Gradual Upsides, But Choppiness To Return

• Tracking the gains on Wall Street, the FBM KLCI (+0.6%) started off the week on an upbeat note alongside the positive performance across regional indices. The lower liners – the FBM Small Cap (+2.4%), FBM Fledgling (+0.6%) and FBM ACE (+2.3%) all extended their gains, while the Industrial Products & Services (-0.7%) and Healthcare (-0.8%) sectors underperformed the positive broader market.

• Market breadth stayed positive as advancers outnumbered decliners on a ratio of 2-to-1 stocks. Traded volumes gained 13.6% to 2.50 bln shares on rotational play among the lower liners.

• Chart toppers on Monday were Tenaga (+18.0 sen), AmBank (+24.0 sen), Sime Darby Plantation (+20.0 sen), Genting (+13.0 sen) and Maxis (+13.0 sen). Significant advancers on the broader market were KESM Industries (+80.0 sen), Pentamaster (+32.0 sen), Petron Malaysia (+30.0 sen) and Dufu Technology (+20.0 sen). DPI holdings added 2.0 sen on its debut on Bursa Malaysia.

• Fraser & Neave (-48.0 sen) remained as the biggest decliner on the broader market, while BLD Plantation (-43.0 sen), Dutch Lady (-18.0 sen), Manulife Holdings (-15.0 sen) and Batu Kawan (- 14.0 sen) fell. Key losers on the FBM KLCI were Petronas Gas (-42.0 sen), Hartalega (-38.0 sen), Petronas Chemicals (-33.0 sen), Nestle (-30.0 sen) and Top Glove (- 24.0 sen).

• Asia benchmark indices advanced as the Nikkei jumped 2.4%, taking cue from the positive developments on Wall Street last Friday. The Shanghai Composite added 0.7% as investors are monitoring the developments of the two-day trade talks between U.S. and China, while the Hang Seng Index gained 0.8%. ASEAN stockmarkets, meanwhile, finished mostly higher on Monday.

• U.S. stockmarkets extended their gains after recovering all their intraday losses as the Dow gained 0.4%, boosted by the resumption of trade talks with China. On the broader market, the S&P 500 climbed 0.7% anchored by gains in the consumer sector (+2.4%), while the Nasdaq (+1.3%) finished above the 6,800 psychological level.

• Earlier, major European indices – the FTSE (-0.4%), CAC (-0.4%) and DAX (- 0.2%) all reversed some of their previous session’s gains. Market sentiment was hit by concerns over slowing global economic growth, Brexit’s vote by the members of the Parliament on 15th January 2019 and the partial U.S. government shutdown.

The Day Ahead

• Expectedly, stocks on Bursa Malaysia gained ground yesterday amid an improved market undertone that has provided some reprieve to equity markets after they has languished over the past few months. Although equities are not out of the woods yet as sentiments remained strained by the uncertain outcome of the trade negotiations between the U.S. and China, there should be more near term upsides as market players bargain hunt on some of the beaten down industry leaders.

• However, we think the gains may be tempered by bouts of profit taking activities after yesterday’s gains that could increase the market’s choppiness and potentially limiting the upsides. While we think the 1,680 level could be cleared, the 1,690 level could be more formidable to clear over the near term. On the downside, the supports are pegged at 1,665 and 1,660 respectively.

• Stocks on the FBM Small Caps should maintain their long overdue recovery over the short term in tandem with the broadbased positivity among the big caps and global indices. As it is, interest on the lower liners is gradually returning and will help to provide some price support to some of the beaten down stocks.

COMPANY BRIEF

• Sapura Energy Bhd has secured four new contracts and one extension totaling RM760.0 mln, including three drilling contracts and two contracts for the engineering and construction segment in Malaysia and Angola. The breakdown of the value of each contract, however, is not known.

• The contracts were awarded by Chevron Corp, Sarawak Shell Bhd/Sabah Shell Petroleum Company Ltd, Petronas and Hess Exploration and Production Malaysia BV. (The Star Online)

• Microlink Solutions Bhd has accepted a Letter of Award (LoA) from Payments Network Malaysia Sdn Bhd (PayNet) for the supply and implementation of a RealTime Electronic Transfer of Funds and Securities System (Rentas) platform replacement for RM27.4 mln. The contract also includes five years of support and maintenance. Bank Negara Malaysia is PayNet's single largest shareholder with joint-shareholders comprising other commercial and Islamic banks. (The Edge Daily)

• Once again, JAKS Resources Bhd has failed to obtain the court's permission to appeal against the release of a RM50.0 mln bank guarantee to Star Media Group Bhd. It plans to seek legal advice on the next course of action. The matter relates to a tower project awarded by Star Media to JAKS' 51.0%-owned unit, JAKS Island Circle Sdn Bhd. To recap, JAKS lost its first suit in July 2018 and has also failed in several subsequent attempts at the Court of Appeal and now at the Federal Court. (The Edge Daily)

• Destini Bhd’s unit has secured a further three-year extension from the Home Affairs Ministry to maintain, repair and overhaul safety and survival equipment for the Royal Malaysian Police's Air Operation Force. The contract's ceiling value is capped at RM10.0 mln and the contract is valid until 29th November 2021. (The Edge Daily)

• Lion Industries Corp Bhd is planning to sell its entire 50.0% equity stake in Singapore-based Angkasa Amsteel Pte Ltd to South Korean steel manufacturer Daehan Steel Co Ltd for S$26.7 mln (RM80.9 mln), to raise funds for its flat steel business venture which requires approximately RM636.0 mln.

• The proposed disposal of its non-core assets is not expected to result in any gain or loss. The deal is expected to be completed by 1Q2019. (The Edge Daily)

• KKB Engineering Bhd has signed a Letter of Acceptance from Petroliam Nasional Bhd that will allow it to bid for contract work involving the provision of engineering, procurement and construction of fixed offshore structure works. The contract is effective from 12th December 2018 and will continue for a period of six years. (The Star Online)  

Source: Mplus Research - 8 Jan 2019