Mild Rebound Seen

• The FBM KLCI (-0.9%) took another beating, dragged down by selling pressure in selected banking and glovemaker heavyweights as the key index bucked the positive momentum across the region. The lower liners – the FBM Small Cap (-0.7%), FBM Fledgling (- 0.4%) and FBM ACE (-0.2%) all erased their intraday gains to close in the red, while the REIT sector (+0.4%) outperformed the negative broader market.

• Expectedly, market breadth was negative as losers hammered winners on a ratio of 638-to-226 stocks. Traded volumes fell 2.8% to 2.54 bln shares, pressured by the negative market sentiment.

• More than two-thirds of the key index constituents closed in the red, dragged down by Petronas Dagangan (-34.0 sen), followed by Public Bank (-30.0 sen), Hartalega (-24.0 sen), Hong Leong Financial Group (-20.0 sen) and Hong Leong Bank (-18.0 sen). Among the biggest decliners on the broader market include Aeon Credit (-32.0 sen), Dutch Lady (-30.0 sen), Amtek Holdings (-25.0 sen), BAT (-24.0 sen) and Chin Teck Plantations (-20.0 sen).

• In contrast, notable advancers on the broader market were Batu Kawan (+12.0 sen), Computer Forms (+10.0 sen), Cahya Mata Sarawak (+8.0 sen) and Panasonic (+6.0 sen). Econpile added 0.5 sen after bagging a contract for piling, pilecap and basement works at Putrajaya. Meanwhile, RHB Bank (+2.0 sen) was the sole winner on the local bourse.

• Asia’s benchmark indices started off the week on a buoyant mood as the Nikkei (+0.5%) snapped a four-day losing streak after recovering all its intraday losses. The Hang Seng Index gained 1.0%, while the Shanghai Composite jumped 1.9% to reclaim its position above the 3,000 psychological level on expectations on further easing monetary policy by the People Bank of China. ASEAN stockmarkets, meanwhile, closed mostly higher yesterday.

• U.S. stockmarkets staged a sharp recovery as the Dow jumped 0.8%, snapping a five-day losing streak, led by the rally in technology shares that offset the sharp decline in Boeing after one of its 737 Max 8 planes crashed. On the broader market, the S&P 500 climbed 1.5% with all eleven major sectors in the positive, led by the technology stocks (+2.2%), while the Nasdaq surged 2.0%.

• Earlier, European equities – the FTSE (+0.4%), CAC (+0.7%) and DAX (+0.8%), all advanced, led by banking stocks like Deutsche Bank AG (+5.1%) and Commerzbank AG (+7.7%). In the meantime, U.K. Prime Minister Theresa May secured some concessions from the European Commission to her Brexit plans.

The Day Ahead

• Although we expected Malaysian stocks to be pressured by fresh selling yesterday, the selldown was more pronounced-than-expected that saw the key index breaching the 1,670 support to sit close to the 1,660 support.

• After yesterday’s steep fall, however, we think that it may have been overdone and a rebound is in the offing. As it is, overseas stocks found some support after their weakness streak that should also permeate to Malaysian stocks as well, in our view. Still, it remains to be seen as to the strength of the rebound as market sentiments are still mostly dour. Therefore, we think the rebound could be mild for now with the 1,670 level now the near term resistance, followed by the 1,678 level. Apart from the 1,660 support, the other is at 1,650.

• The FBM Small Cap, Fledgling and ACE market stocks are undergoing their sideway consolidation spell that looks to continue for now as there are still few fresh catalyst to steer the stocks into another direction.

COMPANY BRIEF

• AirAsia Group Bhd has revised its sale and purchase agreement for its RM3.12 bln aircraft sale to Castlelake LP to include the share sale of five Merah Aviation entities for US$1.00.

• The revised deal would see Castlelake L.P.-controlled entities - AS Air Lease Holdings 5T DAC and AS Air Lease 8 (Offshore) LP acquiring 100.0%- ownership of five Merah Aviation entities, with the previous SPA only involving just one Merah Aviation entity. The aircraft will be transferred to Merah Aviation before being sold to the Castlelake L.P. entities.

• Alam Maritim Resources Bhd was awarded a four-year contract worth RM40.0 mln to provide underwater inspection services for Carigali Hess Operating Co Sdn Bhd facilities.

• The contract from Carigali Hess involves the inspection of Carigali Hess Jackets, pipelines and floating storage and offloading unit (FSO) with the contract set to last from 5th September2018 until 4th September 2022, with an option of a one-year extension. (The Edge Daily)

• Practice Note 17 (PN17) company APFT Bhd has received a letter from four of its shareholders that hold an 11.3% equity stake in the group to hold an Extraordinary General Meeting (EGM) to remove and replace the group’s current directors Laxmi Devi Murugan, Logonathan Vadivelu and Datuk Mohd Ismail Hamdan, while proposing the appointment of a new Executive Director in the form of Siva Kumar Kalugasalam. (The Star Online)

• KNM Group Bhd has launched an arbitration case against Lukoil Uzbekistan Operating Company LLC for over US$96.0 mln in unpaid works it carried out as a contractor in gascondensate fields in Uzbekistan since 3th December 2010.

• The group is seeking claims and damages in relation to unpaid invoices for work done, costs arising from the breach of contract, costs from design changes, additional works, prolongation of the contract and financial losses. (The Edge Daily)

• Malaysia Pacific Corp Bhd plans to dispose of its Wisma MPL building in Jalan Raja Chulan for RM189.0 mln to Asia New Venture Capital Holdings Sdn Bhd in order to settle its RM148.5 mln debt with RHB Bank Bhd, with the debt being a redemption sum for the land the building occupies. (The Edge Daily)

• Zelan Bhd has initiated arbitration proceedings against NRY Architects for as much as RM305.4 mln over the latter’s breach of contract over the construction of buildings for the International Islamic University Malaysia (IIUM) in Kuantan. Zelan is also claiming a refund on the value of cost savings for deviation items amounting to RM6.0 mln, as well as a declaration from NRY that it had failed to carry out its contractual obligations.

• Furthermore, it is also claiming for the loss of income stemming from availability charges, asset management services charges and compounding interest charges from financial institutions of some RM261.1 mln and general damages and liquidated damages, both to be determined by the tribunal, as well as all costs of the arbitration. (The Edge Daily)  

Source: Mplus Research - 12 Mar 2019