Likely To Play Catch Up To EM Weakness

• The eleventh hour buying support in selected index heavyweights lifted the FBM KLCI (+0.03%) marginally higher last Friday ahead of the extended weekend break. Despite that, earlier losses sent the key index falling 1.1% W.o.W. The lower liners also ended mostly higher as the FBM Fledgling and FBM ACE rose 0.01% and 0.1% respectively, while the broader market closed mixed.

• Market breadth stayed negative as losers outmuscled the winners on a ratio of 475- to-334 stocks. Traded volumes slipped 12.4% to 1.73 bln shares as investors trimmed their position ahead of the long weekend break.

• Nestle (+20.0 sen) topped the big board’s advancers list, followed by Telekom (+8.0 sen), Genting (+6.0 sen), Hong Leong Bank (+4.0 sen) and Tenaga (+4.0 sen). Notable advancers on the broader market winners include Ajinomoto (+82.0 sen), Carlsberg (+30.0 sen), UEM Edgenta (+21.0 sen), UMS Holdings (+16.0 sen) and Weida (+14.0 sen).

• On the contrary, Dutch Lady (-40.0 sen), MPI (-34.0 sen), Panasonic (-20.0 sen) and Globetronics (-19.0 sen) were among the biggest decliners on the broader market. TFP Solutions slipped 1.0 sen after announcing its plan to undertake a share capital reduction. Meanwhile, Malaysia Airport Holdings (-11.0 sen), Petronas Dagangan (-8.0 sen), IOI Corporation (-5.0 sen), Hartalega (-4.0 sen) and KLK (-4.0 sen) were the local bourse biggest losers.

• Asia benchmark indices closed on a mixed note as the Nikkei (+1.3%) extended its gains after concerns over impact from last week’s typhoon and earthquake eased. Both the Shanghai Composite (-0.2%) and Hang Seng Index (-0.7%), however, extended their losses after China seeks the World Trade Organisation consent to impose sanctions on the U.S. ASEAN stockmarkets closed on a mixed note yesterday.

• U.S. stockmarkets extended their gains overnight as the Dow rose 0.4%, boosted by the rally in energy shares after crude oil prices advanced, coupled with the recovery in technology shares. On the broader market, the S&P 500 added 0.4%, anchored by the telecommunication sector (+1.1%) while the Nasdaq finished 0.6% higher.

• European equities, however, closed on a mixed note after enduring a choppy trading session. Both the FTSE and DAX fell 0.1% each on lingering concern over trade war. The CAC outperformed its regional peers to close 0.3% higher after recovering all its intraday losses.

The Day Ahead

• Emerging market stocks have endured a wretched trading environment over the past week, roiled by the contagion fears of weaker economic performance and the potential escalation of the trade disagreements between the U.S. and China. Whilst most emerging markets have been affected, FBM KLCI stocks have been relatively unscathed as local institutions were seen providing support to keep the key index afloat.

• After an extended break, however, we think Malaysian stocks will play catch up to the global equity market weakness and we think the downside risk has grown on Malaysian equities, particularly after the recent round of corporate earnings reporting failed to allay fears of slowing earnings growth. In addition, the Malaysian economy is also weakening, leaving the Malaysian equity market in a stay of flux and remaining on the expensive side. With the downside pressures still lingering, we see the key index potentially dipping back to 1,790- 1,795 zone, while the resistances are pegged at 1,805-1,810 levels.

• While the index-linked stocks may still find some measure of support, the broader market shares will continue to see weakness amid the lack of following and weak earnings growth prospects. Therefore, we expect the FBM Small Cap, Fledgling and ACE indices to continue succumbing to the selling pressure over the near term. COMPANY BRIEF

• IOI Properties Group Bhd has issued its third sukuk of RM1.2 bln to fund capital expenditure, working capital and to refinance existing borrowings. The issue forms part of the group’s multi-currency Islamic medium-term note programme of up to RM3.0 bln.

• The RM1.2 bln issuance entails two tranches where the first tranche amounts to RM300.0 mln over a tenure of five years and a profit rate of 4.85% per year, while the second tranche has an issue size of RM900.0 mln with a tenure of seven years and a profit rate of 5.05% per year. (The Edge Daily)

• AirAsia Bhd’s Philippine-unit has announced that its planned initial public offering (IPO) might be delayed to mid- 2019 due to high fuel costs and other factors. The low-cost airline is seeking to raise up to US$250.0 mln in an IPO this year to fund its expansion programme. (The Edge Daily)

• Bumi Armada Bhd's Armada Kraken floating production storage and offloading (FPSO) vessel for the Kraken field in the UK's North Sea has been issued with the final acceptance certificate after completing the requirements set out in the bareboat charter contract dated 20th December, 2013. The final acceptance was completed without any major safety incident. (The Edge Daily)

• Country View Bhd has accepted banking facilities totalling RM232.0 mln from RHB Islamic Bank Bhd and MBSB Bank Bhd to part-finance the purchase of a 164-ac. piece of vacant land in Iskandar Puteri, Johor. About RM217.0 mln will be used to part-finance the RM310.0 mln purchase price of the land, while the remainder would be used for preliminary work including earthworks, main access roads, sewerage treatment plant and main drainage. (The Edge Daily)

• Chemical Co of Malaysia Bhd (CCM) is disposing a piece of vacant industrial land in Seremban, Negeri Sembilan for RM21.5 mln. From the total proceeds, about RM20.9 mln will be used to pare down its borrowings, while the balance will be used to pay the real property gain tax.

• The group has inked an agreement to sell the leasehold land, measuring 73,705 sq. m, to Rock Link Sdn Bhd and the deal is expected to be completed by 1Q2019. The land’s original cost of investment was RM9.0 mln in December 1994. (The Sun Daily)

• Sunsuria Bhd is partnering with UK-based Concord College International Ltd to operate an international school in Malaysia. Concord is a wholly-owned subsidiary and educational charity which runs an independent international school in England.

• The partnership is expected to benefit the local community within Sunsuria City in the south of Putrajaya as it provides access to quality international education.

• The collaboration is conditional upon its subsidiary, Sunsuria Education Sdn Bhd, securing approval from the Education Ministry. (The Sun Daily)

• Loss-making company, TDM Bhd will undertake a debt rationalisation exercise that involves the full settlement of the outstanding Rupiah notes held by its Indonesian subsidiary, PT Rafi Kamajaya Abadi.

• Subsequently, the group will utilise a US$105.0 mln (RM434.3 mln) credit facility to fully settle the group's outstanding rupiah notes used for TDM's plantation operations in Kalimantan, Indonesia.

• Upon completion of the exercise, the group's total interest-bearing borrowings and gearing will be reduced to RM476.6 mln or 0.4x, from RM766.6 mln and 0.68 times respectively as at 30th June 2018. (The Edge Daily)

• Serba Dinamik Holdings Bhd has signed an agreement to acquire a 25.0% equity stake in Dutch company, Psicon BV from Liberty Industries BV for €400,000 (RM1.9 mln). The group has also proposed to buy the entire stake in Psicon AVV from Frank Koper for US$1.1 mln (RM4.6 mln).

• The aforementioned acquisitions will be carried out through its unit Serba Dinamik International Ltd (SDIL). Subsequently, Psicon BV will become a 25.0%-owned associate of SDIL, whereas Psicon AVV will become a wholly-owned subsidiary of SDIL.

• Both Psicon BV and Psicon AVV are focused on rotating equipment performance upgrading, and process module engineering. (The Sun Daily)

• TFP Solutions Bhd is terminating its Bangladesh solution business jointventure (JV) due to “irreconcilable differences and incompatibility” with its partner. The group is selling its 55.0% stake in TFP Bangladesh to Mohamed Junaeid Aziz for RM7,978. Moving forward, the group has decided not to venture abroad in solutions business, but to enhance its current business in Malaysia. (The Edge Daily)

• Mexter Technology Bhd is exiting the mobile services business due to the current challenging and competitive mobile services industry as well as to prevent further losses to the group.

• The group has entered into a sale and purchase of shares agreement (SPA) with its Head of Mobile division, Chan Wai Fong to dispose of its entire 80,000 shares (or 80.0% equity stake) in its lossmaking mobile messaging gateway solutions and services unit Mexcomm Sdn Bhd for RM187,727. The latter has been registering net losses since 2012.

• Chan, who is also Director and Chief Operating Officer of Mexcomm, is already holding a 20.0% stake in Mexcomm. Under the SPA, Chan undertakes that MexComm will repay the RM2.1 mln owing to the subsidiaries of Mexter. The group concurred that the proposed disposal is in-line with the group’s strategic plan to focus and expand its healthcare services segment.

• Further, the disposal will also allow the group to channel its resources into the healthcare services business, which are expected to contribute positively to its profitability in long term. (The Edge Daily)  

Source: Mplus Research - 12 Sept 2018