Going Sideways Ahead Of Budget 2019

• The FBM KLCI (-0.1%) ended incrementally lower after failing to pare losses in the eleventh hour, ahead of the Budget 2019 announcement on Friday. The lower liners were mostly higher – led by the FBM Small Cap (+0.5%) and the FBM Ace (+0.6%), although the FBM Fledgling (-0.1%) fell. The broader market, meanwhile, ended broadly in the green.

• Market breadth remained positive as winners beat losers on a ratio of 434-to- 364 stocks, despite traded volumes trimmed by 6.5% to 2.18 bln shares, as investors turned wary ahead of Budget 2019.

• Underperformers on the FBM KLCI were Nestle (-30.0 sen), PPB Group (-20.0 sen), Hong Leong Financial Group (-14.0 sen), Tenaga Nasional (-14.0 sen) and Press Metal (-10.0 sen). Meanwhile, notableconsumer-products counters like Dutch Lady (-38.0 sen), Fraser & Neave (-32.0 sen) and Ajinomoto (-30.0 sen) narrowed, followed by Petron Malaysia (-17.0 sen) and Top Glove (-14.0 sen).

• Broader market advancers, meanwhile, were BAT (+RM1.10), KESM Industries (+84.0 sen), Shangri-La Hotels (+38.0 sen), BLD Plantation (+35.0 sen) and Perusahaan Sadur Timar (+27.0 sen). Front-runners on the blue-chip gauge include MISC (+51.0 sen), Hong Leong Bank (+22.0 sen), RHB Bank (+8.0 sen), Sime Darby (+8.0 sen) and Genting (+6.0 sen).

• Chinese stockmarkets started November on a stronger footing as investors digested fresh announcements on the economic front amid the ongoing trade concerns. The Shanghai Composite eked out 0.1% gains, while the Hang Seng rose1.8%. The Nikkei, however, lost its momentum after lingering in the red for the entire intraday session, while ASEAN equities closed broadly higher on Thursday.

• All of the major U.S. bourses extended their rally on the back of easing trade concerns and as investors digested the mostly upbeat corporate earnings ahead of the October jobs report and earnings report from Apple. Both the Dow and the S&P 500 ended 1.1% higher, while the Nasdaq jumped by 1.8%.

• U.K. equities fell on Thursday after the Bank of England kept its interest rates unchanged and reports that a tentative deal had been made to enable U.K. banks to maintain their operations in the EU even after Britain’s exit. The FTSE retraced 0.2%, albeit cushioned by gains in banking giants, while the CAC also ended 0.2% lower. The DAX, however, managed to eke-out gains on last-minute buying-support.

THE DAY AHEAD

• The strong push on Wednesday resulted in some bouts of quick profit taking activities that sent the key index lower yesterday. Despite that, the near-term outlook remains mostly positive amid the ongoing recovery of global indices after a wretched October that saw equities taking a tumble.

• Although the general market conditions is still broadly positive, we think Malaysian stocks could still see some tentativeness ahead of the Budget 2019 announcement scheduled for later today. This could leave market players on the sidelines as they assess and digest the Budget before making further decisions on the Malaysian equity market in due course. Therefore, we think the key index could revert to a sideway trend for the day, hovering within the 1,700-to-1,710 points. The other support and resistance levels are at 1,690 and 1,720 points respectively.

• The lower liners and broader market shares are also seeing some measure of recovery after their recent oversold spell, which is encouraging. We also see further near term recovery, but the upsides could be tempered by the bouts of quick profit taking activities as some market players lock-in their gains ahead of the weekend.

COMPANY BRIEF

• Supermax Corp Bhd’s 1QFY19 net profit expanded 28.8% Y.o.Y to RM35.9 mln, driven by increased sales from the additional production output as well as improved operational efficiency and an extraordinary gain of RM6.5 mln from an insurance claim for consequential loss. Revenue for the quarter rose 17.6% Y.o.Y to RM367.1 mln. (The Sun Daily)

• AirAsia X Bhd (AAX) has appointed Thai national, Nadda Buranasiri as group CEO of the carrier. Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, the group’s co-founders and co-Group Chief Executive Officers, were re-designated to Non-Independent Non-Executive Directors effective immediately. (The Edge Daily)

• KNM Group Bhd has won a 40.0 mln yuan (RM24.0 mln) contract from China National Chemical Engineering Co Ltd (CNCEC) to supply vessels for the construction of an integrated petrochemical complex in Kazakhstan. The period of the contract is for 12 months. (The Edge Daily)

• Atrium Real Estate Investment Trust(REIT) plans to buy and leaseback two pieces of land in Penang from Lumileds Malaysia Sdn Bhd, a wholly-owned subsidiary of Lumileds International BV, for a combined RM180.0 mln cash. The two properties will provide the REIT with a stable and sustainable income stream for a committed lease period of 15 years, augmented by a rental escalation every year. (The Edge Daily)

• Hexza Corp Bhd has won a suit against a Singapore-registered firm over failure to pay rental for the lease of a power generation equipment in Myanmar. Singapore’s High Court has ordered Tembusu Industries Pte Ltd to pay the group US$15.3 mln (RM63.9 mln), with interest rate of 8.0% per annum from 14th October to the date of final payment, with costs of USS$12,000.

• Hexza will proceed to enforce the court order and work on the recoverability process, although it noted that the amount of money recoverable is not known at this juncture. (The Edge Daily)

• Unisem (M) Bhd's 3QFY19 net profit fell 13.1% Y.o.Y to RM35.2 mln, dragged down by a less favourable exchange rate and lower profit margins. Revenue for the quarter slipped 7.2% Y.o.Y to RM354.7 mln.

• For 9MFY18, cumulative net profit sank 42.2% Y.o.Y to RM72.3 mln. Revenue for the period fell 8.0% Y.o.Y to RM1.02 bln. A second interim dividend of 2.0 sen per share, payable on 6th December 2018, was declared. (The Edge Daily)

• Hume Industries Bhd has announced the appointment of Andi Johnny Lapon as its Group Chief Executive Officer effective 1st November 2018. Lapon, a Belgian, has 22 years of working experience, including 15 years in the manufacturing industry. (The Edge Daily)

• Axiata Group Bhd has appointed itsinterim Chairman Tan Sri Ghazzali Sheikh Abdul Khalid as the Independent and Non-Executive Chairman effective immediately. Ghazzali, who has been on the telecommunications group's board since March 2008, assumed the role of interim Chairman in August 2018, following the resignation of Axiata's former Chairman Tan Sri Azman Mokhtar.

• Meanwhile, Ghazzali's role as Senior Independent Director of the group will be replaced by David Lau Nai Pek, who also chairs the audit committee and risk management committee. (The Edge Daily)

• Sunway Real Estate Investment Trust's (Sunway REIT) 1QFY19 net property income (NPI) slipped 0.4% Y.o.Y to RM110.5 mln on higher property operating expenses. Revenue for the quarter, however, rose 1.8% Y.o.Y to RM143.7 mln. A first interim income distribution of 2.5 sen per unit, payable on 4th December 2018, was proposed. (The Edge Daily)

• China Automobile Parts Holdings Ltd (CAP), a Practice Note 17 (PN17) company has reported that it was unable to issue its outstanding 2017 annual report, as well as its 2018 annual report, by 31st October 2018. CAP said the group expects to issue the 2017 report by 31st December 2018 as the external auditors are in the midst of accessing the appropriate audit plan. (The Edge Daily)

Source: Mplus Research - 2 Nov 2018