A Rebound Is Due

• The FBM KLCI finished lower for the fourth consecutive session as geopolitical concerns remained in the spotlight. All the lower liners tanked, with the FBM Ace (-2.2%) being the worst hit, while the broader market continued to be lackluster.

• Market breadth was overwhelmingly bearish as decliners outweighed advancers by more than four times. Traded volumes, however, rose 3.1% to 2.01 bln shares, following the sellingpressure across global stockmarkets.

• Tenaga Nasional (-42.0 sen), Petronas Gas (-40.0 sen), Axiata (-24.0 sen), CIMB (-23.0 sen) and Maybank (-20.0 sen) were among the heavyweight underperformers. Broader market losers, meanwhile, include notable consumer products companies like Dutch Lady (- 62.0 sen) and Fraser & Neave (-38.0 sen), followed by KESM Industries (-36.0 sen), Aeon Credit Service (-34.0 sen) and Petron Malaysia (-19.0 sen).

• On the other side, Padini (+28.0 sen), Heineken Malaysia (+22.0 sen), Panasonic Manufacturing (+12.0 sen), Vitrox (+9.0 sen) and Apollo Food (+8.0 sen) bucked the general downtrend and ended positively. The only four key-index members that closed higher were Nestle (+30.0 sen), Maxis (+7.0 sen), KLCC (+2.0 sen) and RHB Bank (+1.0 sen).

• Most regional benchmark indices tumbled as Chinese stocks reversed previous gains amid mounting geopolitical tensions. The Nikkei lost 2.7% as investors await the upcoming corporate report releases, while the Shanghai Composite and the Hang Seng index slumped 2.3% and 3.1% respectively. ASEAN stockmarkets, meanwhile, were also splashed in red.

• The U.S. benchmark bourses - the Dow (- 0.5%), the S&P 500 (-0.6%) and the Nasdaq (-0.4%) closed in the negative territory despite rebounding from intraday lows on concerns over weaker company outlooks, following rising interest rates and a slowdown in China’s economy.

• Earlier, U.K. equities finished mostly lower, following the bearish sentiment in the global stockmarkets and ongoing Brexit concerns. The FTSE (-1.2%) ended on a downbeat tone for the secondstraight day amid a stronger Pound. Meanwhile, the DAX and the CAC also retreated after the European Union made an unprecedented move to reject Italy’s proposed budget.

The Day Ahead

• The jitters over geopolitical issues, slower corporate earnings growth prospects and the unresolved trade dispute continues to weigh on market sentiments that resulted in a more pronounced sway yesterday to send the key index below the critical 1,700 points level. By all counts, the bearish market undertone still prevails as concerns over the above issues remains at large.

• However, we think the selloff on Malaysian stocks is already overdone as it has left many stocks and indices oversold. Although, there is still little inkling to the reversal as yet, we think they should emerge over the near term.

• Notwithstanding a rebound that looms, the recovery may still be mild due as many market players are still staying on the wayside due to the still challenging market outlook. Therefore, we see the rebound capped at around the 1,710 level over the near term. The other resistance is at 1,720. The support, meanwhile, is at 1,680 points.

• Similarly, the broader market is also oversold and is tethering at its year-low. They are also due for a rebound, which could be relatively benign for now due to the continuing market wariness.

COMPANY BRIEF

• EITA Resources Bhd has secured a RM56.4 mln contract from Tenaga Nasional Bhd to execute underground cable work from Ampang to Taman Melawati. The contract, awarded to its 60.0%-owned Transsystem Continental Sdn Bhd, starts on 22nd October 2018 with a duration of 730 days. (The Star Online)

• DiGi.Com Bhd is upsizing its broadband quota offering by up to 50.0%. The new set of offerings is applicable to both new and existing customers. Total quota upgrades have been increased from 15GB to 25GB for the Broadband Monthly 45 plan, from 35GB to 50GB for the Broadband Monthly 65 plan, and from 75GB to 100GB for the Broadband Monthly 105 plan.

• In addition, all existing Digi Postpaid subscribers will enjoy RM5.00 or RM10 lifetime discounts when they sign up for Digi Home Broadband, potentially bringing home internet access to an affordable price of RM40 monthly. Digi's move came after Putrajaya's push for more affordable broadband offerings in Malaysia without compromising network quality. (The Edge Daily)

• Dagang Nexchange Bhd (DNeX) has signed a contract to provide solid expandable tubulars to the North Malay Basin gas development for US$5.0 mln. DNeX’s 80.0% owned unit, DNeX Oilfield Services Sdn Bhd entered into the service contract with Hess Exploration and Production Malaysia BV. The contract is expected to last for one year. (The Edge Daily)

• Chin Hin Group Bhd has proposed to acquire Kempurna Sdn Bhd (Kempurna), a metal doors and window frames manufacturer, for RM4.1 mln cash. The acquisition will enable the group to enhance its involvement in the door manufacturing business. The purchase will be funded from internally-generated funds and is expected to be completed by 4Q2018. (The Edge Daily)

• Lotte Chemical Titan Holding Bhd has awarded two contracts to parties related to the group. One of the contracts was awarded to Lotte Engineering and Construction Co Ltd for offshore engineering and procurement of a new boiler and ancillary equipment to facilitate the high pressure steam production in its Pasir Gudang complex for a total value of RM47.3 mln.

• The second contract was given to Lotte E&C Malaysia Sdn Bhd for onshore engineering, onshore procurement and construction of a new boiler and ancillary equipment at the same complex for a total value of RM20.4 mln. (The Edge Daily)

• London Biscuits Bhd has proposed the issuance of one bonus share-for-every four existing shares held at an entitlement date to be determined.

• The issuance will comprise up to 61.6 mln bonus shares. Following the issuance, the group’s enlarged issued share capital after the bonus issue can go up to 333.6 mln shares. The group expects the bonus issuance to be completed by the end of 2018. (The Edge Daily)  

Source: Mplus Research - 24 Oct 2018