Modest Gains Likely

• The FBM KLCI continued to track higher, closing 0.7% gains due to the positive sentiment spilled over from global stockmarkets. On weekly basis, the local key-index also eked-out marginal gains to 1,709.0 points (+0.1% W.o.W). All the lower liners finished positively, with the exception of the FBM Fledgling (-0.1%), while the broader market ended the week mostly higher.

• Market breadth was favorable as winners trounced the losers ratio of 450-to-345 stocks. Traded volumes, however, fell by another 7.0% to 1.85 bln shares due to the lack of trading catalysts.

• On the blue-chip gauge, Nestle (+RM2.60), Hong Leong Financial Group (+38.0 sen), Genting (+17.0 sen), IHH Healthcare (+14.0 sen) and Public Bank (+12.0 sen) outperformed, while broader market gainers were Apex Healthcare (+43.0 sen), Fraser & Neave (+40.0 sen), Petron Malaysia Refining (+28.0 sen), Dufu Technology (+26.0 sen) and Carlsberg (+22.0 sen).

• On the other side, BAT (-26.0 sen), Panasonic Manufacturing (-18.0 sen), KESM Industries (-16.0 sen), Eksons (- 15.0 sen) and Padini (-11.0 sen) weighed on the broader market. Main Board underperformers, meanwhile, were Telekom Malaysia (-6.0 sen), Malaysia Airports (-4.0 sen), KLCC (-3.0 sen), RHB Bank (-3.0 sen) and MISC (-1.0 sen).

• Key regional benchmark indices closed mostly higher despite unabated trade worries. The Nikkei, however, extended its losses, finishing 0.6% lower, dragged down by semiconductor-related counters, in-tandem with the weakness U.S. chipmakers. On the other hand, the Hang Seng Index (+0.3%) rebounded from earlier weakness to end in the green, alongside the Shanghai Composite (+0.4%). ASEAN equities, meanwhile, also ended mostly higher.

• Wall Street posted gains after a volatile session, boosted by gains in healthcare and energy stocks as well as trade optimism ahead of President Xi Jinping and President Donald Trump’s meeting. The Dow (+0.5%) and the S&P 500 (+0.2%) rallied, but the Nasdaq (-0.2%) inched lower in the eleventh hour on mild profit-taking activities.

• European equities, however, was mainly subdued as the key indices - the FTSE (- 0.3%), the DAX (-0.1%) and the CAC (- 0.2%) closed in the negative territory, weighed down by Brexit jitters and geopolitical uncertainties that kept investors on the sidelines.

The Day Ahead

• Even after Friday’s recovery that was stronger-than-expected, we think the gains are likely to sustain over the near term amid a still mildly positive market undertone that could spur further buying. While there should be sustained upsides, however, market participation has yet to catch up and with the U.S. and China still bickering over their trade dispute, the upsides may become tentative again.

• At the same time, much of the gains have been selective and although there are few signs of the ongoing recovery topping out as yet, we think the lack of following could place a lid on the ongoing rebound as follow through buying is still largely absent. Also, there remains no resolve to the U.S.-China trade dispute, although they are in negotiations and there is still some reservations over the potential outcome. Hence, we think the upsides could become more measured with the 1,710-1,720 levels serving as the resistances, while the 1,700 points level is the near term support.

• The lower liners and broader market shares, meanwhile, are also on a gradual recovery alongside the improved market undertone, albeit the gains are still insipid due to the lack of following. We see the slow recovery continuing over the near term as retail players are still slow to return to the market as they remain slightly wary of the current market conditions.

MACRO BREIF

• Malaysia’s economy expanded at 4.4% Y.o.Y in 3Q2018, which was slower than 6.2% Y.o.Y growth in the previous corresponding quarter and below economists' expectation of a 4.6% Y.o.Y growth. On a Q.o.Q seasonally-adjusted basis, the economy grew by 1.6% Q.o.Q, higher than the 0.3% Q.o.Q growth in the previous quarter.

• Sector wise, the services sector expanded 7.2% Y.o.Y, the manufacturing sector 5.0% Y.o.Y and construction up 4.6% Y.o.Y. However, mining fell by 4.6% Y.o.Y and the agriculture sector contracted by 1.4% Y.o.Y. Private sector activity continued to be the primary driver of growth, as private consumption expanded strongly following the zerorisation of the Goods and Services Tax (GST) in 3Q2018.

• The services and manufacturing sectors supported growth, while the mining sector continued to be affected by production shocks. The agriculture sector remained weak due to the protracted recovery from production constraints in the previous quarter. (The Star Online)

COMPANY BRIEF

• Mah Sing Group Bhd’s 3Q2018 net profit declined 30.4% Y.o.Y to RM64.2 mln as many buyers adopted a wait-and-see stance on buying properties. Revenue for the quarter decreased 28.4% Y.o.Y to RM504.3 mln.

• For 9M2018, cumulative net profit fell 24.7% Y.o.Y to RM205.6 mln. Revenue for the quarter shrank 21.9% Y.o.Y to RM1.68 bln. (The Star Online)

• Mulpha International Bhd has proposed to distribute its entire stake in Mudajaya Group Bhd to its shareholders as dividend. Under the proposed dividend-inspecie exercise, Mulpha will novate the 90.3 mln shares in Mudajaya on a basis of one Mudajaya share-for-every 3.5 Mulpha shares held at a date to be determined later. Mulpha expects to complete the proposed payout by 1Q2019. (The Star Online)

• Petronas Chemicals Group Bhd’s 3Q2018 net profit increased 37.6% Y.o.Y to RM1.26 bln, underpinned by higher revenue, lower tax expenses and higher interest income. Revenue for the quarter rose 20.3% Y.o.Y to RM4.83 bln.

• For 9M2018, cumulative net profit added 16.4% Y.o.Y to RM3.69 bln. Revenue for the period grew 14.6% Y.o.Y to RM14.51 bln. (The Star Online)

• Kossan Rubber Industries Bhd's 3Q2018 net profit rose 18.3% Y.o.Y to RM54.1 mln, driven by higher revenue from its gloves and technical input rubber products (TRP) divisions. Revenue for the quarter increased 17.3% Y.o.Y to RM573.9 mln.

• For 9M2018, cumulative net profit added 2.6% Y.o.Y to RM141.3 mln. Revenue for the period expanded 5.1% Y.o.Y to RM1.55 bln. (Bernama)
• Datuk Bazlan Osman has resigned as Acting Group Chief Executive Officer of Telekom Malaysia Bhd (TM) with immediate effect and given notice of his intention to step down as Executive Director with effect from 28th February 2019. TM's current Chief Operating Officer, Imri Mokhtar will assume the role of Acting Chief Executive Officer with immediate effect. (The Edge Daily)

• Lafarge Malaysia Bhd’s 3Q2018 net loss widened to RM109.3 mln, from a net loss of RM42.0 mln recorded in the previous corresponding quarter due to higher operating loss from the cement segment. The losses was the result of weaker demand which led to lower sales volume and a more competitive environment with a decline in selling prices. Revenue for the quarter fell 14.5% Y.o.Y to RM495.1 mln.

• For 9M2018, cumulative net loss widened to RM261.8 mln vs. a net loss of RM135.0 mln recorded in the previous corresponding period. Revenue for the quarter dropped 5.9% Y.o.Y to RM1.57 bln. (The Edge Daily)

• Excel Force MSC Bhd is acquiring commercial space in MYEG Tower within the Empire City mixed use development in Petaling Jaya from Empire City's developer Mammoth Empire Holding Sdn Bhd for RM9.9 mln cash. Excel Force has entered into a sale and purchase agreement with Cosmopolitan Avenue Sdn Bhd, a wholly-owned subsidiary of Mammoth Empire, for the acquisition. (The Edge Daily)

• APM Automotive Holdings Bhd’s 3Q2018 net profit sank 74.1% Y.o.Y to RM3.35 mln due to higher material costs and unfavorable exchange on export sales suffered by its suspension division. Revenue for the quarter, however, rose 15.0% to RM336.0 mln.
• For 9M2018, cumulative net profit slipped 18.8% Y.o.Y to RM21.1 mln. Revenue for the period, however, grew 10.5% Y.o.Y to RM951.8 mln. (The Edge Daily)  

Source: Mplus Research - 19 Nov 2018