Selling Spree To Continue

• The FBM KLCI (-2.2%) tumbled as the key index registered its sixth straight session of decline yesterday, after the government hinted of a new tax implementations in the upcoming Budget 2019, coupled with disposal of assets to reduce the government’s budget deficit. The lower liners – FBM Small Cap (- 2.3%), FBM Fledgling (-2.7%) and FBM ACE (-3.1%) all took a beating, while the broader market was splashed in red.

• Market breadth was negative as losers hammered winners on a ratio of 993-to- 116 stocks, while 286 stocks closed unchanged. Traded volumes added 67.6% to 3.02 bln shares as selling activities intensified.

• More than two-thirds of the key index constituents retreated, dragged down by Tenaga (-70.0 sen), followed by Petronas Gas (-52.0 sen), Axiata (-51.0 sen), Telekom (-48.0 sen) and Genting (-46.0 sen). Notable decliners on the broader include Fraser & Neave (-RM1.72), Heineken (-52.0 sen), MPI (-48.0 sen), Allianz (-34.0 sen) and Gamuda (-31.0 sen).

• Meanwhile, Panasonic (+18.0 sen), Cycle & Carriage Bintang (+13.0 sen), Grand Hoover (+11.5 sen), Ajinomoto (+8.0 sen) and C.I. Holdings (+5.0 sen) topped the broader market gainers list. Key winners on the local bourse were MISC (+13.0 sen), KLCC (+5.0 sen), Sime Darby (+3.0 sen), KLK (+2.0 sen) and Public Bank (+2.0 sen).

• Asian benchmark indices rebounded yesterday, driven by bargain hunting activities in recent beaten down stocks. The Nikkei (+0.2%) snapped a four-day losing streak on buying support in defensive stocks. The Shanghai Composite gained 0.2%, while the Hang Seng Index closed 0.2% higher on gains in financial stocks. ASEAN stockmarkets, meanwhile, closed mostly higher yesterday.

• U.S. stockmarkets endured their worst session since February 2018 as the Dow sank 3.2%, on fresh concerns over the impact of trade dispute between the U.S. and China, coupled with the rising interest rate. On the broader market, the S&P 500 dipped 3.3% with all eleven major sectors in the red, while the Nasdaq plunged 4.1%.

• Earlier, European indices – the FTSE (- 1.3%), CAC (-2.1%) and DAX (-2.2%), all erased their previous session gains. The weakness stemmed from the rising U.S. bond yields, coupled with signs of economic slowdown amid the downgrade of global growth by the International Monetary Fund.

The Day Ahead

• The stronger-than-expected reaction to the possible introduction of new taxes in the upcoming Budget took the wind of the sail of Malaysian stocks which looks to continue after U.S. stocks were also battered overnight. This has left market conditions increasingly frail and the weakness is likely to extend the selling spree on Bursa Malaysia stocks over the near term.

• As it is, the selloff on U.S. stocks, spooked by the potential fallout from the escalated trade war between the U.S. and China, is likely to resonate globally amid the uncertain outcome of the trade issue. On Bursa Malaysia, market conditions will still be reeling from the possible new taxes and with the key index breaking the 1,750 support, conditions are turning increasingly frail with the next supports pegged at 1,720 and 1,700 points respectively coming into play. The 1,750 and 1,760 levels are the resistances.

• The lower liners and broader market shares are still undergoing a steep pullback amid the severely dented market sentiments. Hence, we see more retail players unwinding their position in view of the weak market conditions and stay on the sidelines until there is clarity in the market’s direction.

COMPANY BRIEF

• LPI Capital Bhd‘s 3QFY18 net profit narrowed marginally to RM91.8 mln (- 0.4% Y.o.Y), from RM92.2 mln the previous corresponding period, in-tandem with the drop in quarterly revenue of 4.0% Y.o.Y to RM390.6 mln, mainly due to a decline in gross earned premiums from its general insurance segment.

• Cumulative 9MFY18 net profit, meanwhile, was flat at RM230.1 mln compared with RM230.8 mln last year, although revenue rose 1.6% Y.o.Y to RM1.12 bln, from RM1.11 bln. (The Star Online)

• Shareholders of Top Glove Corp Bhd has approved a resolution to remove its Executive Director Low Chin Guan despite his claims of innocence in the alleged fraudulent misrepresentations in the acquisition of Aspion Sdn Bhd. Low, who is also a director of Aspion's former parent Adventa Capital Pte Ltd, did not attend Top Glove’s extraordinary general meeting (EGM) on 10th October, 2018.

• Low has vowed to hold Top Glove responsible for any losses he or Adventa Capital may suffer as a result of the suit against them. He also said Adventa no longer considers itself beholden to guarantee the core profit after tax shortfall based on a clause in the sales and purchase agreement for Aspion. (The Star Online)

• LEAP Market-listed Red Ideas Holdings Bhd is partnering Parcel 365 to jointlyoperate community parcel lockers at neighbourhoods. The service is an alternative to delivery of parcels to communities that are unable to await the deliveries during designated times. Consequently, the two companies will set up the community parcel lockers at 50 neighbourhoods managed by Red Ideas. (The Star Online)

• MCE Holdings Bhd expects to manufacture and sell window regulators to Proton and Geely Motor customers in Malaysia under a technical assistance agreement with China-based Shanghai SIIC Transportation Electric Co Ltd (STEC).

• The group had inked an agreement to purchase equipment and products comprising child parts and components designed by STEC and for Multi-Code to manufacture the products. (The Edge Daily)

• Malaysia Airports Holdings Bhd (MAHB) has announced that passenger traffic at the 39 airports in the countries where it operates, rose 1.3% Y.o.Y in September to 7.8 mln, from 7.7 mln in September last year. International traffic was 0.9% Y.o.Y higher to 4.0 mln passengers, while domestic traffic grew 1.6% Y.o.Y to 3.8 mln passengers. (The Edge Daily)

• MMC Gamuda KVMRT (T) Sdn Bhd the joint-venture company (JVco) between Gamuda Bhd and MMC Corp Bhd has announced that it will leave the issue of the termination of the Mass Rapid Transit Line 2 (MRT2) underground contract to Prime Minister Tun Dr Mahathir Mohamad.

• Subsequently, the JVco also welcomes the decision by the government to review the cancellation of the MRT 2 underground contract as it remains committed to further discussion with the Finance Ministry and to cooperating with MoF to reach an agreeable reduction of cost. (The Edge Daily)

• CNI Holdings Bhd has suspended its multi-level marketing (MLM) operations in Myanmar after the government banned the use of such methods. To recap, the Ministry of Commerce Myanmar issued a notification prohibiting the MLM business in Myanmar on 18th September 2018. Consequently, its indirect-subsidiary Creative Network International (Myanmar) Co Ltd suspended its MLM business activities there to comply with the notification. (The Edge Daily)

• mTouche Technology Bhd has terminated its plan to jointly-develop and operate the SMART4 public phone and WiFi hub terminal with G.I.S. Park (Thailand) Co Ltd for Thai state-owned telecommunications company, TOT PCL, following certain issues relating to the due diligence review which cannot be resolved to the satisfaction of its subsidiary mTouche (Thailand) Co Ltd. (The Edge Daily)  

Source: Mplus Research - 11 Oct 2018