Toppish Conditions Could Prompt Pullback

• The FBM KLCI clawed back earlier losses and closed higher in the final hour, on the back of extended buying-support in selected heavyweights. The FBM Small Cap, the FBM Fledgling and FBM Ace strengthened by 0.6%, 0.01% and 1.5% respectively, while the broader market was slightly bearish.

• Market breadth remained positive as gainers continued to beat the losers on a ratio of 509-to-398 stocks. Traded volumes, however, inched 3.0% lower to 3.71 bln as investors lock-in profits amid global trade uncertainties.

• Sustained buying-support in Nestle (+40.0 sen), Hong Leong Financial Group (+30.0 sen), Press Metal (+16.0 sen), Petronas Dagangan (+12.0 sen) and Tenaga Nasional (+12.0 sen) propped up the Main Board. Anchoring the gainers list on the broader market were Carlsberg (+RM1.18), BAT (+RM1.12), Dutch Lady (+76.0 sen), United Plantations (+74.0 sen) and Hengyuan Refining (+44.0 sen).

• Among the biggest decliners were Fraser & Neave (-42.0 sen), KLCC (-18.0 sen), Chin Teck Plantations (-15.0 sen), Apollo Food (-13.0 sen) and Perusahaan Sadur Timah (-12.0 sen). Giant gloves manufacturers like Hartalega (-9.0 sen) and Top Glove (-7.0 sen) were among the key-index laggards, alongside IOI Corporation (-15.0 sen), Petronas Chemicals (-10.0 sen) and Public Bank (- 6.0 sen) after the banking heavyweight posted weaker-than-expected quarterly results.

• Japanese stockmarkets eked-out gains as the Nikkei closed mostly flat, weighed down by weak manufacturing data, renewing fears of a widely-expected economic slowdown. The Hang Seng index, however, maintained its upside momentum on hopes of an end to the dragged-out trade war between the U.S. and China, while the Shanghai Composite fell by 0.3%. The majority of the ASEAN stocks ended up at Thursday’s closing bell.

• Wall Street was painted red overnight, ending its consecutive days of wins as investors booked profits ahead of the U.S.’s trade negotiations with China in Washington. The Dow close 0.4% lower, while on the broader market, the S&P 500 (-0.4%) snapped its three-day gains, weighed down by losses in healthcare and energy stocks. The Nasdaq also lost 0.4% to closed slightly below the 7,460 psychological point.

• The majority of the European blue-chip bourses closed higher, with the exception of the FTSE (-0.9%), on the back of disappointing corporate earnings reports and strengthening Pound. The CAC was flattish, while the DAX ended 0.2% higher despite a volatile session.

The Day Ahead

• The intraday bouts of profit taking and the subsequent late afternoon that allowed the key index to make headway yesterday is pointing to an increasingly toppish market environment. As it is, the profit taking spells are already taking shape after the key index’s surge over the past few sessions.

• Going into the final trading day of the week, we think that profit taking activities are likely to escalate, which is deemed healthy as the FBM KLCI’s technical indicators are already overbought. At the same time, the key index’s valuations have also inched closer to the expensive zone and we think that further gains are more difficult to come by as a result. With the downside looming, we see supports at the 1,725 and 1,720 levels coming into play, while the resistances are at 1,733 and 1,736 respectively.

• Similarly, the lower liners are on an extended overbought streak and a consolidation spell is already overdue. We see profit taking activities taking hold over the near term as market players lock in some of their recent gains ahead of the weekend.

COMPANY BRIEF

• AMMB Holdings Bhd's 3QFY19 net profit climbed 59.7% Y.o.Y to RM349.9 mln, boosted by higher lending volume, lower cost base and increase in recoveries. Revenue for the quarter increased 6.5% Y.o.Y to RM2.30 bln.

• For 9MFY19, cumulative net profit rose 18.9% Y.o.Y to RM1.05 bln. Revenue for the period increased 6.6% Y.o.Y to RM6.78 bln. (The Star Online)

• Sime Darby Bhd's 2QFY19 net profit gained 3.9% Y.o.Y to RM317.0 mln due to strong contribution from the group's industrial division. Revenue for the quarter rose 6.9% Y.o.Y to RM9.42 bln.

• For 1HFY19, cumulative net profit fell 66.6% Y.o.Y to RM542.0 mln. Revenue for the period, however, climbed 7.7% Y.o.Y to RM18.30 bln. A first interim dividend of two sen per share, payable on 8th May 2019, was declared. (The Star Online)

• Petron Malaysia Refining & Marketing Bhd’s 4Q2018 net loss stood at RM25.5 mln vs. a net profit RM99.6 mln recorded in the previous corresponding quarter, dragged down by decline in prices of finished products as crude price dropped towards the end of 2018 that resulted in inventory holding losses. Revenue for the quarter, however, rose 2.1% Y.o.Y to RM2.89 bln.  For 2018, cumulative net profit slipped 44.6% Y.o.Y to RM224.5 mln. Revenue for the year, however, gained 16.3% Y.o.Y to RM12.05 bln. (The Star Online)

• AirAsia X Bhd’s (AAX) 4Q2018 net loss stood at RM99.3 mln vs. a net profit of RM84.4 mln recorded in the previous corresponding quarter, dragged down by increase in average fuel prices. Revenue for the quarter dropped 5.9% Y.o.Y to RM1.15 bln.

• For 2018, cumulative net loss stood at RM312.7 mln vs. a net profit of RM98.9 mln in the previous year. Revenue for the year declined 0.4% Y.o.Y to RM4.54 bln. (The Edge Daily)

• British American Tobacco (Malaysia) Bhd’s (BAT) 4Q2018 net profit rose 43.6% Y.o.Y to RM116.4 mln on higher sales. Revenue for the quarter climbed 12.5% Y.o.Y to RM770.6 mln.

• Despite the stronger 4Q2018 results, the full-year net profit fell 4.9% Y.o.Y to RM468.5 mln. Revenue for the year declined 3.2% Y.o.Y to RM2.83 bln. A fourth interim dividend of 47.0 sen per share, payable on 19th March 2019, was declared. (The Edge Daily)

• Pharmaniaga Bhd's 4Q2018 net profit plunged 79.5% Y.o.Y to RM4.4 mln mainly due to lower demand, coupled with higher finance costs. Revenue for the year fell 2.7% Y.o.Y at RM596.6 mln.

• For 2018, cumulative net profit slipped 21.1% Y.o.Y to RM42.5 mln. Revenue for the year, however, rose 2.6% Y.o.Y to RM2.38 bln. It declared a fourth interim dividend of two sen per share to be paid on 10th April 2019. (The Edge Daily)

• Allianz Malaysia Bhd’s 4Q2018 net profit rose 15.3% Y.o.Y to RM100.0 mln, mainly owing to an increase in general insurance contribution. Revenue for the quarter added 7.5% Y.o.Y to RM1.30 bln.

• For 2018, cumulative net profit gained 30.9% Y.o.Y to RM377.0 mln, while revenue climbed 7.9% Y.o.Y to RM5.18 bln. An interim dividend of 40 sen per share plus an interim dividend of 48 sen per irredeemable convertible preference share was declared. (The Edge Daily)  

Source: Mplus Research - 22 Feb 2019