs. The group has also declared a first interim dividend of two sen per share, payable on 28th September 2018. (The Edge Daily)

• Mycron Steel Bhd has re-designated its Managing Director (MD) Azlan Abdullah as a Non-Independent Non-Executive Director, effective 10th August 2018. Encik Azlan has been the MD of the steelmaker since 30th March 2004. He is also the MD of Melewar Industrial Group Bhd, which owns a 71.3% equity stake in Mycron Steel. (The Edge Daily)
• Malton Bhd has invited Pavilion REIT to participate in the ownership of Pavilion Bukit Jalil which is currently under development. MTrustee Bhd, the trustee for Pavilion REIT, had accepted the invitation for both parties to enter into a non-disclosure agreement to commence due diligence, discussions on method of participation and negotiate relevant terms and conditions. (The Edge Daily)

• TH Plantations Bhd has appointed Lembaga Tabung Haji’s newly-appointed group Managing Director and CEO, Datuk Seri Zukri Samat as its Non-Independent, Non-Executive Chairman effective 13th August 2018. He is replacing Tan Sri Ab Aziz Kasim, who retired on 14th May. Datuk Seri’s previous undertakings include the MD for Khazanah Nasional Bhd and Pengurusan Danaharta Nasional Bhd. (Bernama)

• Vivocom International Holdings Bhd was awarded a RM12.6 mln contract from CRCC Malaysia Bhd to supply labour, tools and equipment for the construction of reinforced concrete structure and structural steel works for an office tower. The project is slated for completion by 30th May, 2019. (The Star Online)  

Source: Mplus Research - 14 Aug 2018