Still Overbought, Consolidation May Persist

• The FBM KLCI (-0.2%) extended its losses after lingering mostly in the negative territory yesterday, bogged down by the renewed volatility in crude oil prices, coupled with the on-going global trade uncertainty. The lower liners – the FBM Small Cap (+0.9%), FBM Fledgling (+0.5%) and FBM ACE (+0.9%), however, all extended their gains, while the broader market closed mostly higher.

• Market breadth turned positive as advancers outstripped decliners on a ratio of 466-to-348 stocks. Traded volumes, however, fell 5.7% with 2.84 bln shares exchanging hands.

• Key losers on the local bourse was, Petronas Gas (-18.0 sen), followed by Tenaga (-10.0 sen), Hong Leong Bank (- 8.0 sen), CIMB (-6.0 sen) and Press Metal (-5.0 sen). Among the biggest decliners the broader market include Aeon Credit (-10.0 sen), UMW Holdings (-10.0 sen), MPI (-10.0 sen), Shangri-La (-9.0 sen) and Oriental Holdings (-6.0 sen).

• Meanwhile, Dutch Lady (+50.0 sen), Yinson Holdings (+41.0 sen), BAT (+38.0 sen) and Fraser & Neave (+30.0 sen) advanced on the broader market. Revenue Group jumped 20.0 sen to close at a fresh all-time high level. FBM KLCI winners on Thursday were Petronas Dagangan (+10.0 sen), Axiata (+4.0 sen), Hap Seng (+4.0 sen), KLK (+4.0 sen) and MISC (+4.0 sen).

• Asia benchmark indices finished mixed as the Nikkei rose 0.3%, taking cue from the positive developments on Wall Stret overnight. Both the Hang Seng Index and the Shanghai Composite, however, fell 0.2% and 0.3% respectively as the latter remained uncertain from the ongoing Sino-U.S. trade developments. ASEAN stockmarkets, meanwhile, closed mixed on Thursday.

• U.S. stockmarkets were closed for the Independence Day public holiday.

• Meanwhile, European benchmark indices finished mixed as the CAC and DAX rose 0.03% and 0.1% respectively after Italy managed to convince the European Union that the country would bring down its debts in line with the European Union’s fiscal rules. The FTSE, however, fell 0.1% after enduring a choppy trading session.

THE DAY AHEAD

• The FBM KLCI decoupled from the positive performance on Wall Street and other global indices a day earlier as its recent uptrend has left it overbought. Even after yesterday’s slight losses, the key index remains overbought which could prolong the consolidation spell into the final trading session of the week.

• We continue to think that the recent gains were already overdone after the key index gained some 8.0% from its year low a month ago. We think the recovery has more-than-reflected corporate Malaysia’s fundamental prospects for the year that has also left it overbought. Therefore, we still see a consolidation spell to allow the recent gains to be digested. On the downside, the resistances are at 1,680- 1,682 levels, followed by the 1,670 level. The resistances, meanwhile, are at 1,694 and 1,700 respectively.

• The FBM Small Cap index is becoming increasingly overbought after the recent uptrend and a pullback is already due. Consequently, we think profit taking activities could set in over the near term as market players could opt to lock in some of their profits ahead of the weekend.

COMPANY BRIEF

• Seacera Group Bhd was slapped with a winding up statutory notice for a default of RM15.5 mln on outstanding rental, goods and services tax and agreed liquidated damages over breaches to its tenancy agreement dated 4th Augut, 2016 for its factory in Selayang, Selangor. (The Edge Daily)

• Sunzen Biotech Bhd is selling its 70.0% equity stake in food items manufacturer, Amplio Ingredients Sdn Bhd for RM1.5 mln as the latter was unable achieve the agreed net profit as per the acquisition agreement last year. Sunzen signed a settlement agreement with Amplio and its Chief Executive Officer to settle and resolve the disputes arising from agreements it had with them. The disposal proceeds will be used for working capital of the company and defraying estimated expenses in relation to the settlement. (The Edge Daily)

• Star Media Group Bhd has appointed Andreas Vogiatzakis as Group CEO, effective 13th August 2019, after the post was left vacant for the past six months. Andreas was previously the CEO of Havas Media Group, Malaysia. (The Edge Daily)

• UEM Edgenta Bhd has been awarded contracts for the provision of hospital support services to the Ministry of Health, Singapore worth up to RM540.1 mln. The group’s indirect 97.5%-owned subsidiary, UEMS Solutions Pte Ltd accepted the contracts for the provision of hospital support services to the restructured hospitals in Singapore, which include housekeeping and portering services. The total value of the contracts is estimated to be between RM430.0 mln to RM540.1 mln, with the final value dependent on the actual manpower resources deployed. (The Edge Daily)

• Diversified Gateway Solutions Bhd (DGSB) is selling off its entire stake in ISS Consulting (Thailand) Ltd for THB236.4 mln (approximately RM32.0 mln) cash. The company will declare a special dividend of 0.8 sen per share with part of the proceeds. The divestment is a move to unlock and realise the value of its overseas investment in the company, especially with the strong Thai baht, to bring the foreign exchange investment and earnings back to invest further into its existing operations in Malaysia. (The Edge Daily)

• KNM Group Bhd has bagged an air cooler heat exchangers contract worth €7.8 mln, (about RM36.1 mln) from Technip Italy SpA. The job was awarded from Technip via a purchase order (PO) dated 28th June 2019, involving the design, detailed engineering, fabrication and supply of air cooler heat exchangers as part of the expansion and modernisation projects of the Middle East Oil Refinery located in Alexandria, Egypt, that is managed by Middle East Refining Ltd (MIDOR). The job is to be completed in no more than 14 months from the PO's date. (The Edge Daily)

• Minetech Resources Bhd has appointed Yee Kon Sin as its CEO. He was the Chief Operating Officer (COO) at De Lufra Sdn Bhd prior to joining Minetech on 1st January 2019. Meanwhile, its NonExecutive Chairman, Choy Sen @ Chin Kin Sang has been re-designated as Executive Chairman on 6th July 2019. Currently, he has a direct interest of 172.9 mln shares or a 19.6% stake in the company. (The Edge Daily)

• Pasdec Holdings Bhd’s Non-Independent Non-Executive Chairman, Datuk Seri Adnan Yaakob has retired from his position. Datuk Seri Adnan has served the board as its Chairman for 16 years since 21st January 2003. (The Edge Daily)

• Tan Sri Vincent Tan Chee Yioun, has upped his stake for the second time in two months in Caring Pharmacy Group Bhd, acquiring 3.1 mln shares from Permodalan Nasional Bhd (PNB) on Tuesday. Previously in May, PNB had sold 3.8 mln shares in Caring Pharmacy to Tan in two transactions. With the latest purchase, Tan holds an 8.4% stake in Caring Pharmacy. He is the third-largest shareholder in the company behind PNB while the major shareholder of Caring Pharmacy is Motivasi Optima Sdn Bhd with a 50.4% stake in the company. Meanwhile, PNB's stake has been reduced to 20.9 mln shares, or 9.6% after the latest disposal. (The Star Online)

Source: Mplus Research - 5 Jul 2019