Near Term Outlook Remains Frail

• The FBM KLCI (-1.3%) started off 2019 on a weak manner after lingering in the negative territory for most of the trading session. Market sentiment was dragged down by the sluggish Nikkei Purchasing Manufacturing Index data in December 2018 that fell to its lowest level in sixand-half years low at 46.8. The lower liners – the FBM Small Cap (-0.7%), FBM Fledgling (-0.8%) and FBM ACE (-0.7%), all slipped, while only the REIT (+0.4%) sector outperformed the negative broader market.

• Expectedly, market breadth turned negative as decliners trounced advancers on a ratio of 532-to-256 stocks. Traded volumes, however, gained 6.8% to 1.68 bln shares on selling activities across the board.

• More than two-thirds of the key index constituents fell, dragged down by Nestle (-70.0 sen), followed by KLK (-64.0 sen), Petronas Gas (-62.0 sen), Petronas Dagangan (-50.0 sen) and PPB Group (- 40.0 sen). Notable decliners on the broader market were Dutch Lady (-50.0 sen), Fraser & Neave (-30.0 sen), Vitrox (- 16.0 sen), AmWay (-15.0 sen) and Ta Ann (14.0 sen).

• Meanwhile, amongst the biggest advancers on the broader market include BAT (+36.0 sen), GHL System (+11.0 sen), Harn Len Corporation (+11.0 sen), N2N Connect (+10.0 sen) and Tasek Corporation (+10.0 sen). The winners on the key index were Maxis (+34.0 sen), Petronas Gas (+20.0 sen), MISC (+3.0 sen), Hartalega (+3.0 sen), RHB Bank (+3.0 sen).

• Asia benchmark indices closed sharply lower as the Hang Seng Index and Shanghai Composite sank 2.8% and 1.2% respectively, dragged down by China’s weak Caixin Factory Purchasing Managers' Index that fell to 49.7 in December 2018 – the first contraction since May 2017. Japanese stockmarkets remain closed, while ASEAN stockmarkets were painted in red on Wednesday.

• U.S. stockmarkets managed to eke-out minor gains after enduring a rough ride. The Dow rose 0.1% after recovering all its intraday losses. Likewise, on the broader market, the S&P 500 added 0.1%, boosted by gains in energy sector (+2.1%) after crude oil prices rallied, while the Nasdaq finished 0.5% higher.

• Earlier, major European indices closed on a mixed note as the FTSE and DAX gained 0.1% and 0.2% respectively after clawing their way into the positive territory in the final trading hour. Despite recovering most of its intraday gains, the CAC (- 0.9%), however, remained in the negative territory.

The Day Ahead

• Yesterday’s rout was more pronounced that expected as the contracting manufacturing sector caused consternation to market players with the latest data also pointing to a slowdown in the Malaysian economy.

• There remains little to suggest that a quick recovery is in the offing as yet. Hence, the downside risk is still pronounced that could send the FBM KLCI lower again over the near term. In the meantime, the buying interest remains insipid as foreigners are still unwinding their positions that is likely to also keep the near term outlook frail for longer. The supports are now at 1,660 and 1,650 respectively, while the resistances are at 1,680 and 1,700 points respectively.  There is also little reprieve for the lower liners and broader market shares as their outlook is also looking dicey over the near term, dampened by the still low following and the insipid market conditions is likely to send more market players to the sidelines.

COMPANY BRIEF

• Malaysia Airports Holdings Bhd (MAHB) has halted the plan to dispose of its 11.0% equity stake in GMR Hyderabad International Airport Ltd (GHIAL) to GMR Airports Ltd, as the contract was automatically terminated after the purchaser failed to complete its obligation in accordance with the terms of the agreement by 31st December 2018. GMR is the biggest shareholder of GHIAL with a 63.0% stake, followed by Airports Authority of India (13.0%), Telangana state government (13.0%) and MAHB (11.0%). (The Edge Daily)

• Reach Energy Bhd has begun drilling activities at the Kariman 15 (K-15) vertical exploration well at its Emir-Oil concession block in Kazakhstan. The group is targeting an identified highly graded hydrocarbon trap in close proximity to the northwest flank of the Kariman field and the well could potentially confirm a larger extent of the hydrocarbon resources that can be exploited in the Kariman field. (The Edge Daily)

• MQ Technology Bhd has aborted plans to collaborate with Cambodian Resort And Entertainment Co Ltd (CRE) on the development and management of a Jurassic Theme Park in Cambodia. The Memorandum of Agreement (MoA) signed with CRE on 12th December 2016 and subsequently extended to 2th January, 2019, has lapsed. (The Edge Daily)  MyEG Services Bhd‘s unit, MyEG Alternative Payment Services Sdn Bhd, has received a Letter of No Objection from Bank Negara Malaysia to the launch of its iPayEasy e-wallet. iPayEasy will be launched in the 2QFY19. To recap, MyEG obtained BNM’s approval for the issuance of electronic money via iPayEasy with a maximum wallet limit of RM1,500 per customer in January last year. (The Edge Daily)

• Rubberex Corp (M) Bhd is planning to sell its manufacturing operations in China for HK$135.0 mln (RM71.6 mln). The sale proceeds will partly be used to repay borrowings, amounting to HK$49.7 mln as at 30th September 2018. Meanwhile, RM20.9 mln has been earmarked for the expansion and automation of its production lines of nitrile disposable gloves at the group's existing production facilities in Ipoh, Perak. (The Edge Daily)

• XingHe Holdings Bhd has proposed to acquire a prawn farm in Tawau, Sabah, along with related facilities and assets, for RM100.0 mln. The proposed acquisition includes a piece of land measuring 97.9 ha. with a 99-year lease period from 1st January 1990 to 31st December, 2088, amounting to RM12.5 mln. Meanwhile, all ponds, other land improvements, buildings, plant and machinery, equipment, motor vehicles, livestock and consumables will cost RM87.5 mln. (The Star Online)

• UMW Holdings Bhd has commenced the voluntary winding up of four of its subsidiaries under the unlisted oil and gas segment as part of its planned strategic exit. The subsidiaries that have begun liquidation are UMW Coating Technologies (Tianjin) Co Ltd, PFP (Shenzhen) Piping Materials Co Ltd, UMW China Ventures (L) Ltd and UMW Offshore Investment (L) Ltd. (The Star Online)  

Source: Mplus Research - 3 Jan 2019