Quick Profit Taking To Sap Friday’s Gains

• The FBM KLCI (+1.2%) bucked the negative sentiment in the global stockmarkets and ended the week on a firmer note, boosted by buying support in selected heavyweights. The key-index also notched a weekly gain, closing 0.5% W.o.W higher amid what is seen as yearend window dressing activities. The lower liners also rebounded, with the exception of the FBM Fledgling (-0.3%), while the broader market closed mostly higher on Friday.

• Market breadth turned positive as winners trounced the decliners on a ratio of 463-to-356 stocks, while traded volumes fell further by 12.4% to 1.72 bln shares as investors flee to safe-haven assets amid the rising global uncertainties.

• Plantation-related stocks like Sime Darby Plantation (+43.0 sen) and Kuala Lumpur Kepong (+18.0 sen) led the Main Board higher, alongside Tenaga Nasional (+66.0 sen), Nestle (+60.0 sen) and Petronas Dagangan (+60.0 sen). Other gainers, meanwhile, include United Plantations (+68.0 sen), Lysaght Galvanised Steel (+33.0 sen), QL Resources (+32.0 sen), Allianz Malaysia (+24.0 sen) and Fraser & Neave (+24.0 sen).

• On the other side of the trade, broader market losers were BAT (-RM1.68), Ayer Holdings (-40.0 sen), Carlsberg (-30.0 sen), Oriental Interest (-17.0 sen) and Tasek (-15.0 sen). Key-index underperformers, meanwhile, include Hong Leong Bank (-20.0 sen), MISC (-15.0 sen), Press Metal (-5.0 sen), Genting Malaysia (-4.0 sen) and KLCC (-3.0 sen).

• Japanese shares were painted red as the Nikkei fell further to a new 15-month low on the back of the strengthening Yen as investors fled risky assets. The Shanghai Composite also extended its losses for the fourth consecutive day amid renewed trade conflicts after U.S. allegedly accuse China of economic espionage. On the bright side, the Hang Seng climbed higher in the eleventh hour, while ASEAN bourses ended the week mostly lower.

• U.S. equities recorded its worst week in more than seven years ahead of a potential government shutdown and heightened political risks following the unexpected resignation of US Defence Secretary James Mattis. The Dow (-1.8%), the S&P 500 (-2.1%) and the Nasdaq (- 3.0%) all retreated, pulled lower by technology and financial stocks selldown.

• European stocks eked-out gains on Friday after paring earlier losses, although sentiments remain depressed by macro uncertainties pertaining to rising U.S. interest rates, political instability in the EU and ongoing U.S.- China trade tensions. French stocks moved incrementally higher as the CAC’s gains were capped by soft economic data and losses in banking counters. The FTSE meanwhile rose 0.1%, owing to recovery in miners and the DAX closed 0.2% higher.

The Day Ahead

• Although Malaysian stocks bucked the regional downtrend to post strong gains on Friday, we remained unconvinced of its longevity as the underlying market tone is still one of uncertainty amid the prognosis of insipid economic and corporate earnings growth outlook over the next 2-3 quarters. Hence, we see Friday’s gains as merely window dressing activities and there remains no change to Bursa Malaysia’s fundamental outlook.  Therefore, the FBM KLCI could retreat at the start of the week as we think that quick profit taking activities could set in after the substantial gains last Friday. At the same time, the persistent weakness in most overseas indices could further dampen the near-term outlook on Bursa Malaysia. Therefore, we think the window dressing activities could take a backseat for now with the key index potentially pulling back to the 1,660 support level. If the level fails to hold, the other support at 1,650 will come into play. The resistances are at 1,680 and 1,690 respectively.

• Meanwhile, the broader market and lower liners could also succumb to profit taking actions after last Friday’s gains amid the still difficult equity market environment. Although most of the above indices remain oversold, the present market conditions are unlikely to provide much reprieve for the lower liners over the near term, in our view, as market participation remains thin.

COMPANY BRIEF

• Sime Darby Bhd’s unit in China is buying a 65.0% equity interest in a motor vehicle sales and services company based in Yunnan province for RM11.8 mln. The company indirect wholly-owned subsidiary, Chengdu Bow Yue Vehicle Company Ltd has entered into an equity transfer agreement with Yunnan Kai Cheng Economic and Trading Co Ltd (YNKC) and Heshan Shunwei Property Management Co to acquire Qujing Bow Kai Motors Sales & Services Co. Ltd (QJBK). Sime Darby has already obtained the written consent from BMW China Automotive Trading Ltd and BMW Brilliance Automotive Ltd for this equity transfer. Sime Darby expects to complete the deal by end of January 2019, or latest by June 2019. (The Star Online)

• DKSH Holdings (Malaysia) Bhd is buying Auric Pacific (M) Sdn Bhd from its Singapore shareholder for S$157.7 mln (RM480.9 mln) in cash as it seeks to expand its services. DKSH is acquiring the company from Singapore-based Auric Pacific Group Ltd which distributes chilled and frozen products in Malaysia. DKSH intends to fund the proposed acquisition through its own funds and bank borrowings. (The Star Online)

• WCT Bhd and TSR Bina Sdn Bhd (TRSB) have secured a RM676.8 mln contract to construct a shopping complex from PNB Merdeka Ventures Sdn Bhd. The contract’s scope of works includes the construction and completion of an eightlevel shopping complex podium, including the architectural works for the basement, retail area, residential drop-off and core, tower link-bridge and external works.

• Following the acceptance of the contract, WCT and TSRB will incorporate a joint venture company in the ratio of 51:49 respectively, to undertake the work that is expected to commence on 2nd January 2019, and completed within 30 months. (Bernama)

• Muhibbah Engineering (M) Bhd has bagged two Engineering, Procurement, Construction, Installation & Commissioning (EPCIC) contracts worth a collective RM205.0 mln. The first is a contract from Regas Terminal (Sg Udang) Sdn Bhd, a wholly-owned subsidiary of Petronas Gas Bhd (PetGas), to provide EPCIC of seawater overboard upgrading, firewater network improvement and new pressure control installation project in Melaka.

• The second is to provide EPCIC of a Yetagun Acid Gas Removal Unit project in Myanmar, from PC Myanmar (Hong Kong) Ltd, a wholly-owned unit of Petronas. (The Edge Daily)

• Sumatec Resources Bhd's largest shareholder Tan Sri Halim Saad has been seen paring down his stake in the Practice Note 17 (PN17) oil and gas company. He sold 54.4 mln shares on 21st December 2018 via the open market. He now holds a 9.3% stake in the company. (The Edge Daily)

• Top Gloves Corp Bhd, which reported earlier this year it would be investing RM100.0 mln to set up a new plant to produce vinyl gloves in Vietnam, announced it has incorporated a subsidiary there for the purpose of manufacturing gloves. The company is a one-member limited liability company that has a charter capital of 136.70 bln Dong (RM24.4 mln). (The Edge Daily)

• Advance Synergy Bhd is buying Beaver Hotel in London, UK, for £10.3 mln (RM55.6 mln), which it expects will be able to provide it a steady revenue income. The acquisition is also in line with its intention to have a greater presence in Europe and to further enhance its hospitality operations in major cities around the world. (The Edge Daily)

• PRG Holdings Bhd has agreed to subscribe to shares in Singapore-listed Capital World Ltd, which is primarily involved in property development in Malaysia. Capital World’s flagship project is Capital City in Johor Bahru, comprising a shopping mall, hotel, serviced suites and serviced apartments. PRG will subscribe for 265.0 mln new shares in Capital World for S$9.3 mln and another 44.0 mln option shares at S$1.00 per share. (The Edge Daily)

• Sedania Innovator Bhd is to jointly supply and install its green technology solutions with Matrix Energy (M) Sdn Bhd in 100 additional branches of a bank, having already installed the technology in 100 branches earlier. The move is part of the group’s RM8.4 mln five-year energy performance contract (EPC), which entails the supply, installation and maintenance of its greentech solutions. (The Edge Daily)

• AirAsia Group Bhd’s unit, Asia Aviation Capital Ltd (AACL) has executed an agreement with CDB Aviation Lease Finance DAC for the acquisition of the entire equity interest of GY Aviation Lease Labuan 1 Ltd to restructure the lease of an Airbus A320-251N aircraft. In another development, Garuda Indonesia is in talks with AirAsia Indonesia on possible joint operations. Garuda sees a possible partnership between its unit Citilink and AirAsia Indonesia on international flights. (The Edge Daily)

• My E.G. Services Bhd’s Philippinebased joint venture has signed a Memorandum of Agreement with the country’s National Bureau of Investigation (NBI) to implement the agency’s electronic payment and collection system (EPCS). The joint venture, comprising I-Pay MYEG Philippines Inc and I-Pay Commerce Ventures Inc (IPCVI), was signed on 17th December 2018. The memorandum is to outline the terms and conditions to be observed by both parties to implement the NBI’s EPCS, including the installation and operation of the EPCS, as well as other aspects of the project. (The Edge Daily)  

Source: Mplus Research - 24 Dec 2018