The FBM KLCI closed sharply higher yesterday, taking cue from the positive developments on Wall Street overnight, couple with the stronger-than-expected 2015 GDP growth at 5.0% Y.o.Y vs. economists’ estimates of a 4.9% Y.o.Y increase. Both the lower liners and the broader market also ended in the positive with the exception of the mining sector (-1.5%).
Market breadth stayed positive as gainers outnumbered losers on a ratio of 545-to-302 stocks. Traded volumes, however, fell by 4.4% to 1.67 bln shares.
Topping the key index’s gains were plantation stocks like KLK (+50.0 sen) and Sime Darby (+23.0 sen), while Genting, PPB and AmBank rose 40.0 sen, 18.0 sen and 14.0 sen respectively. Notable gainers on the broader market were Lafarge (+31.0 sen), Sarawak Oil
Palms (+23.0 sen), Cycle & Carriage Bintang (+22.0 sen) and TimeDotcom (+21.0 sen). Hup Seng, meanwhile, rose 6.0 sen after reporting a strong set of quarterly earnings.
Among the biggest decliners of the day were Genting Plantations (-36.0 sen), Kossan (-23.0 sen), Panasonic (-22.0 sen) and Top Glove (-16.0 sen). SAM tanked 39.0 sen despite reporting a strong set of quarterly earnings. There were only three decliners on the big board – BAT (-24.0 sen), KLCC (-8.0 sen) and Telekom (-2.0 sen).
Japanese stockmarkets extended their gains as the Nikkei jumped another 2.3%, buoyed by the stronger-than-expected U.S. economic data. The Hang Seng Index also added 2.3% to close above the 19,000 level after the energy sector jumped 4.0%, but the Shanghai Composite fell 0.2% to close negative in the final trading hour. ASEAN indices, meanwhile, ended mostly higher.
U.S. stockmarkets retreated from a streak of three winning days as the Dow closed 0.3% lower on mild profit taking. Meanwhile, the S&P 500 dipped 0.5%, dragged down by the energy sector after U.S. crude oil inventories came in at the highest level in 86 years.
European benchmark indices, however, ended mostly higher as the CAC and DAX rose 0.2% and 0.9% respectively. Elsewhere, the FTSE fell 1.0% as mining companies slipped.
THE DAY AHEAD
After a string of gains over the past week, the FBM KLCI is approaching overbought and this may limit further near term upsides, in our view. This near-term toppish conditions could also prompt short-term investors to start locking in their profits ahead of the weekend and we think the FBM KLCI could show consolidate signs to end the week and may find it difficult to penetrate the 1,680 resistance.
Still, any pullback is unlikely to be severe as it is likely to be just short-term profit taking activities. Consequently, we expect the 1,670 level to hold, while above the 1,680 level, the key resistance is at the psychological 1,700 points level.
On the broader market and among the lower liners, we expect the trading environment to remain relatively mixed as retail investors are still slow to re-enter the market despite the relatively calmer market conditions presently. The continuing lack of strong buying interest will also keep a lid on the upsides.
MACRO NEWS
Malaysia’s economy, as measured by the Gross Domestic Product (GDP) expanded by 5.0% Y.o.Y in 2015, which was slightly above economists’ forecast of a growth of 4.9% Y.o.Y, underpinned by a faster manufacturing sector growth. The GDP growth, however, expanded at a slower pace of 4.5% Y.o.Y in 4Q2015 vs. 4.7% Y.o.Y in 3Q2015.
Segmentally, the services sector expanded at a faster pace of 5.0% Y.o.Y in 4Q2015, from 4.4% Y.o.Y in 3Q2015, underpinned by the wholesale and retail trade which advanced to 6.5% Y.o.Y. As for the manufacturing sector, it expanded at a faster pace of 5.0% Y.o.Y vs. 3Q2015, driven by the electrical, electronic & optical products. Meanwhile, the construction sector grew 7.4% Y.o.Y vs. 9.9% Y.o.Y improvement in 3Q2015. (The Star Online)
Comments
Although the GDP growth was slightly ahead of expectations, the outlook continues to be clouded by the sustained weakness in the external sector that is likely to lead to reduced demand for the country’s commodities and exports, albeit the cheaper currency could provide some positives for selected export-oriented industries like glove producers and electronic and electrical manufacturers.
As it is, the global growth conditions remain at a low gear, with the threat of slower economic growth still looming on the back of China’s slower-than-expected growth prospect. At the same time, domestic demand will continue to falter due to rising cost and the lingering effects of the GST, thereby providing little cushion against the weaker external sector.
The revised Budget that places more emphasis on consumer spending remains a tall order for the government’s revenue gap to be completely covered in view of the weak economic environment and we think that government spending will have to be trimmed further and/or more projects may be delayed in order for the government to meet the targeted 3.1% Budget deficit for 2016.
Meanwhile, the revised GDP growth target of 4.0%-4.5% is a realistic assessment of the country’s growth in 2016, in view of the more challenging external and domestic economic environment. The revised estimate is also within the consensus estimates of private economist.
Still, inflation could spike up to about 4.0% in 1Q2015 after the recent round of price hikes that include electricity, gas and urban tolls, before moderating in the upcoming quarters. Therefore, the CPI is likely to range from 2.5%-to-3.5% for the whole of 2016.
COMPANY BRIEFS
Mulpha International Bhd’s associate company and Australia-listed retirement community operator, Aveo Group Ltd has acquired 15 retirement communities in Australia comprising more than 1,000 units for A$215.5 mln (RM643.7 mln) plus acquisition costs.
Mulpha owns approximately 24.0% in Aveo, an operator and manager of retirement communities, comprising of 89 retirement villages with a population of 13,000 residents. It also manages and develops a diversified property portfolio worth A$456.0 mln (RM1.36 bln). (The Star Online)
Sarawak Plantation Bhd’s 4Q2015 net profit fell 87.7% Y.o.Y to RM2.9 mln, mainly due to a reversal of impairment loss on deposits paid for acquisition of equity interest in four plantation companies amounting to RM28.5 mln in the previous corresponding quarter. Revenue for the quarter fell 6.1% Y.o.Y to RM91.3 mln.
For 2015, cumulative net profit fell 65.3% Y.o.Y to RM21.3 mln. Revenue for the year dropped 14.3% Y.o.Y to RM334.2 mln. An interim dividend of 4.5 sen per share for 2015, payable on 30th March 2015, was declared. (The Edge Daily)
Boustead Heavy Industries Corp Bhd’s (BHIC) 51%-owned BHIC AeroServices Sdn Bhd (BHIC AS) has received an extended Letter of Award (LOA) from the Royal Malaysia Navy for its previous “in service support” (ISS) contract. The extended award for three years, effective 7th February 2016, brings the value of the contract to RM63.2 mln, from its initial sum of RM32.4 mln.
To recap, the contract was initially awarded on 30th January 2013 from the Ministry of Defence Malaysia for BHIC AS to provide ISS for six units of Royal Malaysian Navy Fennec AS555SN helicopters for a period of three years. (The Edge Daily)
Inari Amertron Bhd plans to acquire a 5.3-ac. piece of leasehold industrial land together with a factory building erected on it in the Bayan Lepas Free Trade Zone, Penang, for RM22.8 mln.
The land is located within the vicinity of Inari's existing factories in Bayan Lepas and will increase the group's total manufacturing floor space. Inari intends to fund the purchase via a combination of internal funds and bank borrowings. (The Edge Daily)
Kedah-based property developer Bina Darulaman Bhd's (BDB) 4Q2015 net profit jumped 83.7% Y.o.Y to RM14.2 mln, mainly due to the recovery of RM4.7 doubtful debt from a related company. Revenue for the quarter, however, fell 24.4% Y.o.Y to RM105.8 mln.
For 2015, cumulative net profit slipped 0.8% Y.o.Y to RM24.0 mln. Revenue for the year dropped 26.0% Y.o.Y to RM243.3 mln. (The Edge Daily)
PUC Founder (MSC) Bhd, which is undertaking a rights issue to raise RM83.9 mln as part of the group's strategy to diversify into solar photovoltaic (PV) power plant, saw the corporate exercise undersubscribed by 42.8%.
As at 5th February 2016, the total valid acceptances and excess applications received under the rights issue of Irredeemable Convertible Unsecured Loan stocks (ICULS) was RM42.7 mln, representing an undersubscription of RM32.0 mln over the total of RM74.6 mln.
PUC Founder, however, will proceed with the rights issue of ICULS since the minimum subscription level of RM28.0 mln nominal value has been fulfilled.
Of the RM83.9 mln proceeds, PUC Founder had planned to use 89.1% or RM74.8 mln of it for capital expenditure to construct solar PV plants with capacities ranging from 3.0MW to 9.5MW. Another RM8.1 mln or 9.7% was for working capital, and RM1.0 mln for expenses incurred with regards to the exercise. (The Edge Daily)
Source: M+ Online Research - 19 Feb 2016
http://klse.i3investor.com/blogs/MplusOnline/91498.jsp
