Toppish Again

• Tracking the upbeat performance in the regional stockmarkets, the FBM KLCI (+0.8%) also posted gains as investors continue to monitor the U.S.-China trade relationship. All the lower liners rallied except the FBM Ace (-0.7%), while eleven-of-twelve sub-sectors closed positively on Wednesday.

• Market breadth also recovered as advancers overturned the decliners on a ratio of 474-to-330 stocks, while traded volumes rose 19.3% to 2.42 bln shares, lifted by the prevailing positive sentiments.

• Blue-chip stocks like Malaysia Airports (+58.0 sen), Tenaga Nasional (+28.0 sen), Sime Darby Plantation (+18.0 sen), IOI Corporation (+14.0 sen) and Maxis (+14.0 sen) rallied on Wednesday, together with Heineken Malaysia (+26.0 sen), Atlan (+22.0 sen), BAT (+20.0 sen), Allianz (+16.0 sen) and MB World Group (+13.0 sen).

• On the losers end, Bintulu Port (-23.0 sen), Southern Acids (-16.0 sen), Manulife (-13.0 sen) and Vitrox (-12.0 sen) retreated. Lafarge Malaysia (-11.0 sen) also declined after major cement players in Malaysia agreed not to increase cement prices. Key-index decliners, meanwhile, were banking heavyweights like Hong Leong Bank (- 30.0 sen) and RHB Bank (-9.0 sen), alongside MISC (-5.0 sen), Hap Seng Consolidated (-3.0 sen) and Sime Darby (-1.0 sen).

• Asian equities rallied on Wednesday on expectations of potential rate cuts by key global central banks and a temporary ceasefire between Washington and Beijing ahead of the G20 summit next week. The Nikkei (+1.7%) hovers near its six-week high, boosted by Nomura after the investment firm announced its shares buyback plan. The Hang Seng index and the Shanghai Composite also added 2.6% and 1.0% respectively, while most ASEAN stockmarkets advanced.

• Notable U.S. bourses logged gains after the U.S. Federal Reserve left interest rates at it is, albeit adopting a more accommodative stance – opening the way for potential interest rate easing this year. Subsequently, the Dow (+0.2%), the S&P 500 (+0.3%) and the Nasdaq (+0.4%) rallied, mostly supported by extended buying-support in tech stocks, in-tandem with renewed risk appetite.

• Meanwhile, key benchmark European stockmarkets finished mostly lower as investors lock-in gains ahead of the FOMC’s decision on interest rates. The FTSE fell 0.5% amid the prevailing geopolitical uncertainties, while the DAX pulled back slightly. The CAC, however, outperformed its peers and closed with a 0.2% gain.

The Day Ahead

• After making decent headway over the past two sessions, the key index is again in the toppish zone which could limit further gains over the near term, in our view. Already its technical indicators have moved back into the overbought zone and this could see increased profit taking activities. There are resistances at the 1,670 and 1,680 levels, while the supports are located at the 1,654 and 1,650 levels respectively.

• While there has been renewed optimism in the trade dispute between the U.S. and China, coupled with the easing geopolitical concerns, the global economy, and that of the Malaysian economy, are still in a state of flux as the slower growth is still unfolding that could lead to slower corporate earnings growth in its wake. Therefore, we think that the cautious market undertone still prevails and could still dampen the longer term market outlook.

• Although the lower liners and broader market shares made headway yesterday, the near term outlook is still largely indifferent with the lack of catalysts. Consequently, we think that further near term upsides could be tempered by bouts of selling activities as retail players would be quick to lock-in their profits.

COMPANY BRIEF

• Genting Malaysia Bhd’s Chairman and Chief Executive Officer, Tan Sri Lim Kok Thay has announced that he would take a 20% pay cut. With the effect of heavy gaming taxes which have weighed on the group’s financial performance following a weaker set of results last year, Tan Sri Lim’s intended pay cut is expected to help reduce costs.

• Tan Sri Lim is the highest paid CEO, according to the 2019 Corporate Governance Monitor issued by the Securities Commission, where the CEO of Genting Malaysia and Genting Bhd had received a remuneration of RM80.6mln and RM168.0mln respectively. (The Star Online)

• Apex Equity Holdings Bhd has given the green light for the proposed merger between its wholly-owned unit, JF Apex Securities Bhd and Mercury Securities Sdn Bhd. Nonetheless, shareholders seem to be divided in the proposed merger deal, where its resolution was passed with only 54.8% majority, not unanimously. (The Edge Daily)

• Dagang NeXchange Bhd (DNeX) has confirmed that it is in talks to sell its 30% stake in its upstream oil and gas (O&G) associate, Ping Petroleum Ltd.

• The group is confident that it could fetch attractive valuations for the investment given current stronger crude oil prices. (The Edge Daily)

• YTL Corp Bhd’s Executive Chairman, Tan Sri Dr Francis Yeoh is now the Executive Chairman of Lafarge Malaysia Bhd. His appointment effective today comes after Tunku Tan Sri Imran Tuanku Jaafar stepped down as an Independent and Non-Executive Chairman. Lafarge Malaysia also appointed Tan Sri Asmat Kamaludin, Datuk Yoogalingam Vyramuttu and Datuk Tan Guan Cheong as the group’s Independent and NonExecutive directors. (The Edge Daily)  

Source: Mplus Research - 20 Jun 2019