Mild Recovery Possible

• The FBM KLCI (-0.7%) retreated for the first time in seven days ahead of the mid-week Hari Raya break as investors locked in recent profits. The lower liners – the FBM Small Cap (+0.1%), FBM Fledgling (+0.2%) and FBM ACE (+0.3%), however, all rose while the broader market ended mixed.

• Market breadth was slightly negative as decliners nudged advancers on a ratio of 344-to-334 stocks. Traded volumes sank 37.2% with only 1.0 bln shares exchanging hands on a half-day trading session.

• More than half of the key index constituents closed in the red, dragged down by Genting (-20.0 sen), followed by Hong Leong Financial Group (-14.0 sen), Axiata (-12.0 sen), IOI Corporation (-12.0 sen) and Public Bank (-12.0 sen). Significant losers on the broader market include Genting Plantations (-20.0 sen), JMR Conglomeration (-16.0 sen), Heineken (-14.0 sen), MPI (-12.0 sen) and Bursa (-11.0 sen).

• On the contrary, Fraser & Neave (+RM1.00) topped the broader market winners list, followed by Syarikat Takaful (+20.0 sen) and Hume Industries (+14.0 sen). Both Can-One and Dolmite jumped 28.0 sen and 11.5 sen on their respective takeover announcement of their subsidiaries. Key winners on the FBM KLCI were Petronas Gas (+22.0 sen), Petronas Dagangan (+8.0 sen), RHB Bank (+6.0 sen), CIMB (+3.0 sen) and Malaysia Airport Holdings (+2.0 sen).

• Asia benchmark indices ended mostly lower as the Nikkei slipped 0.01% after enduring a choppy trading session. The Shanghai Composite (-1.2%) closed near four month low amid the concerns over economic growth following the intensified trade dispute with the U.S, but the Hang Seng Index gained 0.3%. ASEAN stockmarkets, meanwhile, ended mostly lower on Thursday

• U.S. stockmarkets advanced as the Dow (+0.7%) extended its gains for the fourth straight session after U.S. and Mexico appears to be getting closer to an agreement over immigration issues that would delay the upcoming tariffs. On the broader market, the S&P 500 gained 0.6% with all eleven major sectors in the green, led by the energy sector (+1.7%), while the Nasdaq added 0.5%.

• Earlier, European benchmark indices ended mostly lower as the CAC and DAX fell 0.3% and 0.2% respectively, snapping their three-day winning streak after erasing all their intraday gains. The FTSE, however, climbed 0.6%, boosted by energy shares after crude oil prices rebounded.

The Day Ahead

• Market conditions look to improve as some external events look to ease during the Hari Raya break that could provide some near term impetus for the market to regain some of its lost ground on Tuesday.

• As it is, the U.S.’ tariff threats on Mexico is easing, while the Federal Reserve’s willingness to use monetary policies to cushion any slowdown in the U.S. economy will provide further relieve to equities, albeit the U.S.’ trade spat with China remains no closer to a resolution.

• Therefore, we see Bursa Malaysia stocks playing catch up to the gains in overseas stockmarkets, but with the FBM KLCI racking up decent gains over the past few sessions and still overbought, any recovery is likely to be mild with the 1,650 level serving as the near term hurdle. Further on, the resistance is at the 1,656 level. Meanwhile, the supports are at 1,640-1,642 levels, followed by the 1,639 level.

• After their incessant fall of late, the lower liners and broader market shares are finding support and this could provide some room for near term upsides as conditions are seeing some improvement. Still, we think that any gains will be measured as fresh buying is still lacking.

COMPANY BRIEF

• Can-One Bhd has accepted the offer from Asia Dairy Creations Sdn Bhd (ADCSB) to sell its sweetened creamer and evaporated creamer original equipment manufacturer (OEM) unit, F&B Nutrition Sdn Bhd which is worth between RM800.0 mln to RM1.0 bln.

• To recap, ADCSB is a special purpose vehicle managed by Southern Capital Group Private Ltd. Can-One has a direct 20.0% equity stake in F&B, with the balance 80.0% indirectly held by its unit Amber Alliance Sdn Bhd. (The Star Online)

• Seacera Group Bhd’s shares will be suspended for trading on 12th June 2019 if it does not furnish Bursa Malaysia its quarterly financial report for the quarter ended 31st March, 2019. The tile manufacturer has up to 11th June to submit the report or face suspension. (The Edge Daily)

• Yee Lee Corp Bhd‘s shareholders have until 21st June 2019 to consider the takeover offer of RM2.33 a share from the joint-offerors, private equity fund Dymon Asia Private Equity (S.E. Asia) Fund II Ptd Ltd and Yee Lee’s founder Datuk Lim A Heng @ Lim Kok Cheong and his family.

• This comes after the joint-offerors extended the deadline for the acceptance from the original due date (7th June). As of 3rd June, the joint-offerors have acquired about 70.0% (or 134.0 mln) shares of the group’s outstanding 191.6 mln shares, after 6.6% (or 12.7 mln) of the outstanding shares have been accepted. (The Star Online)

• China-based Maxwell International Holdings Bhd and Xingquan International Sports Holdings Ltd will continue to see its shares being suspended from trading after both companies failed to submit their quarterly financial reports for the period ended 31st March 2019 by the deadline 31st May. Meanwhile, for Maxwell, this is the third time the group did not deliver its quarterly fiscal report. (The Edge Daily)

• Metronic Global Bhd‘s shareholders which reportedly hold at least 10.0% of the group’s shareholdings are calling for an extraordinary general meeting (EGM) to replace its board of directors. Shareholders Lagenda Perdana Sdn Bhd and Ng Wai Yuan have called for the EGM to be held in order to appoint Loh Chye Teik, Seah Soo Chang, Kok Chee Hong and Choo Chung Tiong as directors.

• The EGM will also decide on proposals to remove Hoo Wai Keong, Datuk Kua Khai Shyuan, and Khor Ben Jin as directors of the group. Tentatively, the EGM is expected to be held on 1st July 2019. (The Edge Daily)

• Top Glove Bhd has officially launched its flagship environmentally-friendly product, BioGreen Biodegradable Nitrile Gloves (Powder-Free), in conjunction with World Environment Day. The latest product is the eco-friendly variant of disposable nitrile gloves, which is designed to biodegrade in anaerobic environments (where there is little to no breathable oxygen) such as in landfills.

• The group will continue to pursue more green versions of gloves within its synthetic latex product range, in-line with its commitment to sustainability. (Bernama)  

Source: Mplus Research - 7 Jun 2019