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Malaysia shares fall as US-North Korea standoff spooks investors

KUALA LUMPUR (Nikkei Markets) -- Malaysia shares fell Wednesday, tracking losses in regional markets and U.S. index futures amid rising geopolitical tensions over North Korea.

The Nikkei Asia300 Index of companies outside Asia dropped 0.5%. According to a statement by Korean People's Army spokesman, carried by state-run KCNA news agency, North Korea is examining an operational plan to strike Guam, America's military base in the Western Pacific. The threat by Pyongyang came as President Donald Trump warned the unleashing "fire and fury" if the recluse nation endangered U.S.

"Traders continue to watch developments and the dynamics between the U.S. and North Korea," said Chris Weston, chief market strategist at Melbourne-based brokerage IG. "The comments (by Trump) suggest he is getting closer to a breaking point."

South Korea's benchmark equity index slipped 1.1% and the Korean won dropped 0.9% against the dollar. Demand for safe-haven assets lifted gold and the Japanese yen. U.S. bond yields declined. Singapore markets were closed on account of National Day.

The FTSE Bursa Malaysia KLCI fell 0.2% to 1,777.94. MISC fell 2% after the shipping company said Tuesday its net profit for the second quarter slumped 59%, mainly due to an impairment loss on ships, property, plant and equipment.

Finance companies were the other big losers. RHB Bank declined 1.6%, AMMB Holdings lost 2.1%, and Hong Leong Financial Group dropped 1%.

Other than North Korea, company earnings were the other key focus for investors.

MIDF Research expects KLCI constituents to report 15.08 billion ringgit ($3.5 billion) aggregate earnings for the quarter ended in June, up 3.3% on-year, but down 4.4% from the previous quarter. Adjusted earnings (excluding extraordinary and non-recurring items) may surge 12.6% on-year.

"We are anticipating positive on-year adjusted earnings growth performance for banking, plantation, telecommunication, oil & gas heavyweights, but utility constituents are expected to report a decline in its on-year growth," MIDF said. It kept the end-2017 index target at 1,830 points.

Hartalega Holdings slipped 3.1% to 6.93 ringgit, as brokerages downgraded the glove maker on valuations, even as they raised the target price. The stock had rallied over 45% this year through Tuesday. For the first-quarter, the company reported a 72% rise in net profit.

"While we continue to like Hartalega for its strong volume growth, improving industry outlook and superior operational efficiency, we believe that current premium valuations are likely to cap further near-term share price performance," Affin Hwang Investment Bank said, downgrading the stock to "hold." It, however, raised the target price to 7.20 ringgit.

BIMB Securities raised the stock's target price to 7.40 ringgit, while downgrading it to "hold."

Press Metal Aluminium Holdings jumped 11% to 3.27 ringgit after UOB Kay Hian Securities raised the target price to 3.50 ringgit, citing higher aluminum prices.

ManagePay Systems, an electronic payment system provider, rose 2% after it said Wednesday it plans to form a joint venture for the procurement of a mobile virtual network operator licence from Malaysian Communication and Multimedia Commission.

--Nimesh Vora and Jason Ng

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