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Author: MalaccaSecurities   |   Latest post: Fri, 17 May 2019, 6:20 PM


Mplus Market Pulse - 19 Oct 2018

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Downside Pressure Rises Again

  • The FBM KLCI (-0.2%) retreated in tandem with the negative performance across its regional peers on concerns over rising U.S. interest rates. The lower liners also closed mostly lower as the FBM Small Cap and FBM Fledgling shed 0.2% and 0.04% respectively, while broader market closed mixed.
  • Market breadth turned negative as decliners overpowered advancers on a ratio of 472-to-338 stocks, while 371 stocks closed unchanged. Traded volumes fell 1.2% to 2.00 bln shares as investors were quick to lock-in their recent gains.
  • Sime Darby Plantation (-10.0 sen) was the biggest decliner on the FBM KLCI, followed by Hong Leong Financial Group (-8.0 sen), IHH (-8.0 sen), MISC (-6.0 sen) and TM (-6.0 sen). Among the biggest decliners on the broader were Fraser & Neave (-74.0 sen), KESM Industries (-64.0 sen), Ajinomoto (-30.0 sen), Paragon Globe (-15.5 sen) and Pintaras Jaya (- 13.0 sen).
  • Consumer products giants like Dutch Lady (+60.0 sen), Heineken (+44.0 sen), and Carlsberg (+24.0 sen) topped the broader market advancers list, while Taske Corporation and MPI rose 24.0 sen and 14.0 sen respectively. Key winners on the local bourse were Nestle (+10.0 sen), Press Metal (+9.0 sen), Hong Leong Bank (+4.0 sen), Public Bank (+4.0 sen) and KLCC (+3.0 sen).
  • Asia benchmark indices edged lower yesterday as the Nikkei fell 0.8% after exports data in September 2018 unexpectedly fell 1.2% Y.o.Y – the first decline in 22 months. The Hang Seng Index slipped 0.2% after erasing all its intraday gains, while the Shanghai Composite sank 2.9% after the Chinese Yuan depreciated to its lowest level in two years against the Greenback. ASEAN stockmarkets, meanwhile, were painted in red yesterday.
  • U.S. stockmarkets took a beating overnight as the Dow sank 1.3%, dragged down by lingering concerns over the U.S.- China trade war’s impact on economic growth, the Italian debt crisis and rising interest rates. On the broader market, the S&P 500 declined 1.4% to close below the 2,800 psychological level, while the Nasdaq tumbled 2.1%.
  • Earlier, major European indices – the FTSE (-0.4%), CAC (-0.6%) and DAX (- 1.1%) extended their losses after erasing all their intraday gains. Market sentiment was dampened further by European leaders’ frustration at the Brussels summit after Britain failed to offer any new proposals over the Brexit deal.

The Day Ahead

  • There will be no let-up in the market’s downside pressure as sentiments are remaining frail amid the combination of toppish market conditions and trade issues that is dampening global market conditions as well. Consequently, we expect the frail market conditions to lead Malaysian stocks to end the week on another downbeat note.
  • Although we think Malaysia stocks could end the week lower, we still think the downsides could be mild as we expect institutional players to provide support. At the same time, the selling pressure has also weakened, particularly from foreign funds that provide some reprieve for the index-linked stocks. Hence, we see the FBM KLCI finding support at the 1,740 level for now. Meanwhile, the near term resistance remains at 1,750.
  • The lower liners and broader market shares are also likely to drift lower amid profit taking activities ahead of the weekend.


  • The government outlined the progress and plans for the remainder of the 11th Malaysia. The highlights are as follows:
    1. Slower GDP growth of 4.5%-5.5% per annum between 2018-2020
    2. Lower development expenditure ceiling of RM220 bln vs. RM260 bln to curb spending
    3. Allowing higher budget deficit for the next two years, before reverting to fiscal consolidation
    4. Government investments to decline 0.8% per annum over the next two years on the back of the postponements of several mega infrastructure projects
    5. Services sector to grow 6.3% yearly, while the manufacturing sector to grow 4.5% per annum. Construction sector growth to slow to 4.3% Y.o.Y with fewer number of infrastruture and property projects
    . The mining sector to expand just 0.1% Y.o.Y on production cuts and supply constraints, but the agriculture sector should recover with a 2.0% annual growth
    7. Gross export growth to be sustained at 6.2% per year for the next two year, while the CPI rate is expected at 2%-3% per year


  • The revisions to the growth rates reflects the realities of the government’s tighter fiscal position amid the combination of high public debts and lower revenue estimates due to the repeal of the GST. While the move to allow a bigger deficit is temporary, it could also stretch future government coffers and this could force the government to introduce new taxation sources to meet its fiscal objectives in the longer run.
  • Although growth is expected to moderate over the next two years, the projected rates remain decent, largely riding on the private sector that should remain firm amid the still strong employment prospects and decent wage growth. Focus on the B40 category will be crucial not only to uplift their standard of living, but more so to provide stronger purchasing power over the longer run to benefit the economy.
  • In view of the country’s tighter fiscal position where the total government direct and indirect debt obligation amounts to just over RM1.0 trl, the upcoming Budget 2019, to be announced in early November, is likely to see significant cuts to development expenditures as the new government addresses its high debt level and the forecast Budget deficit of 2.8% for 2018 may be exceeded.
  • In addition, there could also be introduction of new areas for taxation/higher sin taxes or even reintroducing the individual tax rates to those prior to the GST regime as the government looks to fill its fiscal shortfall. However, the higher crude oil prices, coupled with higher dividend from GLCs, could fill some of the shortfall.
  • Although there could be few giveaways, Budget 2019 could still be seen as progressive as the Pakatan Harapan government attempts to meet its election manifesto that could include cheaper internet, promote Industry 4.0 initiatives to SMEs and other measures to boost business activities, as well as reducing wastage and leakages.


  • Gabungan AQRS Bhd‘s 3QFY19 net profit jumped 80.7% Y.o.Y to RM17.1 mln, from RM9.4 mln in the previous corresponding year on higher progress billings. Revenue, meanwhile, nearly doubled to RM159.3 mln, from RM80.5 mln after recognising work progress for the Sungai Besi – Ulu Kelang (SUKE) Highway and Pusat Pentadbiran Sultan Ahmad Shah (PPSAS) projects. (The Star Online)
  • PUC Bhd and point-of-sale services provider Bersian Technology (M) Sdn Bhd has mutually agreed to abort a Memorandum of Understanding (MoU) to jointly-implement a cross-marketing collaboration following the expiry of their MoU. The lapsed agreement is not expected to have any material financial impact on PUC or its subsidiaries. (The Edge Daily)
  • Country Heights Holdings Bhd is planning to collaborate with AsiaAuto Venture Sdn Bhd (AAV) to develop an auto lifestyle centre as well as conduct other auto industry-related businesses.
  • Both parties have inked a MoU to form a new company (NewCo) in which MIEC and AAV will each have an equity stake. The proposal is in-line with the Country Heights's business strategy and it is expected to contribute positively towards the growth of the group. (The Edge Daily)
  • Maxis Bhd’s 3QFY19 net profit narrowed to RM513.0 mln, from RM564.0 mln last year, following weaker revenue contribution that fell to RM2.26 bln, from RM2.3 bln in 3QFY18. Even so, the group has declared a third interim dividend of 5.0 sen per share, payable on 27th December 2018. For the cumulative 9MFY19, net profit also slipped RM1.51 bln, from RM1.64 bln a year ago, while revenue thinned to RM6.75 bln vs. RM7.04 bln in the previous year. (The Star Online)
  • JAKS Resources Bhd is looking into renewable energy as a new source of revenue for the group. It is looking at projects focused on solar and hydro power, particularly in Vietnam, Indonesia and Malaysia. (The Edge Daily)
  • Bioalpha Holdings Bhd plans to increase its export sales to China by working with Jinrui Fortune Holding Group, following a MoU signed between both parties. Jinrui is a China-based conglomerate involved in traditional Chinese medicine. It operates several medical halls across China, with a target to open 1,000 halls by 2025. (The Edge Daily)  

Source: Mplus Research - 19 Oct 2018

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