Weakness Still Prevails

• The FBM KLCI continued its downward trajectory in-tandem with the weakness in regional peers as investors cope with the sharp losses in emerging economies’ currencies and rising geopolitical tensions. All the lower liners were splashed in red, alongside the majority of the broader market shares.

• Market breadth was tepid as decliners overturned the advancers on a ratio of 703-to-270 stocks, although traded volumes jumped 20.6% to 2.91 bln stocks amid the sharp selldown in emerging market stocks.

• Significant decliners were Nestle (-90.0 sen), Petronas Dagangan (-32.0 sen), CIMB Bank (-23.0 sen), Hong Leong Financial Group (-22.0 sen) and Axiata (- 17.0 sen). Broader market underperformers, meanwhile, include BAT (-62.0 sen), Carlsberg (-28.0 sen), Supermax (-23.0 sen), Tasek (-20.0 sen) and UMW Holdings (-18.0 sen).

• On the opposite side, UEM Edgenta (+18.0 sen) rallied, boosted by expectations of positive growth prospects in 2H2018. Other gainers include SP Setia (+13.0 sen), Aeon Credit (+12.0 sen), Allianz Malaysia (+12.0 sen) and Westports (+12.0 sen). Petronas Gas (+14.0 sen), Public Bank (+12.0 sen), KLCC (+5.0 sen) and Sime Darby (+3.0 sen), meanwhile, outperformed its bluechip peers and closed in the green on Wednesday.

• Asian stockmarkets reversed Tuesday’s gains and closed negatively, sparked by an extended selldown in emerging currencies amid expectations of weaker global growth. The Nikkei (-0.5%) fell after Japan was hit by its strongest typhoon in 25 years, which resulted in business disruptions and closures. The Shanghai Composite (-2.0%) and the Hang Seng Index (-2.6%) also close sharply in the red, while the majority of ASEAN stockmarkets followed suit.

• U.S. stockmarkets were mostly in the red as investors await further developments on the U.S.-Canada bilateral trade negotiations. The Dow bucked the general bearish sentiment and closed with meagre gains, while the S&P500 (- 0.3%) and Nasdaq (-1.2%) weakened on losses in giant tech-names.

• European bourses retreated as political uncertainties and sharp selldown in the emerging markets continued to weigh on sentiments. The FTSE (-1.0%) narrowed for the second-straight trading day, on fears of a hard Brexit, while the CAC and the DAX closed 1.5% and 1.4% respectively lower.

The Day Ahead

• Emerging Market stocks, including Malaysian stocks, took a beating yesterday on fears of the contagion effect from the problems facing economically challenged economies like Turkey, South Africa and Argentina. While the Malaysian economy is significantly stronger that the above countries, the blanket selloff of Emerging Market shares will not leave Malaysian stocks unaffected.

• Therefore, there remains downside pressure on Malaysian stocks over the near term as the concerns over Emerging Market economies mount. At the same time, the Ringgit is continuing to weaken against the US Dollar and this could also prompt further foreign selling as they reduce their portfolio exposure to Ringgit denominated assets. We also think local technology stocks could see further selling after the rout on Nasdaq overnight has taken the shine out of the upside momentum.

• With the key index slipping below the 1,800 points level and the prospects of further weakness ahead, the FBM KLCI could retrace back to the 1,780-1,790 levels to find support. The 1,800 points level is the immediate resistance, followed by the 1,810 level.

• The rebound of FBM Small Cap, FBM Fledgling and Ace Market listed stocks stalled yesterday amid the renewed selling pressure that is likely to linger. This will prolong their oversold streak and the frail outlook until some measure of market calmness returns.

COMPANY BRIEF

• Utusan Melayu (Malaysia) Bhd is being sued by two companies seeking refunds on their deposits that total RM18.5 mln. Utusan is in the midst of seeking legal advice and taking the necessary actions to respond to the claims.

• Nylex (Malaysia) Bhd is claiming that that Utusan had failed to refund the deposit of RM10.0 mln in relation to advertising, branding and communication exercise by the Nylex group of companies through Utusan Malaysia & Mingguan Malaysia. Meanwhile, Redberry Sdn Bhd is also claiming RM8.5 mln in unreturned deposit. (The Star Online)

• Berjaya Philippines Inc has increased its stake in 7-Eleven Malaysia Holdings Bhd by buying 6.5 mln shares or a 0.6% stake. This brings its total holdings to 18.0 mln shares or a 1.6% stake in 7-Eleven Malaysia. Berjaya Philippines said it has paid a total of RM9.6 mln or an average price of RM1.48 per 7-Eleven Malaysia share in purchases made in the open market during 1st March 2018 to 3rd September 2018. (The Edge Daily)

• Gabungan AQRS Bhd expect earnings to pick-up from the financial year ending 31st December 2019, underpinned by better performance across all segments. Currently, construction order book stands at RM2.40 bln, providing earnings visibility for the next three years. (The Edge Daily)

• Hengyuan Refining Co Bhd will invest US$48.0 mln for the clean air regulation project to be executed within its refining complex in Port Dickson, Negeri Sembilan. This is done via the installation of air pollution control systems at the Long Residue Catalytic Cracking Unit and Plat-2 and an emission monitoring system on HRC’s flue gas stacks. (The Edge Daily)

• XOX Bhd plans to undertake a 10.0% private placement in a third independent party investor to raise RM7.0 mln for branding and marketing activity expenses. The activities are expected to garner more brand awareness from consumers and increase its subscriber base and market share. XOX’s mobile network subscriber base has grown 37.4% Y.o.Y to 2.4 mln subscribers as at 31st July 2018, from 1.7 mln a year ago, mainly due to marketing and branding efforts. (The Edge Daily)

• Globaltec Formation Bhd plans to consolidate the company's shares on the basis of 20 shares held into one share, which could raise its share price to 90 sen from 4.5 sen now. Concurrently, it plans to issue 67.3 mln free warrants on the basis of one warrant-for-every four consolidated shares held on the entitlement date. (The Edge Daily)

• Censof Holdings Bhd has reported that it has no plans to divest its 16.2% stake in Dagang NeXchange Bhd (DNeX) as crude oil prices continue to gain strength. The group is also expecting better dividend payouts from DNeX going forward as the business environment improves. (The Edge Daily)  

Source: Mplus Research - 6 Sept 2018