Dour Trend Returns

• The FBM KLCI (+0.5%) staged a mild recovery from its previous session’s selloff, taking cue from the positive developments on Wall Street overnight. The lower liners, however, edged mostly lower as the FBM Small Cap and FBM ACE fell 0.1% and 0.6% respectively. The technology sector (-4.4%) sector took a heavy beating and was the sole decliner on the broader market after Apple Inc slashed its revenue guidance.

• Market breadth was fairly even with decliners and advancers on a ratio of 367-to-366 stocks. Traded volumes rose 4.6% to 1.76 bln shares on rotational play among the lower liners.

• Key winners on FBM KLCI were Nestle (+80.0 sen), Hong Leong Financial Group (+58.0 sen), Tenaga (+32.0 sen), Hong Leong Bank (+20.0 sen) and Sime Darby Plantation (+16.0 sen). Notable gainers on the broader market were Fraser & Neave (+68.0 sen), United Plantations (+26.0 sen), Kluang Rubber (+22.0 sen), Apex Healthcare (+20.0 sen) and Carlsberg (+18.0 sen).

• In contrast, consumer product stocks like Dutch Lady (-80.0 sen), Ajinomoto (-54.0 sen), Heineken (-34.0 sen) and BAT (-22.0 sen) sank, while Dufu technology slumped 36.0 sen to close at its lowest level since September 2018. Meanwhile, Petronas Dagangan (-24.0 sen), Press Metal (-20.0 sen), Malaysia Airport Holdings (-8.0 sen), Public Bank (-6.0 sen) and Genting (-4.0 sen) were the FBM KLCI’s biggest decliners.

• Asia benchmark indices remain downbeat as the Hang Seng Index (-0.4%) slipped into the negative territory in the final trading hour, while the Shanghai Composite edged 0.04% lower as investors monitored closely the ongoing trade talks with U.S. Japanese stockmarket remain closed, while ASEAN stockmarkets finished mostly lower yesterday.

• Wall Street was rocked by unabated volatility as the Dow sank 2.8% after Apple Inc. slashed its sales outlook, citing concern over slowing demand from China. On the broader market, the S&P 500 slumped 2.4% with the technology sector (-5.1%) experienced one of its worst daily selloff, while the Nasdaq tumbled 3.0%.

• Earlier, major European indices – the FTSE (-0.6%), CAC (-1.7%) and DAX (- 1.6%) all finished lower, taking cue from the negative sentiment on Wall Street. Notable decliners were Apple suppliers like AMS AG (-23.2%) and ST Microelectronics (-11.7%).

The Day Ahead

• Although the key index managed to head higher yesterday, the gains looks to be shortlived as the dour trend looks to return after another yet another rout in global equity markets that is likely to extend to Malaysian stocks.

• As it is, the buying interest is still broadly selective while the broader market environment remains mixed as the market following was still largely tepid. The market is also still inundated by negative news with the latest being Apple Inc warning of slower sales ahead as the trade war bites further. Back home, the manufacturing sector is also similarly affected as demand is faltering. With the downside bias returning, the key index could retrace back to the 1,670 level. If the level fails to hold, the next support is at 1,660. The resistances are at 1,680 and 1,700 respectively.

• We also think that the lower liners and broader market shares will endure another session of volatility in tandem with the renewed concerns over corporate earnings growth amid a potential slowdown in economic activities.

COMPANY BRIEF

• UMW Holdings Bhd has commenced the liquidation for three additional subsidiaries under the unlisted oil and gas (O&G) segment on 3th January 2018, in a bid to focus on the group's core businesses.

• The three subsidiaries are UMW Oil & Gas Bhd, Arabian Drilling Services LLC and UMW Middle East Ventures Holdings WLL. The exercise is in line with UMW's strategic plan to exit from its investments in the O&G segment, in which it is well underway to conclude a complete exit from the sector. (The Edge Daily)

• Star Media Group Bhd is establishing a temporary special committee, comprising of three non-executive directors to oversee the operations of the company, following the retirement of its group Managing Director (MD) and Chief Executive Officer (CEO) Datuk Seri Wong Chun Wai. The group has identified the replacement for the CEO position, but will only make the announcement in due course.

• In the meantime, the operations of the group will be supervised by the temporary special committee consisting of Datuk Fu Ah Kiow, Datuk Dr Mohd Aminuddin Mohd Rouse and Chan Seng Fatt. (The Edge Daily)

• Ecobuilt Holdings Bhd (formerly known as M-Mode Bhd) has clinched a contract worth RM202.5 mln to build two affordable apartment blocks housing 1,320 units in Kampung Muhibbah, Bukit OUG. The contract was awarded by Vistarena Development Sdn Bhd and the project is expected to be completed by 3th July 2021. (The Edge Daily)

• Unisem (M) Bhd will submit an application to Bursa Malaysia to seek an extension of time to comply with the 25.0% public spread requirement, which has fallen below the threshold due to a recent takeover of the company. (The Edge Daily)

• As at 31st December 2018, the jointofferors of the takeover owned 546.9 mln Unisem shares (or 75.2% issued share capital). Correspondingly, the public shareholding spread was around 22.7%. To rectify the situation, the joint-offerors will acquire Tianshui Huatian Electronics Group Co Ltd via Huatian Electronics Group (HK) Ltd (HT Hong Kong) and Tianshui Huatian Technology Co Ltd (TSHT) via Huatian Technology (Malaysia) Sdn Bhd (HT Malaysia), to comply with the requirement. (The Edge Daily)

• Kejuruteraan Asastera Bhd (KAB) is planning to raise RM7.1 mln from a proposed special issue of up to 34.0 mln new ordinary shares in the company to Bumiputera investors. Most of the proceeds from the exercise will be used to fund potential acquisitions and investments in businesses and assets that can help drive it’s electrical and mechanical engineering services further. (The Edge Daily)

• Ahmad Zaki Resources Bhd (AZRB) has agreed to continue providing marine high speed diesel bunkering services to vessels belonging to Petronas Dagangan Bhd customers at Kemaman Port in Terengganu. With the new agreement, the group will continue its bunkering activities at the Kemaman Supply Base for five years until 31st DDecembe 2023. (The Edge Daily)

• AMMB Holdings Bhd (AmBank Group) is selling off AmBank (M) Bhd's and AmBank Islamic Bhd's non-performing loans (NPLs) totalling RM553.9 mln to Aiqon special purpose vehicles (SPVs). The group has obtained approval from Bank Negara Malaysia for the proposa and will dispose RM428.1 mln and RM125.8 mln worth of NPLs from AmBank and AmBank Islamic respectively.

• The proposed disposal is in-line with the debt recovery strategy of AmBank and AmBank Islamic to strengthen their respective loan/ financing management, resolution processes and to monetise the portfolio. (The Edge Daily)

• S P Setia Bhd has announced the resignation Tan Sri Dr Wan Mohd Zahid Mohd Noordin from his position as a NonIndependent and Non-Executive Chairman after serving the group for almost a decade. The reason for his resignation was to pursue other interests. (The Star Online)

• He is succeeded by Tan Sri Syed Zainol Anwar Ibni Syed Putra Jamalullail who is also the Chairman of Nestle (Malaysia) Bhd, Malaysia Airports Holdings Bhd and Lembaga Zakat Selangor, besides being the chancellor of SEGi University. (The Edge Daily)

• United Malacca Bhd has inked three agreements to dispose of several pieces of plantation land in Melaka and Negeri Sembilan with an aggregate land area of 1,021.06 ha. for RM175.2 mln. The company has signed a conditional sale and purchase agreement with Huat Lai Broiler Breeders Sdn Bhd for the sale of 568.09 h. of land comprising 11 lots in Alor Gajah and 18 lots in Jasin for RM96.8 mln.  Another agreement was entered into with HLRB Broiler Farm Sdn Bhd for the sale of two lots of land totalling 298.91 ha. in Tampin, Negeri Sembilan for RM51.7 mln.

• Lastly, HLRB Processing Sdn Bhd has also proposed to acquire three lots of land with a total land area of 154.06 ha. in Rembau, Negeri Sembilan for RM26.7 mln. (The Star Online)  

Source: Mplus Research - 4 Jan 2019