Tracking Higher On Trade Boost

• The FBM KLCI (-0.03%) erased all its intraday gains to close in the red, dragged down by quick profit taking activities in selected index heavyweights ahead of the G-20 meeting. Consequently, the key index fell 0.6% W.o.W. The lower liners – the FBM Small Cap (+0.5%), FBM Fledgling (+0.2%) and FBM ACE (+0.1%), however, all advanced while the broader market ended mixed.

• Market breadth turned negative as decliners overpowered the advancers on a ratio of 413-to-334 stocks. Traded volumes, however, rose 20.7% to 2.22 bln on rotational play amongst the lower liners.

• Key losers on the FBM KLCI were Maxis (-23.0 sen), Public Bank (-16.0 sen), MISC (-5.0 sen), IOI Corporation (-4.0 sen) and Sime Darby (-4.0 sen). Significant decliners on the broader market losers were BAT (-30.0 sen), Heineken Malaysia (-24.0 sen), MPI (- 18.0 sen) and Aeon Credit (-12.0 sen).

• In contrast, Allianz (+20.0 sen), GHL Systems (+18.0 sen), Ajinomoto (+14.0 sen), Sam Engineering (+13.0 sen) and UEM Edgenta (+12.0 sen) rose on the broader market. Gamuda added 4.0 sen after agreeing on the takeover offer of its four toll concessionaires. Petronasrelated companies like Petronas Gas (+26.0 sen), Petronas Chemicals (+2.0 sen) and Petronas Dagangan (+2.0 sen) advanced on the key index, while Tenaga and PBB Group added 16.0 sen and 14.0 sen respectively.

• Asia benchmark indices retreated ahead of the G-20 meeting as the Nikkei fell 0.3%. The Shanghai Composite fell 0.6% after the Trump administration added China’s supercomputing companies into its trade blacklist, while the Hang Seng Index ended 0.3% lower. ASEAN equities, meanwhile, closed mostly in the red on Friday’s close.

• U.S. stockmarkets finished higher as the Dow rose 0.3%, boosted by banking shares. Consequently, the Dow climbed 7.2% M.o.M in June 2019 to register its biggest gain in June since 1938. Likewise, the S&P 500 and Nasdaq added 0.6% and 0.5% respectively – the former saw all eleven major sectors in the green.

• European benchmark indices also finished in the positive as the FTSE added 0.3% on optimism over Sino-U.S. trade progress over the weekend G20 meeting. The CAC rose 0.8%, while the DAX jumped 1.0%.

THE DAY AHEAD

• With a truce announced on the U.S-China trade spat, we see stocks on Bursa Malaysia heading higher on what is deemed as a relief rally on hopes that the two nations can come to an agreement, albeit there is no time frame for any deal to be reached.

• As it is, the trade angst has been the major impediment to the global stockmarket’s performance over the past year and while there is still no trade agreement, the move is still as positive as it potentially break the impasse that could translate to firmer global trade and the corresponding improvements in the global economy.

• While we expect Malaysian equities to be firmer over the near term, the upsides may still be measured due to the FBM KLCI’s already fair valuations. Therefore, the key index may still find the 1,680 level a formidable level to clear over the near term. Further above, the resistance is at the 1,690 level. The supports, on the other hand, are at 1,660 and 1,650 respectively.

• Meanwhile, we see the more stable market conditions to provide some near term impetus for the lower liners and broader market shares to tip higher over the near term. While it remains to be seen how much impetus the latest news could lift the lower liners, it could still allow these stocks to break their largely sideway trend that have been the trend over the past month.

COMPANY BRIEF

• Sunway Construction Group Bhd (SunCon) has secured three projects worth a total of RM496.8 mln. Meanwhile, YTD projects secured totalled RM1.54 bln, exceeding its target of RM1.5 bln for 2019. Going forward, the group will continue to work to secure new contracts and move forward with its expansion strategy into ASEAN and India. (The Edge Daily)

• Unisem (M) Bhd plans to close its facility in Batam, Indonesia, following continuing losses since 2011 and weak business outlook, despite recent investments. (The Star Online)

• Perdana Petroleum Bhd has bagged two work awards by Petronas Carigali Sdn Bhd for the provision of accommodation work barge vessel. The contracts were awarded to the group on 17th May 2019. The estimated contract value for the work orders are between RM9.6 mln and RM15.8 mln. (The Edge Daily)

• Supermax Corp Bhd is acquiring a Japanese coloured contact lens company for RM3.85 mln as it seeks to gain strategic access to the lucrative cosmetic lens market in Japan. The group’s 70.0%- owned subsidiary, Aime Supermax is buying Clayton Dynamics Co Ltd — together with its wholly-owned subsidiary Plan A Co Ltd — from Fordham Precision Co Ltd.

• The acquisition will give Supermax a strategic access to the lucrative cosmetic lens market in Japan, with Japan being one of the largest contact lens markets in the world. (The Edge Daily)

• Serba Dinamik Holdings Bhd Founder and Group CEO, Datuk Dr Mohd Abdul Karim Abdullah has been appointed as Executive Deputy Chairman of Kumpulan Powernet Bhd effective immediately.

• Kumpulan Powernet, which is involved in manufacturing of warp knitted fabric and property development, saw the emergence of Abdul Karim as a substantial shareholder on 20th June 2019 when he acquired 15.3 mln shares or a 20.0% equity stake via an off-market transaction. The group also announced the appointment of Mustakim Mat Nun as its group Managing Director. (The Star Online)

• Ikhmas Jaya Group Bhd is confident that it can secure a portion of contracts to be awarded to local companies for the East Coast Rail Link (ECRL) project, given its expertise in bore piling and foundation works as well as bridge construction.

• The group has already submitted its application for the pre-qualification exercise for the ECRL project and is currently waiting for the results. (The Edge Daily)

Source: Mplus Research - 1 Jul 2019