Continuing Recovery

• The FBM KLCI (+0.6%) halted a six-day losing streak yesterday, stemming from the positive developments over the ongoing trade talks between the U.S. and China. The lower liners – the FBM Small Cap (-0.04%), FBM Fledgling (-0.2%) and FBM ACE (-0.3%), however, all trended lower after erasing their intraday gains, while the broader market finished mixed.

• Market breadth turned positive as advancers pipped decliners on a ratio of 394-to-371 stocks. Traded volumes added 44.2% to 2.07 bln shares, lifted by the positive market sentiment.

• Chart-toppers on the FBM KLCI were banking heavyweights like Public Bank (+40.0 sen), CIMB (+24.0 sen) and Hong Leong Bank (+12.0 sen), while Malaysia Airport Holdings and Petronas Gas added 16.0 sen and 12.0 sen respectively. Consumer products stocks like BAT(+RM1.08), Dutch Lady (+68.0 sen), Heineken (+52.0 sen) and Ajinomoto (+30.0 sen) rose, while LB Aluminium gained 1.0 sen after reporting a strong set of quarterly earnings.

• In contrast, notable decliners on the broader market were Hong Leong Industries (-28.0 sen), Panasonic (-28.0 sen), KESM Industries (-19.0 sen), MyEG (-17.0 sen) and Petron Malaysia (-17.0 sen). Meanwhile, Nestle (-50.0 sen), Hong Leong Financial Group (-8.0 sen), Maxis (- 8.0 sen), KLCC (-7.0 sen) and Maybank (- 5.0 sen) led the key index’s decliners list.

• Asia benchmark indices staged a sharp recovery, boosted by the positive trade developments where China has agreed to lower its tariff on imported U.S. cars to 15% (from 40%). The Nikkei jumped2.2%, while the Hang Seng Index (+1.6%) reclaimed the 26,000 psychological level.The Shanghai Composite added 0.3%, while ASEAN stockmarkets finished in the positive territory on Wednesday.

• Wall Street advanced overnight as the as the Dow (+0.6%) recovered all its previous session losses after trade tensions eased and following the bailing of a Huawei executive that was arrested in Canada. On the broader market, the S&P 500 added 0.5%, while the Nasdaq climbed 1.0% higher.

• Earlier, European equities – the FTSE (+1.1%), CAC (+2.2%) and DAX (+1.4%), all extended their gains amid a more upbeat sentiment following a potential U.S.-China trade deal. Meanwhile, British Prime Minister May remained in power in after surviving a no confidence vote.

THE DAY AHEAD

• As the U.S-China trade dispute seems to be thawing, the Malaysian stockmarket saw a decent recovery yesterday to break its downward spell. However, the recovery appears selective, concentrated on index heavyweights while the broader market only saw superficial gains.

• While we think the near term positivity should sustain amid an improved sentiment, the gains may still be measured as we see selective follow through buying as the lack of broadbased buying support is likely to limit the upside, in our view. Therefore, we think that the 1,670 level may become a significant near term hurdle for the FBM KLCI, which is followed by the 1,680 level. The supports are at 1,657 and 1,650 respectively.

• The lower liners and broader market performances were relatively mixed despite the gains on the key index constituents yesterday. As it is, marketinterest on these stocks remains low and although they are also due for a rebound from oversold, the indifferent trend looks to continue for now.

COMPANY BRIEF

• BIMB Holdings Bhd has made a partial redemption of RM609.9 mln of a 10-year RM1.66 bln sukuk, which was issued at a discount and fully subscribed by Lembaga Tabung Haji. The maturity date of the sukuk is 12th Decembe 2023.

• The exercise is expected to reduce the group’s future payment obligations under the sukuk issue and is expected to have a positive impact on its future earnings. (The Edge Daily)

• Cypark Resources Bhd has secured two contracts totaling RM450.0 mln to build two solar photovoltaic energy generating facilities, one of which is in Sik, Kedah and another one at Empangan Terip, Negeri Sembilan. (The Edge Daily)

• Alam Maritim Resources Bhd has been awarded another contract to provide panMalaysia underwater services for petroleum arrangement contractors. This is its third PAC contract win since 30th November this year. The project by Hess Exploration and Production Malaysia BV is on a regular or a call-out basis, whereby work orders will be issued by client based on the schedule of rates as set forth in the contract. (The Edge Daily)

• Zhulian Corp Bhd’s founder, Teoh Beng Seng has resigned from his position as President-cum-Chief Executive Officer (CEO) after more than 12 years at the helm of the multi-level marketing company due to personal reasons. Teoh was appointed to the board in April 2006. (The Edge Daily)
• My E.G. Services Bhd (MyEG) said that it is unaware of any factors which may have resulted in the sharp fall in its share price to a five-month low yesterday. The group has made due inquiry with its Board of Directors (BoD) and major shareholders to seek the cause of the unusual market activity, but could not find any reason behind the share price movement. (The Star Online)
• Bermaz Auto Bhd (BAuto) posted more than three-fold jump in 2QFY19 net profit to RM73.9 mln, from RM22.2 mln, owing to better sales during the tax holiday period, improved vehicle sales mix and margins.
• Other contributing factors included the stronger Ringgit against the Japanese Yen and significantly higher share of profit contribution from its associate company, Mazda Malaysia Sdn Bhd, due to the higher production volume for the new CX-5 model. Revenue, meanwhile, rose 46.3% Y.o.Y to RM690.3 mln, compared to RM471.7 mln previously. (The Star Online)
• Poh Huat Resources Holdings Bhd‘s 4QFY18 net profit grew 16.9% Y.o.Y to RM20.9 mln vs. RM17.8 mln a year ago, on higher sales from both its Malaysian and Vietnamese operations. Quarterly revenue also gained 10.4% Y.o.Y to RM189.5 mln, from RM171.7 mln last year and Poh Huat has proposed a final dividend of 2.0 sen per share. (The Star Online)
• Pasdec Holdings Bhd is disposing its entire stake in a South African associate company at a loss in a bid to settle a debt it owes a business partner, extricate itself from a corporate guarantee and to streamline its operations and realign focus on its Malaysian property business.
• The group will sell CRH Africa Automotive Proprietary Ltd for 60.0 mln SouthAfrican Rand (or approximately RM18.0 mln) to South Africa-based P Pather Capital Proprietary Ltd (PPC), which would result in a loss of RM440,000.
• The stake in CRH is held under Pasdec Automotive Technologies (Proprietary) Ltd (PAT), which has a 30.9% equity stake in CRH. PAT is in turn 70.0%-owned by Pasdec's 97.0%-owned Pasdec Resources SA Ltd, with the remainder 30.0% held by PPC. Thus, Pasdec has an effective shareholding of 21.0% in CRH. (The Edge Daily)

Source: Mplus Research - 13 Dec 2018