Window Dressing Looks To Sustain

• The FBM KLCI (+0.8%) tracked higher on Monday amid holiday-thinned trading and window dressing activities. The lower liners also ended mostly higher, with the exception of the FBM ACE (-0.8%), while the majority of the broader market closed on an upbeat note.

• Market breadth remain bullish as advancers outweighed the decliners on a ratio of 428-to-332 stocks, although traded volumes plunged 27.8% to just 1.27 bln shares ahead of the Christmas holiday break.

• Top Glove (+23.0 sen) led the key-index outperformers on its first trading day on the Main Board, followed by Tenaga Nasional (+52.0 sen), Petronas Dagangan (+50.0 sen), MISC (+21.0 sen) and Hong Leong Bank (+18.0 sen). Broader market winners, meanwhile, were Ajinomoto (+RM1.08), BAT (+60.0 sen), Fraser & Neave (+44.0 sen), Petron Malaysia (+21.0 sen) and Genting Plantations (+15.0 sen).

• On the other hand, significant broader market decliners were Dutch Lady (-70.0 sen), United Plantations (-48.0 sen), Heineken Malaysia (-40.0 sen), Allianz Malaysia (-18.0 sen) and MSM Malaysia (- 17.0 sen). Main Board underperformers include Nestle (-RM1.60), Hong Leong Financial Group (-24.0 sen), Sime Darby Plantation (-16.0 sen), Maxis (-6.0 sen) and Genting (-4.0 sen).

• Japanese stockmarkets were painted red with its key bourse – the Nikkei (-5.1%) closing below the 20,000 psychological support level and entered into the bear territory on the back of the deep selldown on Wall Street on Christmas eve. The Shanghai Composite rebounded late in the session, albeit still closing in the negative territory, while the Hang Seng was closed for Christmas. The majority of the ASEAN stockmarkets finished lower at Tuesday’s closing bell.

• Wall Street tumbled on Tuesday as the Dow (-2.9%), the S&P 500 (-2.7%) and the Nasdaq (-2.2%) all lost more than 2% amid heightened political turmoil after President Donald Trump criticised the Federal Reserve’s Chairman Jerome Powell’s monetary policies, potentially undermining the confidence in the U.S. financial system.

• Earlier, European equities also closed in the red as investors retreated to the sidelines ahead of the Christmas holiday and global risk-off sentiment. Consequently, the FTSE ended 0.5% lower, while the CAC lost 1.5% to 4,626.4 points. The DAX, meanwhile, flatlined.

The Day Ahead

• Despite the weak global market sentiments, the FBM KLCI bucked the insipid trend to continue heading higher on the window dressing activities. Although we think that there are few reasons for the key index to head higher, we think institutions will still be bent on lifting up stocks ahead of the year-end.

• However, we think there could some early profit taking activities after Wall Street endured another bout of weakness on Christmas Eve that would likely permeate to Malaysia stocks. Depending on how well the selling is absorbed, we think there could be late buying to push the key index higher, potentially back to the 1,700 points level. There is an interim resistance is at 1,690, while above 1,700 the other resistance is at 1,710. The supports, meanwhile, are at 1,680 and 1,670 respectively.

• The broader market is also likely to push higher with the FBM Small Cap stocks finding some reprieve after its extended downtrend. The near term positivity could also spread to the other lower liner stocks, but we think further upsides could be difficult to come by due to the lack of market interest that has seen the market’s daily traded volume not much above the 1.0 bln shares transacted for the past few sessions.

COMPANY BRIEF

• Sunway Bhd has proposed to dispose of selected land and buildings to its real estate investment trust (REIT), Sunway REIT for a total cash consideration of RM550.0 mln. The proposed disposal is expected to improve the group’s cash flow and result in a net cash inflow totalling RM311.3 mln. Part of the proceeds from the proposed disposal will be utilised to repay existing bank borrowings that is expected to reduce the gearing of the Sunway Group and potentially save RM9.9 mln of finance expense per annum. As for Sunway REIT, the proposed acquisition would be funded via a combination of its existing and/or future financing facilities.

• The proposed acquisition is in line with the key investment objective of the manager to continuously pursue an acquisition strategy to acquire and invest in properties that are yield accretive with the potential to contribute to the longterm growth in Sunway REIT’s distribution per unit (DPU) and/or net asset value (NAV) per unit. Sunway REIT’s property portfolio size is expected to increase to RM7.80 bln after the proposed acquisition from about RM7.30 bln as of 30th June 2018. The proposed exercise is expected to be completed in 1H2019. (The Star Online)

• JayCorp Bhd expects some production delays after a fire destroyed part of its factory in Melaka, but the company estimated that total losses from the incident would be capped at below RM1.0 mln. The assets damaged include a finishing line, part of the factory roof, some spray guns, fire extinguishers and sprinklers.

• The area damaged by the fire on 23rd December 2018 was restricted to a single finishing line within the factory with minimal impact to other areas of the factory. (The Star Online)

• AirAsia Group Bhd is disposing of 25 aircraft to U.S. private investment firm, Castlelake LP in a deal worth US$768.0 mln (RM3.22 bln). Castlelake will also purchase four new aircraft that will be delivered to AirAsia in 2019. The 29 planes – Airbus A320-200ceo and A320neo – will be leased back to AirAsia.

• For AirAsia, the deal marks another move to monetise its assets as Asia’s biggest budget airline seeks to transform itself into an asset-light, digitally focused firm. Proceeds from the disposal would mainly be for the repayment of existing debt and to defray estimated expenses for the proposed transaction.

• Following the proposed disposal, AirAsia’s gross gearing ratio is expected to fall from 0.5x to 0.2x. The proposed transaction is expected to be completed by 2Q2019. (The Star Online)

• TSR Capital Bhd has secured a RM79.8 mln road project in Sungai Buloh. The 24-month project, awarded by Kwasa Land Sdn Bhd, involves the construction of the elevated roads crossing junction at Persiaran Atmosfera-Persiaran Jati, and the upgrading of the four-arm grade junction at Kwasa Puteri-Persiaran Sg Buloh. The project is expected to be completed by January 2021. (The Edge Daily)

• MCE Holdings Bhd has terminated two Memorandum of Understanding for the purpose of setting forth a framework for the consultation and exchange of information and technology with PT Garuda Multi Investama and Sandhar Technologies Ltd on 21st December 2018. MCE, however, will continue to explore cooperation opportunities with the two companies as and when such opportunities arise. (The Edge Daily)  

Source: Mplus Research - 26 Dec 2018