Looks To Linger Within A Tight Range

• Quick profit taking in the second half of the trading session erased all of the FBM KLCI’s intraday gains as the key index fell 0.1% on New Year’s Eve. Consequently, the FBM KLCI declined 5.9% Y.o.Y in 2018 to close at the 1,690.58 level – marking its worst annual performance since 2008. The lower liners – the FBM Small Cap (+0.2%), FBM Fledgling (+0.9%) and FBM ACE (+1.3%), all extended their gains, while the broader market finished mixed.

• Market breadth stayed positive as advancers outnumbered decliners on a ratio of 429-to-361 stocks. Traded volumes rose 10.9% to 1.57 bln shares on rotation play among the lower liners.

• Banking giants like Hong Leong Financial Group (-30.0 sen), Hong Leong Bank (- 12.0 sen) and Public Bank (-12.0 sen) topped the big board’s decliners list, while PPB Group and Maxis shed 12.0 sen and 11.0 sen respectively. Scientex’s share price (-30.0 sen) sank after announcing a weak set of quarterly earnings, while Ajinomoto (-20.0 sen), Dutch Lady (-20.0 sen), Computer Forms (-16.0 sen) and Scicom (-14.0 sen) also fell.

• In contrast, significant gainers on the broader market were Manulife (+18.0 sen) Gabungan AQRS (+15.5 sen), UMW Holdings (+15.0 sen), Country Heights Holdings (+14.0 sen) and KESM Industries (+14.0 sen). Meanwhile, notable advancers on the FBM KLCI were Petronas Dagangan (+34.0 sen), Petronas Gas (+20.0 sen), MISC (+12.0 sen), Malaysia Airport Holdings (+8.0 sen), KLK (+7.0 sen).

• Both the Japanese and Chinese stockmarkets were closed on New Year Eve. However, the Hang Seng Index jumped 1.3%, taking cue from the positive trade developments between the U.S. and China over the weekend, but fell 13.6% Y.o.Y to close at 25,845.70 level for the year. ASEAN stockmarkets, meanwhile, ended mostly higher last Friday.

• Wall Street advanced on the final trading day of 2018 as the Dow added 1.2%, boosted by optimism that U.S. President Donald Trump will move toward a trade deal with China. On the broader market, the S&P 500 added 0.9%, while the Nasdaq closed 0.8% higher. Still, U.S. stockmarkets endured their worst annual decline since 2008 as the Dow, S&P 500 and Nasdaq finished 5.6% Y.o.Y, 6.2% Y.o.Y and 3.9% Y.o.Y lower respectively in 2018.

• Earlier, major European indices ended mixed as the FTSE fell 0.1% after erasing all its intraday gains to close 12.5% Y.o.Y lower in 2018, but the CAC jumped 1.1% higher, trimming its annual loss to 11.0% Y.o.Y. Meanwhile, the DAX (-18.3% Y.o.Y) was closed on New Year Eve. Like the Asia and U.S. counterparts, European stockmarkets also endured their worst annual decline post the 2008 global financial crisis.

The Day Ahead

• The near term outlook for Malaysian equities remain indifferent amid the still weak investor participation and lack of positive leads to shore up sentiments further. The lack of buying support also saw the key index failing to take out the 1,700 points resistance on the last trading day of 2018 as the follow through buying support remains weak.

• As it is, the FBM KLCI’s valuation remains fair at 16.6x for 2018 and 16.0x for 2019, which are well within its historical forward range of 14x-17x. The fair valuation also leaves limited upside options for the key index to head higher over the near term, in our view. Under the prevailing environment, we think the market could continue drifting within the 1,680 and 1,700 points for now as there appears to be some measure of stability in many overseas bourses that could also extend to the FBM KLCI and to allow it to build up a base.

• The lower liners and broader market shares are also on a gradual comeback after an extended downtrend that lasted almost a year. With many of the lower liners showing stronger value proposition, we think there could be continued nibbling and this will help to shore up the lower liners and broader market shares for longer.

COMPANY BRIEF

• Petronas Gas Bhd (PetGas) has entered into the second term of the gas processing agreement (GPA) with its parent, Petroliam Nasional Bhd (Petronas) with revised remuneration terms and will commence from 1st January 2019 until 31st December 2023. According to the GPA inked on 31st March 2014, the duration of the entire deal spans 20 years from 1st April 2014 until 31st December, 2033.

• For 2019, the tariff for the PGU is RM1.072 per gigajoule, down from RM1.248 per gigajoule this year, while the tariff for RGTSU is RM3.518 per mln British thermal unit (mmBtu) and RGTP is US$0.637 per mmBtu. (The Edge Daily)

• Public Bank Bhd has announced that Tan Sri Teh Hong Piow will retire as Chairman but he will remain on the board as nonindependent non-executive Director effective 1st January 2019. Concurrently, Deputy Chairman Lai Wan will be redesignated as Chairman. (The Edge Daily)
• AMMB Holdings Bhd has appointed Voon Seng Chuan as the new Chairman of AmBank (M) Bhd, effective 1st January 2019 as part of the financial-services group's directorship and chairmanship transition plan. Voon has been a member of the board of directors of AmBank (M) Bhd since 18th June 2015 and is also a member of the board of directors of AMMB Holdings Bhd. (The Edge Daily)

• Lim Keong Hui, the son of Tan Sri Lim Kok Thay — Chairman and Chief Executive Officer (CEO) of Genting Group — has been appointed as deputy CEO of Genting Bhd, Genting Malaysia Bhd (GENM) and Genting Plantations Bhd (GENP), effective 1st January 2019.

• Keong Hui will be re-designated from his Executive Director positions in Genting and GENM, as well as non-executive director positon at GENP. Tan Sri Lim Kok Thay, meanwhile, will assume the Deputy Chairman role at GENP, while Tan Kong Han has been appointed as the CEO of GENP. The latter was appointed as GENP’s Deputy CEO on 1st December 2010. He is also the President and Chief Operating Officer (COO) of Genting. (The Star Online)

• Vizione Holdings Bhd has secured a RM377.6 mln contract from Permata Rebana Sdn Bhd to supply materials, labour and project management services relating to road works in Kota Kinabalu, Sabah. The 24-month contract is subject to any extension of time granted under the construction contract to be entered into at a later stage. (The Edge Daily)

• Pintaras Jaya Bhd's Singapore unit has been awarded three new piling contracts worth a combined RM103.0 mln. All the contracts have varying contract periods, ranging from three to eight months. (The Edge Daily)

• Handal Resources Bhd has announced that its founder and Non-Executive Chairman, Datuk Mohsin Abdul Halim intends to retire from the position. Tengku Baderul Zaman Sultan Mahmud has been re-designated as the new Chairman, effective 1st January 2019. Tengku Baderul Zaman is also a director of Borneo SeaOffshore Sdn Bhd, which owns an 11.1% stake in Handal. (The Edge Daily)

• Ornapaper Bhd’s Executive Director, Sai Han Siong has been re-designated as Chief Executive Director of the group, replacing See Wan Seng who has retired. The former is the son of Sai Ah Sai, who is a Non-Independent and Non-Executive Director of the group and has a 0.02% direct stake and a 25.9% indirect stake in the company. (The Edge Daily)

• FGV Holdings Bhd has halted its plan to collaborate with the Sabah Forestry Department to explore the rehabilitation of riparian and forest buffer zone which lies between the forest reserve and the FGV estate in Sahabat, Sabah. Both parties have agreed not to renew the Memorandum of Understanding (MoU) entered into on 8th November 2016 after its expiry on 7th December 2018. (The Edge Daily)

• Geoffrey Ng Ching Fung has been appointed the Non-eEecutive Chairman of Kronologi Asia Bhd, effective 1st January this year, following the resignation of Gerard Tan Wee Seng. (The Edge Daily)

• Yinson Holdings Bhd’s Vietnam associate, PTSC Asia Pacific Pte Ltd (PTSC AP) has entered into an addendum to the bareboat charter interim contract with Petrovietnam Technical Services Corp (PTSC) to extend the tenure for a further six months commencing from 1st January until 30th June 2019.

• The charter is for PTSC Lam Son floating production, storage and offloading vessel for the petroleum operations within the Lam Son Field. The group did not disclose the contract value of the extension. (The Edge Daily)

• KAF Investment Bank Bhd (KAF IB) has urged shareholders in Merge Energy Bhd to reject the unconditional mandatory takeover offer by Westiara Development Sdn Bhd, Cerdik Cempedak Sdn Bhd, Fine Approach Sdn Bhd, Anjuran Utama Sdn Bhd and Datuk Lee Tian Hock, as the offer is seen to be unfair and unreasonable. (The Star Online)

• PUC Bhd is planning to buy the rest of Pictureworks Holdings Sdn Bhd it does not already own from its group Managing Director and CEO Cheong Chia Chou and two other companies for RM167.5 mln.

• The acquisition of 12.3 mln shares (or a 67.0% equity stake) in Pictureworks from Cheong, Superb Go Sdn Bhd and Beauty World Holdings Pte Ltd (BWH) will be carried out via a combination of new share issuance and cash. Cheong currently holds a 42.2% equity stake in Pictureworks, SGSB 20.0% and BWH 4.8%. (The Edge Daily)  

Source: Mplus Research - 2 Jan 2019