Mild Rebound Seen​​

• The FBM KLCI (-0.3%) closed lower last Friday, following the weak sentiment spilled over from Wall Street and extended selling pressure in selected telco heavyweights. On a weekly basis, however, the local key-index saw a slight improvement, closing 0.1% W.o.W higher. The majority of the lower liners finished in the red, with the exception of the FBM Ace (+0.1%) while the broader market was splashed in the red.

• Market breadth was tepid as losers outweighed winners by more than twofold. Traded volumes, however, spiked 20.4% to 2.41 bln shares, partly due to the overwhelming selling-pressure in MY E.G. and Datasonic stocks amid their corruption-linked scandal.

• Telco giants like Axiata (-18.0 sen), Digi (- 12.0 sen) and Maxis (-12.0 sen) led the Main Board lower, alongside Nestle (-50.0sen) and Petronas Gas (-14.0 sen). Broader market losers, meanwhile, were BAT (-RM1.58), KESM Industries (-76.0 sen), Carlsberg (-64.0 sen), Heineken Malaysia (-54.0 sen) and Dutch Lady (- 50.0 sen).

• On the flipside, Malaysian Pacific Industries (+52.0 sen), BLD Plantation (+41.0 sen), Lotte Chemical Titan (+12.0 sen), Ark Resources (+11.0 sen) and Yinson Holdings (+11.0 sen) outperformed its broader market peers. Blue-chip advancers were Hap Seng Consolidated (+20.0 sen), Sime Darby Plantation (+15.0 sen), MISC (+14.0 sen), Genting (+13.0 sen) and Malaysia Airports (+11.0 sen).

• Chinese stockmarkets pared earlier losses and closed higher despite a turbulent session after posting weakerthan-expected 3Q2018 GDP growth. TheShanghai Composite (+2.6%) finished higher after Chinese officials introduced a series of policies to support the ailing stockmarkets. The Hang Seng index also closed 0.4% higher, but the Nikkei lost 0.6%, weighed down by losses in energy and property-related stocks. ASEAN equities, meanwhile, were mostly downward pressured.

• Wall Street finished mostly lower on Friday as investors digested fresh corporate earnings announcement amid ongoing trade concerns. The Dow, however, ended 0.3% higher, boosted by gains in Procter and Gamble after the company’s quarterly results beat analysts’ estimates. The S&P 500 and the Nasdaq, meanwhile, were splashed in red.

• U.K. equities bucked the otherwise downbeat trend across the European stockmarkets, lifted by renewed strength in energy stocks. The FTSE (+0.3%) closed slightly below the 7,050 psychological point but the CAC (-0.6%) and DAX (-0.3%) remained downward pressured amid concerns surrounding Italy’s fiscal policies.

The Day Ahead

• Expectedly, the key index ended last week on a whimper as the selling pressure remained unabated in line with the weakness in global equities that continues to be affected by the concerns over the unresolved U.S.-China trade dispute and the potentially slower economic growth, including that of Malaysia after the government trimmed its economic prospects for the next two years.

• After the last few sessions’ weakness, however, there could be some near term reprieve after U.S. stocks recovered last Friday that could also ease of the sellingpressure on Malaysian stocks, in our view. However, we think the recovery is likely to remain mild for now as the still wary market conditions is likely to leave most market players on the sidelines. Hence, we think the rebound could find significant resistance at the 1,740-1,750 levels for now. The supports, meanwhile, are at 1,730 and 1,710 levels.

• We also think that the lower liners and broader market shares could stage a mild rebound in tandem with the recovery on the heavyweights. We see bargain hunting activities to dominate, but quick profit taking activities will place a lid on the upsides.

COMPANY BRIEF

• Opcom Holdings Bhd has appointed Magnus Kreuger as an Independent and Non-Executive director. Prior to his appointment, he was the president of cable & interconnect business at Ericsson AB. (The Star Online)
• Both Datasonic Group Bhd and My EG Services Bhd (MyEG) have issued clarifications denying making payment to former Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi or anyone to secure projects from the Government. Both companies denied being a party to the charges that had been filed against Zahid, who was slapped with 45 charges related to criminal breach of trust, graft and money laundering. (The Edge Daily)

• DutaLand Bhd has bagged a RM12.0 mln contract for the construction of a new extension and upgrading work for the Avenue K shopping mall on Jalan Ampang, Kuala Lumpur. Its wholly-owned unit, Oakland Holdings Sdn Bhd, accepted the letter of award today from City Properties Sdn Bhd. The work is expected to commence this month and is scheduled to be completed in four months. (The Edge Daily)

• British American Tobacco (Malaysia) Bhd's (BAT) 3Q2018 net profit was flat at RM145.8 mln amid the marginal 0.1% Y.o.Y improvement in the topline to RM735.5 mln.

• For 9M2018, cumulative net profit fell 14.4% Y.o.Y to RM352.2 mln. Revenue for the period dropped 8.1% Y.o.Y to RM2.05 bln. A third interim dividend of 40 sen per share, payable on 16th November 2018, was declared. (The Edge Daily)

• Gadang Holdings Bhd’s 1QFY19 net profit dropped 9.8% Y.o.Y to RM16.5 mln due to lower revenue from its construction and utilities segment as well as higher expenses. Revenue for the quarter, however, rose 10.6% Y.o.Y to RM129.2 mln. (The Edge Daily)

• Vortex Consolidated Bhd intends to raise up to RM54.9 mln through a series of corporate exercises that involves a share consolidation, rights issue with warrants, and a right issue of new Irredeemable Convertible Preference Shares (ICPS). Vortex plans to consolidate every two existing shares into one, which would result in an adjustment to its share price.

• Vortex will then carry out a renounceable rights issue of up to 61.0 mln new shares on the basis of one rights share-for-every five consolidated shares held on an entitlement date to be determined. The issuance comes with one free detachable warrant for each rights share subscribed. The issue price of the rights share has been fixed at 15 sen each. (The Edge Daily)  

Source: Mplus Research - 22 Oct 2018