To Spring Higher

• The FBM KLCI (-0.4%) erased some of its previous session’s gains, spooked by the renewed volatility on Wall Street overnight, coupled with the weak Chinese economic data. Consequently, the local bourse slipped 1.3% W.o.W. The lower liners – the FBM Small Cap (+1.1%), FBM Fledgling (+1.4%) and FBM ACE (+0.7%), however, all advanced while the broader market finished mostly higher.

• Market breadth turned positive as advancers edged decliners on a ratio of 492-to-349 stocks. Traded volumes rose 25.2% to 2.20 bln share, boosted by the still positive market sentiment.

• More than half of the FBM KLCI constituents fell, dragged down by Nestle (-RM2.20), followed by Tenaga (-30.0 sen), Malaysia Airport Holdings (-23.0 sen), Petronas Gas (-16.0 sen) and IOI Corporation (-11.0 sen). Notable decliners on the broader market were consumer products stocks like Fraser & Neave (-56.0 sen), Carlsberg (-28.0 sen), BAT (-322.0 sen) and Ajinomoto (-20.0 sen), while Pentamaster slipped 17.0 sen.

• In contrast, the biggest gainers on the broader market include Dutch Lady (+28.0 sen), Petron Malaysia (+27.0 sen), Heng Yuan (+26.0 sen), Time dotCom (+25.0 sen) and Padini (+18.0 sen). Meanwhile, Hong Leong Financial Group (+24.0 sen), Petronas Dagangan (+14.0 sen), KLK (+12.0 sen), IHH (+10.0 sen) and Sime Darby Plantation (+9.0 sen) topped the key index’s winners list.

• Asia benchmark indices finished mixed as the Nikkei slipped 2.3% on its first trading day of 2019. The Shanghai Composite, however, jumped 2.1% to reclaim the 2,500 psychological level on positive developments over trade talks with U.S., while the Hang Seng Index surged 2.2%. ASEAN stockmarkets, meanwhile, finished mostly higher last Friday.

• Wall Street was powered higher as the Dow jumped 3.3% to recover all its previous session losses, boosted by strong employment data, coupled with U.S. Federal Reserve Chairman Jerome Powell’s dovish remarks on the pace of U.S. interest rate hike. On the broader market, the S&P 500 jumped 3.4% with all eleven major sectors in the positive territory, while the Nasdaq soared 4.3%.

• Earlier, major European indices – the FTSE (+2.2%), CAC (+2.7%) and DAX (+3.4%) all finished recovered their previous session losses. Market sentiment was lifted by the expectation over the potential positive development on trade talks between U.S. and China. On the flipside, Eurozone’s Markit Composite in December 2018 fell to 51.1, from 52.7 recorded in November 2018.

The Day Ahead

• The volatility on Bursa Malaysia looks to continue with stocks now expected to head higher after Wall Street posted strong gains at the end of last week. The performance of the overseas markets will help to induce some fresh buying as funds and retail players take advantage of the positivity to pick-up some beaten down industry leaders.

• We also see the gains to be broad-based after the previous quarter’s steep losses have seen many stocks taking a beating, particularly among the small caps that have resulted in the FBM Small Cap index’s valuation dipping to 8.0x and 7.0x for 2019 and 2020 respectively, which are well below its 10-year average of 20x.

• Therefore, there are still ample bargain hunting opportunities on the lower liners and broader market shares after they have fallen significantly over the past year which we believe is already overdone.

• Meanwhile, the upsides among the heavyweights could see the key index taking a fresh stab at the 1,680 level and if it is cleared, the 1,690 level will be the next resistance. The supports, meanwhile, are at 1,666 and 1,660 respectively.

COMPANY BRIEF

• Malaysia Airports Holdings Bhd (MAHB) has appointed Raja Azmi Raja Nazuddin, who was serving as the Acting Group Chief Executive Officer (CEO) since 23th June 2018, as the group’s CEO for a three-year tenure. To recap, Raja Azmi took over the role following the retirement of Datuk Mohd Badlisham Ghazali from MAHB last year. (The Star Online)

• LBS Bina Group Bhd aims to achieve a new property sales target at RM1.5 bln in 2019 despite the sluggish property market due to tighter banking regulations and higher housing loan application rejections at a rate of 50% or more. As it is, the mortgage loan rejection rate stood at 50% in 2018 and 45% in 2017.

• Moving forward, LBS will focus on selling projects priced around RM300,000 for the next five years, noting that properties in this price range have always been well received and can help tackle the high rejection rate on housing loan applications. (The Star Online)

• Loss-making group Spring Gallery Bhd has announced the resignation of its CEO, Datuk Lim Chaing Cheah in a bid to focus on ceramic business at the subsidiary level, although a replacement was not named.

• The ceramics and pottery products manufacturer has also appointed Rasydan Alias Mohamed as an Independent Non-Executive Director, replacing Amirul Azhar Baharom, who has also resigned. (The Edge Daily)

• PUC Bhd's unit, Wealth Pursuit Sdn Bhd has entered into a Memorandum of Understanding (MoU) with Yayasan Pekerja Malaysia (YAPEM) to provide micro financing to YAPEM members. The MoU comes on the heels of the company’s proposed takeover of Pictureworks Holdings Sdn Bhd, which specialises in imagery capture and distribution platforms, for RM168.0 mln through a share plus cash deal.

• YAPEM is expected to facilitate all operations to implement the deduction of salary program to manage its respective members’ repayment of the micro financing to its financial services arm, Wealth Pursuit. (The Edge Daily)

• Ho Wah Genting Bhd has proposed a private placement of up to 34.2 mln new shares to third party investors to raise funds for working capital and pare borrowings. The proposed exercise may be implemented in one or more tranches within six months, from the date of Bursa's approval or any extended period approved by Bursa.

• The issue price of each tranche of the placement shares will be determined separately and announced at a later date. (The Edge Daily)  

Source: Mplus Research - 7 Jan 2019