Cautious Trend Persisting

• Despite opening higher at the start of the trading bell, the FBM KLCI (-0.3%) extended its losses after tumbling into the negative territory in the eleventh hour of the trading session yesterday and consequently underperformed its regional peers that basked in the positive territory. The lower liners – the FBM Small Cap (+2.5%), FBM Fledgling (+1.5%) and FBM ACE (+2.2%), however, all advanced sharply higher, while the broader market closed mostly higher.

• Expectedly, market breadth turned positive as advancers overpowered decliners on a ratio of 678-to-258 stocks. Traded volumes rose 20.6% to 3.02 bln shares as trading interest were centered towards the lower liners.

• KLK (-50.0 sen) topped the FBM KLCI decliners list, followed by Petronas Chemicals (-44.0 sen), Maxis (-18.0 sen), MISC (-18.0 sen) and Top Glove (-18.0 sen). Among the biggest losers on the broader market include Kossan Rubber (- 24.0 sen), Petron Malaysia (-15.0 sen), Genting Plantations (-13.0 sen), Pintaras Jaya (-12.0 sen) and Westports (-11.0 sen).

• Meanwhile, Gamuda (+29.0 sen), SAM Engineering & Equipment (+28.0 sen), Lysaght Galvanized (+21.0 sen), Carlsberg (+16.0 sen) and Chin Teck Plantations (+15.0 sen) led the broader market gainers list. Key winners on the key index were Nestle (+30.0 sen), Malaysia Airport Holdings (+22.0 sen), Sime Darby Plantation (+9.0 sen), Genting (+10.0 sen) and PPB Group (+10.0 sen).

• Asia benchmark indices rallied on Wednesday, boosted by optimism over U.S. President Donald Trump remarks over the recently concluded trade talks with China. The Nikkei (+1.1%) extended its gains, while the Hang Seng Index jumped 2.3% to close above the 26,000 psychological level. The Shanghai Composite (+0.7%) recovered all its previous session losses. ASEAN stockmarkets, meanwhile, closed higher yesterday.

• U.S. stockmarkets recorded their fourth straight session of gains as the Dow climbed 0.4%, lifted by the optimism over the three-day trade talks with China. On the broader market, the S&P 500 also added 0.4%, while the Nasdaq finished 0.9% higher.

• Earlier, major European indices – the FTSE (+0.7%), CAC (+0.8%) and DAX (+0.8%) all extended their gains as investors continue to monitor for further leads from the trade talks between U.S. and China. Despite that, Germany’s exports data in November 2018 fell 0.4% M.o.M, underscoring fears that trade tensions will curb the growth of Eurozone’s largest economy.

The Day Ahead

• It was yet another meek showing among the index heavyweights yesterday as the FBM KLCI remained disconnect from the global equity uprising that was buoyed by the optimism of a trade deal between the U.S. and China.

• With confidence still wearing thin, we see another session of volatile trade among the index heavyweights with the downside bias still in play. As it is, concerns over ratings downgrade among FBM KLCI component stocks could continue to weigh on sentiments. At the same time, overseas stockmarkets are also becoming cautious after their recent gains that could also leave Malaysian stocks on a tentative mode for longer. With the downside bias still prevailing, we think the key index could veer towards the 1,660 level, before the 1,650 level comes into play. On the upside, the resistances are at 1,670 and 1,680 respectively.

• Meanwhile, the lower liners and broader market shares are on a purple patch as confidence is retuning among retail players that looks to continue over the near term. However, we also see quick profit taking activities punctuating the gains and increasing the volatility, albeit we think there will still be mild upsides as the rotational plays persist.

COMPANY BRIEF

• Ancom Bhd and Nylex Bhd expect their business operations to remain unaffected by the four-day remand of the Executive Chairman of Ancom and the Group Managing Director of Nylex,Datuk Siew Ka Wei by the Malaysian Anti-Corruption Commission. Datuk Siew is also a substantial shareholder in both companies.

• Datuk Siew is being remanded over an alleged abuse of power involving a government contract worth more than RM99.0 mln, which took place during his tenure as chairman of Tourism Board of Malaysia. (The Star Online)

• WCT Holdings and China-based China Communications and Construction Group (CCCG), will jointly-develop the first residential project located at the Tun Razak Exchange (TRX) with an estimated gross development value (GDV) of RM1.1 bln. The 20:80 joint-venture (JV) company, CORE Precious Development Sdn Bhd officially held the groundbreaking ceremony on 9th January 2019. The JV is also is the progress of tendering the project to a main contractor.  The development will include two serviced residence towers and one serviced apartment tower and is scheduled to be completed around the end of 2022. (The Edge Daily)

• AirAsia Group Bhd has aborted its initial plans to lease five of the aircraft to third party airlines with an enterprise value of US$173.7 mln amid efforts of divesting its aircraft leasing business to entities managed by BBAM Ltd Partnership. However, the transfers of the other aircraft and aircraft engines to BBAM units comprising FLY SPA, Incline B SPA and Herondell SPA are already completed.

• Separately, AirAsia’s cargo and logistics arm, RedCargo Logistics Sdn Bhd, has secured its first direct partner, Tasco Bhd - an NYK Group company providing global freight forwarding services. (The Edge Daily)

• SEB Upstream Sdn Bhd (SUP), a partnership between Sapura Energy Bhd and OMV Aktiengesellschaft (OMV AG), is planning to obtain financing facilities from local and foreign financial institutions and/or its Austrian partner for funds between US$350.0 mln (RM1.46 bln) and US$550.0 mln (RM2.29 bln) to repay part of its debt and for working capital.

• About US$350.0 mln will be used to partially repay the amount owing by it to Sapura Energy of US$890.0 mln (RM3.7 bln) and the remainder will be used to fund its working capital. (The Edge Daily)

• Asia Media Group Bhd saw 12.0 mln of its shares (or 5.0% equity stake) traded off market yesterday for a total of RM1.7 mln (or at 14.0 sen a share). The identities of the parties involved in the transaction are unknown.

• However, the group had announced previously that its single largest substantial shareholder, Wong SK Holdings Sdn Bhd, a private vehicle of Asia Media's founder-cum-Chief Executive Officer (CEO) Datuk Wong Shee Kai, had disposed of 12.0 mln shares in an off-market transaction on 20th December, 2019. Consequently, the sale reduced Wong's shareholding in Asia Media to 14.6%, from the 27.2% equity stake he held as at 2nd April, 2018. (The Edge Daily)  

Source: Mplus Research - 10 Jan 2019