Still Looking Insipid

• The FBM KLCI (-0.3%) was painted red, in-tandem with the global weakness and sluggish Chinese industrial data, fuelling concerns of slower economic growth and weaker demand amid the ongoing U.S.-China trade conflicts. The lower liners also closed mostly lower as the FBM Fledgling and FBM ACE declined 0.02% and 0.6% respectively. The broader market, meanwhile, finished on a mixed note.

• Market breadth was negative as decliners outpaced the advancers on a ratio of 498-to-288 stocks. Traded volumes tanked 14.3% to 1.75 bln shares amid the prevailing negative sentiment.

• On the downside, heavyweights like Nestle (-RM1.00), Public Bank (-30.0 sen), Petronas Gas (-16.0 sen), Tenaga (-14.0 sen) and Hong Leong Bank (-10.0 sen) retreated. Broader market losers were BAT (-76.0 sen), Carlsberg (-28.0 sen), Lafarge Malaysia (-26.0 sen), Heineken Malaysia (-20.0 sen) and Atlan Holdings (-19.0 sen).

• In contrast, United Plantations (+50.0 sen), Apex Healthcare (+25.0 sen), Shangri-La Hotels (+16.0 sen), Boustead Heavy Industries (+12.0 sen) and KESM Industries (+10.0 sen) were the main broad market gainers. Key-index advancers include Malaysia Airports (+25.0 sen), Hap Seng Consolidated (+15.0 sen), PPB Group (+6.0 sen), Hartalega (+5.0 sen) and Maxis (+5.0 sen).

• Key regional benchmark bourses extended their losses ahead of key economic data from China and rising crude oil prices. The Nikkei recovered some of losses on Friday, propped up by energy-linked stocks amid heightened U.S.-Iran tensions following the attacks on two tanker ships. The Hang Seng Index (-0.7%) and the Shanghai Composite (-1.0%), however, ended on a weak note, alongside the majority of ASEAN stockmarkets.

• U.S. stockmarkets closed mostly lower last Friday, albeit slightly offset by stronger-than-expected retail data. The Dow (-0.1%) and the S&P 500 (-0.2%) retraced in the eleventh hour, ahead of the FOMC meeting next week. Meanwhile, the Nasdaq weakened 0.5% after downbeat results from Broadcom triggered a selldown in the tech-sector amid concerns of slowing demand.

• Key European benchmark indices were mostly in the red, weighed down by weakness in tech-stocks and uncertainties in the global landscape amid the ongoing tensions in the Middle East. The FTSE fell 0.3% as investors digested the latest political developments, while the DAX and the CAC closed 0.6% and 0.2% lower following weak Chinese industrial data.

The Day Ahead

• Market conditions on Bursa Malaysia are staying insipid in the absence of new catalysts and still toppish conditions on the FBM KLCI that could leave sentiments on the wayside again. As it is, concerns are still abound over the state of the global economy as the U.S-China trade dispute lingers.

• After making headway for the past few weeks, the FBM KLCI remains toppish with valuations veering to the upper range of its historical forward valuations. We think that further upsides will be more difficult to attain unless there are further improvements in corporate earnings. There has been some upward revision to the year’s corporate earnings growth prospects, but it has already been reflected in the recent runup.

• Hence, we think that the key index could continue to drift with the downside bias still very much the prevailing trend. On the downside, there supports are now at 1,635 and 1,630 respectively. The resistances, meanwhile, are 1,640 and 1,650 respectively.

• The tide is also turning on the lower liners and broader market shares with early signs of weakness appearing after their recent uptrend. Therefore, we think that profit taking activities may escalate as there are fewer available catalysts to lift market sentiments for now, in our view.

COMPANY BRIEF

• Eco World Development Group Bhd (EcoWorld Malaysia) will form a partnership with China’s state-owned construction company, PowerChina Group to jointly develop 117.4 ac. of industrial land. The land, located at Puncak Alam, Shah Alam has an estimated gross development value of RM850.0 mln and the project will be named Eco Business Park V, Phase 2.

• The partnership will be carried out through a conditional joint venture that will see the formation of the JV company, Eco World PowerChina Business Park Sdn Bhd. Eco World PowerChina will be 60.0% owned by PowerChina and 40.0% owned by EcoWorld Malaysia. (The Star Online)

• UEM Sunrise Bhd aims to downsize its Desaru, Johor, residential and beach development to 228.0 ac., from 680.0 ac. in order to conserve cash and limit exposure. This means that the price of the land is now reduced to RM120.8 mln from RM485.3 mln. The development will be undertaken by joint venture company, Desaru North Course Residences Sdn Bhd (DNCR), which is one of the three JV companies owned by the group and Khazanah-owned Themed Attractions Resort & Hotels Sdn Bhd (TAR&H). The excess RM73.4 mln paid to TAR&H will be refunded to DNCR as the group has paid RM194.1 mln to date. (The Edge Daily)

• Sino Hua-An International Bhd will issue RM150.0 mln in Redeemable Convertible Medium-term Notes to fund business expansion measures. Advance Opportunities Fund, where Tan Choon Wee is principal shareholder and sole director will subscribe to the notes. The notes will be doled out in three tranches with all three containing RM50.0 mln in notes.

• The notes are to mature within the first 36 months from the closing date of the first sub-tranche of the note’s first trance. (The Edge Daily)

• Straits Inter Logistics Bhd’s unit acquired a 14-year-old oil tanker for US$4.7 mln (RM19.6 mln). The acquisition of the ship is at a discount to its current market value and is seen to enlarge its asset base. The unit will pay for the ship in 61 monthly cash instalments from 14th June 2019 onwards, with the unit placing a US$900,000 cash deposit as part of the acquisition. (The Edge Daily)

• Perisai Petroleum Teknologi Bhd’s 51.0%- owned unit, Perisai Offshore Sdn Bhd won a US$20.0 mln (RM83.9 mln) deal from Petronas Carigali Sdn Bhd. The contract is in relation to the high specification jack-up rig — which is capable of operating in a water depth of 400 ft. with a drilling depth capability of 30,000 ft. for Petronas Samarang drilling campaign. The contract is from August 2019 and September 2019, with five wells to be completed in 200 days. (The Edge Daily)  

Source: Mplus Research - 17 Jun 2019