Lingering Around 1,800

• The FBM KLCI snapped two sessions’ of losses and closed positively on Monday, led by gains in O&G heavyweights and Genting-related counters. On the other hand, the lower liners – the FBM Small Cap (-0.7%), the FBM Fledgling (-0.1%) and the FBM Ace (-1.6%) succumbed to selling-pressure, while the broader market was splashed in red.

• Market breadth was tepid as underperformers dominated the advancers on a ratio of 554-to-376 stocks. Traded volumes, however, spiked by 25.3% to 3.01 bln shares, following the sharp profit-taking in the lower liners.

• Genting and energy-related companies like Genting (+17.0 sen), Genting Malaysia (+11.0 sen), MISC (+8.0 sen) and Petronas Chemicals (+7.0 sen) supported the gains on the Main Board, alongside consumer products giant Nestle (+10.0 sen). Other outperformers were Dutch Lady (+66.0 sen), Heineken Malaysia (+34.0 sen), Hengyuan Refining (+30.0 sen), United Plantations (+30.0 sen) and Malaysian Pacific Industries (+24.0 sen).

• Broader market losers, meanwhile, include KESM Industries (-RM1.98), Aeon Credit (-28.0 sen), Bursa Malaysia (-15.0 sen), Kawan Food (-14.0 sen) and MSM Malaysia Holdings (-13.0 sen). The five key-index laggards were Hong Leong Financial Group (-16.0 sen), Hartalega (- 6.0 sen), Malaysia Airports (-5.0 sen), Telekom Malaysia (-5.0 sen) and Axiata (- 2.0 sen).

• Asian stockmarkets finished in the red as trade concerns made its way back to the forefront after the Pentagon cancelled Defense Sectary James Mattis’ visit to China. The Nikkei bucked the general downbeat trend and closed higher owing to extended gains in energy stocks, while the China market remained closed for the week. The majority of the ASEAN indices, meanwhile, were also painted red, while the Hang Seng took a beating, falling 2.4%.

• Wall Street was mostly weaker, with the exception the Dow (+0.5%), which hit a fresh record high due to gains in Boeing and Caterpillar, although capped by losses in retailers after Amazon raised its hourly wages. The S&P 500 flatlined, while the Nasdaq finished 0.5% lower to close marginally below the 8,000.0 psychological level.

• Italian stocks were in the red as with the CAC that closed 0.7% lower amid rising bond yields and concerns over Italy’s burgeoning debt and budget deficit. The unabated geopolitical fears also dragged the FTSE and the DAX down on Tuesday, as the indices tumbled 0.3% and 0.4% respectively.

The Day Ahead

• Despite bucking the regional weakness, we still think that the market undertone on Bursa Malaysia is largely cautious amid the lingering trade war concerns and the toppish valuations. Once again, it was the institutional support on selective stocks that allowed the FBM KLCI to close in the green yesterday.

• As it is, we still think that there are still few catalysts to provide a prolong impetus for a sustained market upside with the trade war concerns still dominating sentiments. In addition, the FBM KLCI’s valuation is more than fair at this juncture after it managed to recoup all its losses following GE14. Consequently, we think that the indifferent trend is likely to persist for now and we expect local institutions to provide the support to ensure that the key index remains close to the 1,800 points level. The other near term resistance is at 1,810, while the support is at 1,790.
• Profit taking activities ruled among the lower liners and broader market shares yesterday, but we think the process could be still be unfolding after the FBM Small Cap’s 5.0% recovery over the past two weeks. However, the positive sentiment on the lower liners is still intact for now and we think the downsides will be shallow.

COMPANY BRIEF

• The Arbitral Tribunal has ordered Sabah Electricity Sdn Bhd to compensate Mega First Corporation Bhd a total of RM28.8 mln as compensation. Sabah Electricity is ordered to pay to Serudong Power the principal shortfall amount of RM19.2 mln in energy payment and capacity payment for the period from 15th November 2007 to 1st December 2016.

• The order also included interest on the shortfall in the payments for the period and calculated up to 31st May 2018 amounting to RM9.1 mln and the claimant’s representation costs fixed at RM420,000. (The Star Online)

• Matrix Concepts Holdings Bhd has signed a joint venture (JV) agreement with an Indonesian Consortium comprising PT Bangun Kosambi Sukses (BKS) and PT Nikko Sekuritas Indonesia (NSI) to jointly undertake the development of an Islamic Financial District in Pantai Indah Kapuk (PIK) 2 Sedayu Indo City, Jakarta, Indonesia. BKS will hold 40% equity in FCS, while Matrix Concepts and NSI would hold 30% stake each.  The 30% equity participation by the group would be supported through internally generated funds and/or proceeds from future equity or debt fund raising exercise, depending on the group’s cash flow position.

• PIK 2 Sedayu Indo City is poised to be a central business district north of Jakarta. It will encompass 4,000-ha. of integrated development with residential houses, apartments, shopping centres, a light rail transit system and a stadium. (The Star Online)

• GD Express Carrier Bhd (GDex) has firmed up its Indonesian venture with a subscription of 44.5% in the initial public offering (IPO) of PT Satria Antaran Prima Tbk (SAP Express) for 92.7 mln rupiah (RM25.8 mln) or 250 rupiah per share. (The Edge Daily)

• Malakoff Corp Bhd has received shareholders’ nod to acquire 97.4% in waste management company, Alam Flora Sdn Bhd from DRB-Hicom Bhd for RM944.6 mln. The acquisition is part of its push into the renewable energy segment in the waste-to-energy (WTE) category. (The Edge Daily)

• Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) will rigorously defend the claims made by EA Technique (M) Bhd for US$21.7 mln (RM90.0 mln) over a dispute concerning a contract to convert a vessel into a floating storage and offloading (FSO) facility. It will make counter claims for the additional work orders (AWOs) issued to EA Technique in relation to the contract and the costs incurred as a result of the extension of time. (The Edge Daily)

• Malton Bhd is planning a 20:80 partnership with Hong Kong-listed Nan Hai Corp Ltd in a bid for a property project in Taipei, Taiwan. It involves the development of high-rise multipurposecomplexes comprising hotel, retail and prime office space with base area of approximately 31,700 sq. m. with direct access to an express rail service to the Taoyuan International Airport. (The Edge Daily)
• Sanbumi Holdings Bhd has proposed to place out new shares to Penang-based property developer, Iconic Group Sdn Bhd founder and chairman Datuk Tan Kean Tet to raise about RM3.9 mln. The company has entered into a conditional share subscription agreement with Tan for the proposed placement of 22.6 mln new shares in Sanbumi, representing 10.0% of the issued shares at 17.3 sen per placement share. The proposed exercise is expected to be completed by December 2018. (The Edge Daily)
• Sapura Industrial Bhd has entered into a Memorandum of Understanding (MoU) with Wada Aircraft Technology Co Ltd and Aero Inc in for the purpose of establishing a joint venture to manufacture aerospace components in Malaysia. Both Wada and Aero have experience in aerospace parts manufacturing, said the Sapura Industrial – which is itself engaged in manufacturing of automotive parts, among others. (The Edge Daily)  

Source: Mplus Research - 26 Sep 2018