Translate This Page

Wednesday, July 27, 2016

Abenomics, Japan's bold strategy to tackle stagnant economic issues

The term Abenomics, referring to the economic policies advocated by Shinzo Abe since the December 2012 general election, which elected Abe to his second term as Prime Minister of Japan.

Shinzo Abe, Prime Minister of Japan
Abe's bold strategy is to tackle the stagnant economic climate in Japan that has lasted for 20 years and was overtaken by China in 2010 as the world's second largest. Abe tells voters that the strong economic medicine he has pursued for more than three years is Japan’s last chance to remain a world power, framing his policies as a matter of national security. After early promise, progress has stalled.

WHAT HAPPENED TO JAPAN?

Before we look at the current situation, it is important to understand the background that Japan was in....since the real estate and stock market bubble burst in the early 1990s, companies have focused on cutting debt and shifting manufacturing overseas. Wages stagnated and consumers reined in spending, leading to what was famously known as the "lost decade".

For 20 years, Japan has not seen nominal growth in the economy. 

Prices of goods such as fresh food and sake kept falling, creating deflation that sapped optimism. Japan’s devastating earthquake, tsunami and nuclear meltdown in 2011 didn’t help. 

The challenge of growing the economy with an aging population has vexed a series of prime ministers. Abe himself had a failed 12-month first term starting in 2006. He returned to office in December 2012 and has now stayed longer than any of the last five prime ministers. 

This time the country’s central bank joined with policy makers and set a target for inflation of 2 percent, a shift so significant that it has been compared with the rate increases that ended high levels of U.S. inflation after Paul Volcker became chairman of the Federal Reserve in 1979. Rising prices encourage companies to invest and consumers to spend.

THE THEORY BEHIND ABENOMICS

The theory behind Abenomics was that unprecedented monetary easing and government spending would tackle deflation and buy time to implement much-needed structural reforms. 

"THREE-ARROW" STRATEGY

Abe called it a “three-arrow” strategy, borrowing the image from a Japanese folk tale that teaches that three sticks together are harder to break than one. 

Early optimism contributed to a doubling of Japan's benchmark stock index through mid-2015 as a weaker yen boosted exporters and tourism. Yet the goal of spurring inflation remains elusive: prices continue to fall and economic growth is tepid.

In an extraordinary move designed to spur bank lending to businesses and consumers, the Bank of Japan introduced negative interest rates in January. Stocks have since slumped and, pushed by Britain's vote to leave the European Union, the yen surged to its strongest level since 2013, clear signs — according to Abe's critics — that his plan is failing. 

Unbowed, Abe delayed a planned sales tax increase in June and promised "comprehensive, bold" fiscal stimulus following resounding support in July's parliamentary elections. 

Other Abenomics policies have included cutting the corporate tax rate, pushing Japan’s state pension fund to buy riskier assets and a pending trade agreement led by the U.S. 

If Abe stays in power through 2020 (he can call an election any time before his term ends in 2018), he would become the longest-serving Japanese Prime Minister.


THE BIG QUESTION: WILL ABENOMICS SUCCEED?

The big question remains: will Abenomics succeed?

There are those who view Bank of Japan's mammoth purchases of government debt as the only way to shake off deflation and avoid more stagnation....there are even some (including the IMF) has called for a "reload" of the "three-arrows" of Abenomics.

Investors are looking for signs that Abe is willing to take more bold steps, such as changes to labor regulations dating from the 1960s that offered lifetime employment at large companies. Abe is also trying to lure more women into the workforce and enforce a new corporate governance code that promotes boardroom transparency. These are areas where the 61-year-old Abe must take on tough vested interests — including farmers, drugmakers and utilities — or Abenomics will fail.

Brokers Report: AirAsia Bhd - 2QFY16 operating statistics

Maintain our neutral call with target price (TP) of RM2.36



Yesterday, AirAsia announced its 2QFY16 preliminary operating statistics, delivering strong load factor at 85.5% (1QFY16 at 85.6%). Its traffic volume saw a 12.2% YoY growth to 16.8bn revenue-passenger-kilometres (RPKs) on the back of increased in passengers carried by 12.2% YoY. However, the operational numbers was flat QoQ. AirAsia is scheduled to release its 2QFY16 results and passenger yield data on 29th August 2016. We maintain our Neutral call on AirAsia, with target price of RM2.36, pegged on 8x FY17F EPS. Our target price is based on enlarged share capital, including the proposed share placement to Tune Live Sdn Bhd.

Malaysia (MAA) operating statistics. Malaysia AirAsia (MAA) increased in passengers’ carried by +10.0% YoY to 6.55m, though its seat capacity was flat YoY (+1.4%) at 7.54m. Available-seat-kilometres (ASK) increased by +9.8% YoY to 10.0bn and revenue-passenger-kilometres (RPK) increased by +18.6% YoY to 8.6bn. Meanwhile, passenger loads remain strong at 86.8% during the quarter compared to 80.1% in 2QFY16. However, QoQ operational numbers was flat with load at 85.6%. (Table 2).

Associates’ performance. Thailand (TAA) remains strong with load factor at 83.0% on the back of passenger volume and capacity growth YoY increased by 17.7% and 12.9% respectively, due to new route commencements, additional route frequencies and 6 additional aircraft was added to its fleet. Indonesia (IAA)’s load factor QoQ improved by 3.1ppts to 83.1% and passengers volume increased by 3.9%. Strong load was recorded in Philippines (PAA) at 90.8%, with passenger carried up by 3.0% YoY and seat capacity decreased by 8.9%. (Table 3-6)

Pending more details on yield data and results for 2QFY16, we expect passenger fares in 2Q to remain strong due to travel demand recovery. Overall, 2QFY16 operational numbers was stronger than a year before, but flat QoQ. We maintain our Neutral call with target price of RM2.36, pegged on 8x FY17F EPS, as we believe the positives have already been priced-in amid the continued run-up in share prices. Our target price is based on enlarged share capital, including the proposed share placement to Tune Live Sdn Bhd which is expected to complete by this quarter.

Source: PublicInvest Research, 27 July 2016

Brokers Report: WCT Holdings - secures RM1.29 bil Pan Borneo job

Maintain Outperform with unchanged SOTP-derived TP of RM1.80. 

WCT Holdings

WCT Holdings Berhad, via its joint-venture with KKB Engineering Berhad, secured one of the Pan Borneo packages worth RM1.29bn. This job win, which is the Group’s first in FY16, is expected to take 51 months from now to complete. WCT owns 30% of the JV, with the remaining owned by KKB Engineering Berhad. As such, its net stake of c.RM390m is within our replenishment rate of RM2bn p.a. for the Group. This job win is estimated to raise the Group’s outstanding orderbook to RM4.8bn. ensuring earnings visibly for the next few years. Maintain Outperform with SOP-derived TP of RM1.80.

RM1.29bn Pan Borneo Package. The scope of works, among others includes upgrading of Pan Borneo Highway in Sarawak which involving Phase 1, spanning from Sungai Arip Bridge to Bintulu Airport junction. The works are including piling works, civil works which includes demolition & site clearance, earthworks, geotechnical works, drainage work, roads & pavings, road furniture and other miscellaneous works.

C.RM4.8bn outstanding orderbook. With the new job win, the Group’s outstanding orderbook is estimated at RM4.8bn. To recap, the Group is expected to clinch jobs worth RM2bn in 2016, with RM1.6bn expected locally and the rest from the Middle East. Going forward, other key jobs eyed are RAPID Pengerang civil works (c.RM300m), TRX infrastructure and buildings (c.RM800m), Kwasa Damansara civil and infrastructure works, KL118 infrastructure, Southern Double Track, LRT3 and MRT2 rail works.

Maintain Outperform with unchanged SOTP-derived TP of RM1.80. With the potential value to be unlocked from reorganization, we believe the re-rating catalysts are on the cards. Elsewhere, the arbitration claim of AED1.15bn or c.RM1.3bn would potentially add another RM0.95/share to our SOTP valuations. Earnings are kept unchanged.

Source: PublicInvest Research, 27 July 2016

Goldman accused of selling out client - curry favor with Malaysia's Najib

Goldman Sachs Group Inc is being accused in a lawsuit of selling out a client to curry favor with Prime Minister Najib Razak at a time when the bank has already been under scrutiny by regulators over its fundraising for the embattled 1Malaysia Development Bhd (1MDB).



Goldman and former managing director Tim Leissner allegedly betrayed their duties as financial adviser of EON Capital Bhd, which was taken over by Hong Leong Bank Bhd. for $1.7 billion in May 2011. Goldman used EON’s confidential information to help the bank buy EON on the cheap knowing that Najib’s brother served as a board member and another brother chaired the investment firm advising the bank, Primus Pacific Partners 1 LP said in the complaint. (Source: Bloomberg)

Spokesman for Goldman said lawsuit as "misguided"

Primus Pacific, EON’s biggest shareholder after buying a stake of more than 20 percent in 2008, unsuccessfully sued twice to block the sale, arguing that Hong Leong’s takeover price was too low.

“This plaintiff previously lost its challenge in the Malaysian courts seeking to stop the transaction at issue, which was then approved by shareholders," Andrew Williams, a spokesman for Goldman, said in a statement. 

He called the lawsuit “misguided.”

Leissner’s attorney, Jonathan Cogan, didn’t return a call for comment.

Goldman persuaded EON’s board to hire it as financial adviser by misrepresenting and hiding conflicts of interest, according to the lawsuit, filed Tuesday in New York state court. 

The conflicts stemmed from existing and potential business interests in Malaysia, including its close relationship with Najib, according to the complaint.

Primus Pacific seeks $510 million in damages - said of Goldman Sach's fraud

Primus Pacific will seeks for $510 million in damages, including a punitive award.

Goldman served as the "key adviser" to 1MDB and Leissner "repeatedly engaged in misconduct" in connection with the fund before, during and after the time the company served as EON’s adviser, according to the complaint.

Goldman initially advised EON in January 2010 that the bid was below the company’s value, and four months later recommended that the board accept a bid that was 2.8 percent higher - a proposal that was approved by shareholders, Primus Pacific said.

"As a result of Goldman Sachs’s fraud, shareholders approving HLB’s takeover bid were unaware of critical facts that, if known, would have precluded approval of the HLB offer," Primus Pacific said.

RECAP of Goldman and 1MDB's recent complaint filed by US prosecutors

In a complaint filed last week, US prosecutors laid out a road map that appeared to show how more than $2 billion raised by Goldman for 1MDB was siphoned off by politically connected people and funneled into various projects, including Hollywood movie productions, famous paintings and a Bombardier jet.

The lawsuit comes following it.

The prosecutors' complaint (without assigning any blame to the bank) indicated that the documents  circulated by Goldman prior to the bond sales were misleading. Former vice chairman of Goldman’s operations in Asia, Leissner, was the lead banker on the 1MDB deals. 

He resigned from Goldman after he was placed on leave in January over “inaccurate and unauthorized statements” in a letter of reference, according to Financial Industry Regulatory Authority records.

Najib and Leissner, both were not accused of any wrongdoing in the US complaint.


1MDB: 2013 & 2014 audited financial statements "not reliable"


1Malaysia Development Bhd (1MDB) has made a media statement, saying that its audited financial statements for 2013 and 2014 shouldn’t be relied on after U.S. prosecutors said more than $3.5 billion was misappropriated from the fund during a period that included those years.

"Whilst the Board remains confident that no wrongdoing has been committed by 1MDB and that the past audited financial statements continue to show a true and fair view of the company’s affairs at the relevant points in time, the Board has decided that, as a precautionary measure, the 2013 and 2014 audited financial statements of 1MDB should no longer be relied on by any party, pending final and conclusive determination by a court of law of certain alleged facts, as described in the Complaint."


1MDB also said its auditor Deloitte LLP is resigning and the company is seeking a replacement, according to an e-mailed statement on Tuesday. 

It didn’t give a reason for the departure but said that Deloitte, which notified 1MDB on February 26, 2016 of its decision, will continue to audit its key subsidiaries. It is also mentioned in the statement that Deloitte will remain as auditor on record until a new auditor is appointed. 

1MDB is currently at the center of a scandal, involving the investigations of several countries including Singapore, Switzerland, Luxembourg and the US. At least four of these countries are looking into money flows from the investment vehicle, which was established for national development according to Bloomberg.

The media statement was clear nonetheless, stating that the Board remains confident that no wrongdoing has been committed by 1MBD. 

Tuesday, July 26, 2016

Brokers Report: Bursa Malaysia - Within Expectations

Maintain Market Perform with marginally increased target price (TP) of RM8.80


1H16 NP came in within expectationsAs expected, an interim DPS of 17.0 sen was declared. Fluctuation in Ringgit, China’s economic slowdown, BREXIT as well as the expectations of a gradual rise in US interest rate will continue to cast a long shadow over market sentiment; hence, suppressing trading sentiment. Our FY16E/FY17E NPs have been tweaked by +2% following house-keeping purposes. Maintain MP with TP marginally increased to RM8.80 (from RM8.56).

Within expectations. BURSA reported 2Q16 net profit (NP) of RM49.5m (-1% QoQ; 0% YoY), bringing 1H16 NP to RM99.4m (+3%) which made up 53% and 48% of our and the consensus’ full-year estimates, respectively. As expected, an interim DPS of 17.0 sen (representing 92% of dividend payout ratio) was declared under the quarter reviewed.

YoY, 1H16 operating revenue increased by 3% with better performance in stable revenue (+6%) superseding the meagre growth in trading revenue (+2%, which was dragged by lower securities trading revenue amid lower average daily trading value and volume). Coupled with the decent growth in “other income” segment (+12%) which was predominantly driven by higher interest and dividend income (+13% and +38%, respectively), total income grew by 4%. On a closer look at the star performer- stable revenue, the decent performance was anchored by both: (i) higher growth from Bursa Suq Al-Sila (BSAS; +18%), on the back of higher adoption of the Murabaha concept as well as (ii) better listing and issuer services revenue (+5%) on higher initial and additional listing fees from the transfer of listing status and higher number of corporate exercises in 1H16. At the bottom line, even with a slight uptick in cost-to-income ratio (CIR) at 46.9% (vis-à-vis 1H15: 46.3%), the group’s net profit still grew by 3%, reflective of the underlying decent performance from the top line.

Meanwhile on QoQ basis, 2Q16 total income decreased by 3% with softer revenue seen in both Operating revenue (-3%) and Other income (- 4%). Looking at the lion’s share- operating revenue, weaker trading revenue (-1%) was recorded due to poor sentiment in the securities market amid domestic and global market uncertainties. This is despite the higher trading revenue from derivatives market, which increased by 5%. However, with normalisation of CIR from the high base in 1Q16’s CIR (expenses incurred for conferences and exhibitions), 2Q16 PATAMI only dropped by 1%.

Headwinds persist. Fluctuation in Ringgit, China’s economic slowdown, BREXIT as well as the expectations of a gradual rise in US interest rate will continue to cast a long shadow over market sentiment. Challenging external headwinds still linger and our strategist is now forecasting the local bourse to hit 1,715-point by end-2016, lower than what was initially projected at 1,725-points, amid: (i) modest corporate earnings growth (2%- 9% YoY for FY16-FY17) coupled with (ii) cautious investment sentiment. Meanwhile, we are keeping our conservative stance by forecasting average trading value and volume for the equity market in 2016 at RM1.86bn (-7% YoY) and 1.81bn shares (-8% YoY). As for the derivatives market, we expect total volume for future contracts to increase by 6% YoY.

Post earnings model update, our FY16E/FY17E NPs have been tweaked by +2% for house-keeping purposes. Post revision, our TP has been marginally increased to RM8.80 from RM8.56. This is still based on a targeted FY17E PER of 22.0x (at its 5-year average P/E). Maintain MARKET PERFORM.

Risks to our call include: Higher-than-expected trading volume in the securities and derivatives markets, Lower-than-expected opex, More IPOs.

Source: Kenanga Research, 26 July 2016

Brokers Report: Kossan Rubber Industries Bhd - Safe and strong

Maintain our Outperform call with an unchanged target price (TP) of RM8.50


Our recent meeting with Kossan’s management reaffirmed our belief that Group’s expansion plans and operational improvements are on track. 

We believe our Outperform recommendation for Kossan will be supported by i) continuous improvements in productivity and efficiencies through R&D initiatives, reflected through its growing margins over the years (from 7.6% in 1QFY12 to 12.4% in 1QFY16 - Figure 1), ii) diverse product range, and iii) most of the additional capacities for new products contribute by FY18 onwards.

Widening product mix. Under immense competition, Kossan continues to improve their products to differentiate themselves. For instance, they introduced and patented its latest “accelerator free” nitrile glove, which minimizes latex protein and chemical allergies. We are also positive on other new innovative offerings which are expected to be launched by end-2016.

Continuously improving efficiencies. To recap, Kossan formed a JV company, Aseptapak (M) Sdn Bhd with its UK partners, to acquire the latest technology in automated packaging machine since February. This new automated packaging machine with advanced technological features will be adopted in its upcoming plant. Some of these features include contamination prevention during the dispensing process. Together with automation, Kossan’s new plant will feature higher speed production lines which only requires a third of the number of workers versus its old plants. We are encouraged by this move as the group can re-designate its workers to other areas and thus would be less impacted by the shortage of workers issue following the Government’s policy to freeze hiring foreign workers. Kossan’s target is to further reduce headcount from 2.9 workers per million gloves to 2.2 workers per million gloves by FY18.

Capacity expansion. All existing plants are currently running at maximum capacity (above 80% utilization rate) and have thus limited the Group’s ability to take on additional orders for its new products. Kossan is therefore planning to double its current capacity to 43.0bn pcs over the next five years. 3.0bn nitrile gloves capacity is targeted to commence in 3QFY17, while another plant housing 4.5bn pcs capacity will begin construction by end-2016 and targeted to complete by 1QFY18. Total capex is estimated to be RM120-150m/year. The prudent expansion plans also includes upgrading its older lines on a staggered basis once the new capacity comes on-stream.

Source: PublicInvest Research, 26 July 2016

Brokers Report: SAPURAKENCANA - New award from Pemex

Reaffirmed Outperform with target price (TP) of RM1.90


SapuraKencana Petroleum’s (SAKP) wholly-owned subsidiary SapuraKencana Mexicana S.A.P.I. de C.V. has been awarded a USD113m (c.RM461m) contract by Pemex Exploración y Producción for an approximate 8-9 months duration. 

The award is for the procurement and construction of a 36-inch by 18km sour gas pipeline (KMZ – 76) from platform E – KU – A2 to Platform CA – AJ – 1(J4) in Ciudad del Carmen, Campeche, Mexico. 

We are pleased with this announcement as the award underpins the Group’s progress in Mexico, having first initiated its local operations in May 2015. Aside from providing contract replenishment and moreover enhancing earnings visibility to the Group, the contract concedes that SAKP’s execution capabilities are intact and is poised for more jobs in the region going forward. Our Outperform recommendation on SAKP is thus reaffirmed, with a TP of RM1.90 based on our blended SOP valuation.

Contract details. The scope for work includes transportation and installation of pipelines, crossings, topside modifications and subsea works, including procurement management. The activities are scheduled to commence in July and to last until March 2017. The award is sufficiently accounted for in our contract replenishment assumptions. The Group’s robust order book stands at c.RM20.3bn as at end-April 2016.

Pemex Exploración y Producción is the exploration and production arm of Mexico’s state-owned petroleum company, Pemex. SAKP established their presence in Mexico since May 2015, when they were awarded a c.RM300m-500m job for the installation of structures and superstructures of fixed marine platforms, pipelaying and lifting of major power generation equipment from Pemex. Today, they have received a USD113m contract, a similar size award, supporting the Group’s ability amidst the weaker oil price landscape.

Outperform. We continue to like SAKP for its growth going forward which is supported by its engineering and construction (E&C) division with long-term contracts for its offshore construction and subsea activities such as the deepwater pipelay support vessels (PLSV) for Petroleo Brasileiro S.A. (Petrobras) coupled with ongoing contracts in areas of fabrication, hook-up and commissioning (HUC) and for the longer term its energy portfolio comprising a total of c.9-10 TCF of gross gas reserves and resources in SK310 & SK408.

Source: PublicInvest Research, 26 July 2016

Sunday, July 24, 2016

Reasons to be bullish on Microsoft

Microsoft has seen its share price surged recently, especially with its recent earnings announcement that saw it beat the analysts' estimates.

It appears that the company is on track for growth and profitability.

Microsoft CEO Satya Nadella refocused the company’s core strategy from devices and services, redefining it as a productivity platform for a “mobile-first, cloud-first-world.” In other words, Nadella explained that the company’s strategy is focused on empowering people to become more productive by delivering a cloud that connects all devices.


IMPRESSIVE EARNINGS RESULTS AND SHARE PRICE RECENTLY

Microsoft stock has traded between $39.72 and $56.85 per share over the past 52 weeks and has gained almost 20% in stock value over the past year, with a market capitalization of $432.39 billion. Only Alphabet (Google) and Apple actually beat Microsoft on that front.

The company reported that its earnings increased 11% to $0.69 per share and its revenue rose two percent to $22.64 billion year-over-year, which is pretty impressive given that it beats the Wall Street analysts expectations of $0.58 per share on $22.15 billion in revenue.


“This past year was pivotal in both our own transformation and in partnering with our customers who are navigating their own digital transformations. The Microsoft Cloud is seeing significant customer momentum, and we’re well positioned to reach new opportunities in the year ahead,” said Microsoft CEO Satya Nadella during the earnings release for the company's fourth quarter financial year 2016.

MICROSOFT AZURE TO GROW OVER 80%

One of Microsoft's key driver for its revenue has been its cloud business and with only two companies setting the tone for the cloud computing platform for the enterprise (the other one being Amazon), it is expected to grow by more than 80% for at least two or three years (according to Trip Chowdhry, managing director of Global Equities Research).

During a conference call, Microsoft CFO Amy Hood said the company would focus on improving the profitability of its commercial cloud business.

“We expect the commercial cloud gross margin percentage and dollars to materially improve next fiscal year. We have invested heavily to build share, expand geographically and ensure world-class support and reliability for our commercial customers," she said.

THE QUESTION MARK ON LINKEDIN

Perhaps one of the biggest question mark remains: what and how will LinkedIn contribute to Microsoft? It is still early days but the world's largest professional social network, for $26.2 billion is expected to accelerate Microsoft's growth, particularly in its Office 365 and "Dynamics" software.

History may not be too favourable on Microsoft's acquisition but with Nadella making the right moves so far, who's to say this is not going to be another magic that he could pull out.

Of course, there are a lot of reasons to be bullish about Microsoft, given its strong historic startup and how the company has moved away from its legacy. We have been following the company for a while now, given its progress in the cloud business and here's what we would like to recap for our readers:

Back in 2014, we talked about Microsoft Corporation making all the right friends with Satya Nadella took the helm of the company from Steve Ballmer, not forgetting that the progress was very fast because in 2013, Salesforce actually labelled the software giant as the "evil empire"....but Nadella was able to strike a partnership with them.

Recap of our post back in 2014
Of course, we know that with Nadella, the direction is definitely towards cloud and in 2015, we actually showed some statistics based on its earnings results back then that suggest Microsoft is going the right direction.

Recap of our post back in 2015
The recent 4QFY16's earnings results for Microsoft simply suggests to us that the company is really on the move now. We have seen progress for two years now and if anything at all, the recent results just show that our expectations of the company's growth and profitability has been on track.

And beginning of the year, we talked about the "Windows 10" vision. And how the company is giving away free upgrade until end of this month. 

Recap of our Windows 10 post beginning of this year

And honestly, I'm impressed at how consistent the company has been in pushing for Windows 10. Of course, there are a lot of bad publicities and mistakes along the way especially when it seems that the company has crossed the line in terms of privacy and how they push for the upgrade.

Windows 10 installation stood at over 350 million as of its recent's announcement.

We think that it's still early to tell how well is the "always improving Windows" vision of Nadella's will turn out to be but so far, the company has shown us that there are reasons to be bullish of its company.

At the end of 2013, Microsoft was trading at $37.84.

End of July 2014, Microsoft was at about $44.50.

And in October 2015, the company's breach the $50 mark.

Now, it is trading at $56.57.

I'm not sure about you but it's bullish enough for me.


Monday, July 4, 2016

KLCI gains 8.62pts as ringgit strengthens with crude oil

The FBM KLCI gained 8.62 points or 0.5%, tracking Asian shares' rise as the ringgit strengthened with crude oil.

At the 5pm closing bell, the KLCI settled at 1,654.84 points while the ringgit strengthened to 3.9967 against the US dollar. The KLCI and ringgit gained as Asian shares recovered from the immediate impact of the UK's European Union exit (Brexit) decision.

In China, the Shanghai Composite rose 1.91%, while Hong Kong's Hang Seng gained 1.27% and Japan's Nikkei 225 climbed 0.6%.

Reuters reported that Hong Kong stocks climbed on Monday for a third straight session of gains, as higher commodity prices and hopes of more stimulus measures from Beijing boosted resources shares, and investors built up positions amid ample liquidity in the market.

Oil prices rose on Monday following comments from the Saudi energy minister that the market was heading towards balance, although signs of slowing demand in Asia weighed. Brent crude futures were trading at US$50.60 (RM201.92) per barrel at 0643 GMT, up 25 cents from their last settlement. US crude was up 22 cents at US$49.21.

In Malaysia, analysts said the share market saw lacklustre trade in a holiday-shortened week. US markets are closed on Monday (July 4) for the Independence Day holiday.
In Malaysia, Bursa Malaysia said tomorrow's (July 5) trading will be opened for the morning session only and there will be no trading in the afternoon in conjunction with Hari Raya Aidilfitri. Bursa Malaysia said in a statement today that it will be closed this Wednesday (July 6) and Thursday (July 7).

Today, Mercury Securities research head Edmund Tham told theedgemarkets.com: "I can't tell whether the rebound (in the domestic market) is sustainable."

Tham noted that external factors like the upcoming US jobs data and Federal Reserve meeting besides Brexit's latest development would continue to dictate market direction.

Across Bursa Malaysia, decliners outpaced gainers by 363 to 338. A total 1.01 billion shares worth RM1.22 billion exchanged hands.

The most-actively traded stocks included Borneo Oil Bhd and AirAsia X Bhd. Top gainer was British American Tobacco (Malaysia) Bhd, while top decliner was Hong Leong Industries Bhd.

(Source: TheEdgeMarkets)

FBM KLCI open higher by 0.16%

FBM KLCI open higher today by 2.57 points or 0.16% to 1,648.79 as at 9.17am. 


The market saw a relatively low volume of about 81.3 million shares changed hands at the time of writing, most likely due to a shorter trading days in the country with the Raya Holiday.

Air Asia X was the most actively traded counter and it has risen by 2.63% to 39 sen with 9.1 million shares being traded. 

Dutch Lady was the top gainer so far with the milk counter risen by 50 sen to RM58.98 with a volume of 100.

Heineken was at the other end of the table, leading the decliner for the day so far with a loss of 22 sen or 1.42% to RM15.24. 


AmBank expects USD/MYR to trade a tighter range of 3.968 to 4.078

A forex report by AmBank said that it expects the USD/MYR to trade a tighter range of 3.968 to 4.078 on shorter trading days due to Hari Raya holidays, gridlock formation in oil prices and depreciation pressure on CNY.

Ringgit
Last week, USD/MYR broke key supports of 50- and 100-day MA to close below 4.00 level.

It was impressive follow a rather downtrend after the Brexit but the pair has rebounded strongly after that. The currency pair was the second best performing currency with a 2.30% gain against US dollar due to declining 1-month volatility, reduced expectation of higher US
rates and declining cross SGD/MYR below psychological level of 3.00. 

This week, we envisage the pair to trade in a tighter range of 3.968 to 4.078 on shorter
trading days due to Hari Raya holidays, gridlock formation in oil prices and depreciation pressure on CNY.

Chart wise, RSI continued to head south, and along with widening MACD gap, it suggests that the currency pair is likely to be range bound trading. Uptick in 50- day MA crossing above 100-day MA at 4.0456 points to a possibility that the USD/MYR to trade on strengthening bias.

(Source: AmBank FX Weekly report)