Stronger Rebound Ahead

• The FBM KLCI (+0.5%) recovered all its previous session’s losses after lingering in the positive territory yesterday, lifted by buying support in selected banking and oil & gas blue chips. The lower liners also rebounded as the FBM Fledgling and FBM ACE rose 0.2% and 0.5% respectively, while the REIT (-0.3%) and Property (-0.2%) sector underperformed the positive broader market.
• Market breadth, however, stayed negative as losers outpaced winners on a ratio of 439-to-339 stocks, while 406 stocks closed unchanged. Traded volumes fell 24.8% to 1.53 bln shares as investors remain wary of the recent volatility.

• Two thirds of the key index constituents advanced, led by Hong Leong Bank (+44.0 sen), followed by MISC (+13.0 sen), Petronas Gas (+12.0 sen), CIMB (+12.0 sen) and Genting (+10.0 sen). Among the biggest advancers on the broader market include Top Glove (+38.0 sen), UMW Holdings (+18.0 sen), Hong Leong Industries (+16.0 sen), Westports (+16.0 sen) and Keck Seng (+12.0 sen).

• On the flipside, significant decliners on the broader were consumer products stocks like BAT (-RM1.78), Carlsberg (- RM1.24), Dutch Lady (-RM1.00), Heineken (-86.0 sen) and Ajinomoto (- 48.0 sen). There were only five decliners on the local bourse – Nestle (-20.0 sen), KLCC (-7.0 sen), Maxis (-4.0 sen), Malaysia Airport Holdings (-3.0 sen) and Maybank (-3.0 sen).

• Asia benchmark indices closed higher as the Nikkei rose 1.3%, lifted by a strong rebound in large cap stocks. The Hang Seng Index added 0.1% after enduring a volatile trading session, but the Shanghai Composite (-0.9%) extended its lossesafter China’s September’s Producer Price Index rose 3.6% Y.o.Y – cooling from 4.1% Y.o.Y increase in the previous month. ASEAN stockmarkets, meanwhile, closed mostly positive yesterday.

• U.S. stockmarkets recorded its biggest daily gain since March 2018, boosted by a series of stronger-than-expected corporate earnings. The Dow surged 2.2% with all 30 components in the green, while the S&P 500 (+2.2%) rose above the 2,800 psychological level. Meanwhile, the Nasdaq was powered 2.9% higher.

• Earlier, major European indices – the FTSE (+0.4%), CAC (+1.5%) and DAX (+1.4%) all trended higher after recovering from their intraday losses. Gains were underpinned by fading tensions between Italy and the E.U. over Rome's spending, coupled with expectations over the positive Brexit negotiation.

THE DAY AHEAD

• We see stocks on Bursa Malaysia tipping higher today, in tandem with the positivity in most overseas markets overnight. This follows the string of positive corporate results in the U.S. that is temporarily casting aside the prognosis of slower earnings and economic growth ahead.

• At the same time, the foreign selling has abated and this will provide some reprieve to the Malaysian stockmarket. The calmer market conditions could also allow some of the beaten down stocks to stage a firmer recovery and to adjust from their bout of oversold. On the upside, the resistances are set at the 1,740-1,750 levels for now. The supports, meanwhile, are at 1,727 and 1,720 respectively.
• Similarly, we expect the lower liners and broader market shares to stage a firmer rebound over the near term amid the improved investor sentiments that could spur bargain hunting activities.

COMPANY BRIEF

• Serba Dinamik Holdings Bhd will purchase a 49.0% equity stake in OHP Ventures Incorporated (OHP Ventures) for US$800,000, or approximately RM3.3 mln, to expand its EPCC (engineering, procurement, construction and commissioning) business segment and capabilities.

• OHP Ventures has a joint-development agreement with Thavone Athsamouth to develop, finance, construct, commission and operate and maintain two mini hydro installations with an aggregate capacity of 30MW in Houaphan, Laos. The project begun in July and will be completed by January 2022.

• OHP Ventures also owns 70.0% of the issued and paid-up shares in Nam Taep 1,2,3 Hydropower Company Ltd (NT), which holds the two concessions for the Laos project. Upon completion of the proposed acquisition, OHP Ventures will become a 49.0%-owned associated company of Serba Dinamik’s subsidiary, Serba Dinamik International Ltd which will give Serba Dinamik an effective 34.0% stake in NT. (The Star Online)

• Globaltec Formation Bhd has terminated its plan to collaborate with Hong Kong's EPI Energy Holdings Ltd to participate in the exploration and production activities of Globaltec's Indonesian unit after failing to reach a mutual agreement on the commercial terms. (The Edge Daily)

• Barakah Offshore Petroleum Bhd and its unit, PBJV Group Sdn Bhd have beengranted a court order to restrain all proceedings and actions brought against them, except with leave of the court, for up to 90 days from 12th October 2018 until 9th January 2019.

• The order was applied for as part of a proactive measure by the group to manage the debt levels of Barakah and its subsidiaries and the order allows the Barakah Group to negotiate terms with its lenders and creditors without having the threat of any proceedings and actions being brought against the company. (The Edge Daily)

• Nextgreen Global Bhd has obtained a RM400.0 mln investment from Asia Capital Investment Fund (ACIF) to finance Nextgreen's Green Technology Park (GTP) projects in Malaysia. The investment includes a subscription of 280.0 mln new Cumulative Redeemable Preference Shares (CRPS) in Nextgreen at RM1.00 each and a RM120.0 mln loan. (The Star Online)

• Bank Negara Malaysia has given a conditional approval on Sapura Energy Bhd’s issuance of new Islamic Redeemable Convertible Preference Shares (RCPS-i) to non-resident shareholders. The rights issue of RCPS-i is part of Sapura Energy’s cash call, which includes a rights issue of new ordinary shares to raise up to RM4.0 bln.

• The central bank's approval is subject to the condition that the group converts the proceeds raised from the rights issue of RCPS-i in stages for part repayment of foreign currency borrowings. (The Edge Daily)

• Wegmans Holdings Bhd is planning to undertake a bonus issue of 125.0 mln free warrants on the basis of one warrant-for-every four existing shares. The exercise price of the warrants has been fixed at 30.0 sen per warrant, representing a discount of 9.9% to the five-day volume weighted average market price of its shares of 33.3 sen apiece as at 15th October 2018. The entitlement date will be determined later. (The Edge Daily)

• Bumi Armada Bhd has denied a report that it has purchased the very large crude carrier (VLCC) Front Ariake for US$20.7 mln. The Bahamas-flagged vessel is owned by Bermuda-based Ship Finance International Limited (SFL). (The Edge Daily)  

Source: Mplus Research - 17 Oct 2018