Volatility To Return

• The FBM KLCI (+0.7%) started off the week on an upbeat manner, snapping a five-day losing streak after both the U.S. and China agreed to halt further tariffs escalation in the G20 meeting. The lower liners – the FBM Small Cap (+2.2%), FBM Fledgling (+1.0%) and FBM ACE (+2.1%) all extended their gains, while the broader market finished higher, led by the technology sector (+3.2%).

• Market breadth turned positive as advancers overwhelmed decliners on a ratio of 679-to-214 stocks. Traded volumes jumped 49.4% to 3.32 bln as investors turned their attention to riskier assets.

• Petronas Chemicals (+34.0 sen) anchored the FBM KLCI winners list, followed by RHB Bank (+19.0 sen), Axiata (+17.0 sen), Petronas Gas (+14.0 sen) and Tenaga (+12.0 sen). Notable gainers on the broader market were MPI (+60.0 sen), LPI Capital (+24.0 sen), Time dotCom (+23.0 sen) and Guan Chong (+22.0 sen). Sunway Construction added 9.0 sen after bagging three contracts collectively valued close to RM500.0 mln.

• On the contrary, among the biggest losers on the broader market include Atlan Holdings (-20.0 sen), BLD Plantations (-20.0 sen), Fraser & Neave (-16.0 sen), Manulife (-14.0 sen) and Allianz (-10.0 sen). Meanwhile, Nestle (- 70.0 sen), PPB Group (-10.0 sen), Hong Leong Bank (-2.0 sen), Hong Leong Financial Group (-2.0 sen) and Petronas Dagangan (-2.0 sen) led the key index’s decliners list.

• Asia benchmark indices advanced following the positive developments from the G20 meeting as U.S. and China are ready to resume their trade negotiations. The Nikkei jumped 2.1%, while the Shanghai Composite surged 2.2%. The Hang Seng Index was closed for the Special Administrative Region Establishment Day public holiday, while ASEAN equities finished mostly higher on Monday.

• U.S. stockmarkets extended their gains as the Dow rose 0.4%, lifted by the temporary Sino-U.S. trade truce. On the broader market, the S&P 500 gained 0.8% to close at a fresh all-time high at 2,964.33 level, anchored by gains in the technology sector (+1.5%), while the Nasdaq finished 1.1% higher.

• Earlier, European benchmark indices – the FTSE (+1.0%), CAC (+0.5%) and DAX (+1.0%) all advanced alongside with gains across global equities. In the meantime, the major diplomatic breakdown between European Union and Switzerland saw the former countries cut off from trading in Swiss shares.

THE DAY AHEAD

• Expectedly, stocks went on a relief rally after the U.S and China agreed to restart their trade negotiation over the weekend. This has buoyed hopes that there the trade dispute that has consumed the global equity environment over the past few quarters could be close to a resolution, albeit there is no timeframe set for the talks and China warning that the negotiations could be long drawn.

• Even after yesterday’s market reaction, which was relatively benign, the FBM KLCI has tipped into the toppish territory again and this could well limit further near-term gains, in our view. At the same time, fresh tariff concerns arose as the U.S is now threatening to impose tariffs on European goods that is likely to leave sentiments guarded again. Therefore, we think that the key index could see renewed volatility in the near term as the fresh concerns mount and profit taking activities accelerates. The resistances are at 1,690 and 1,670, while the supports are at 1,680 and 1,670 respectively.

• The lower liners and broader market shares were on a purple patch yesterday amid the return of market players that was buoyed by the resumption of the U.SChina trade negotiations. While there appears to be more upside potential with the increased trading activities, we think that quick profit taking activities could temper the potential near term gains.

COMPANY BRIEF

• Sunway Bhd has inked a 60:40 jointventure (JV) agreement with the Selangor State Development Corp (PKNS) to develop a mixed development on a prime 9.5-ac parcel of leasehold land in Kota Damansara. The proposed development will include serviced apartments and lifestyle retail units with an estimated RM544.0 mln in gross development value (GDV) and is targeted to be completed in 2025.

• For the development rights of the land, the joint-venture (JV) will pay to PKNS a rights value of RM36.6 mln, a revenue share of RM50.0 mln or a sum equivalent to 8.9% of the gross sales value of the development of the land minus sales discounts and other incentives, whichever is higher. PKNS will also be entitled to a portion of the pretax profit of RM38.0 mln. (The Star Online)

• Oriental Interest Bhd is acquiring a piece of land in Kuala Langat district from Sime Darby Plantation Bhd for RM40.1 mln, to be funded by internally-generated funds and bank borrowings. The 423,402-sq.m. land is currently planted with oil palm trees. (The Edge Daily)

• Prestariang Bhd, which is suing the government for terminating the RM3.5 bln National Immigration Control System (SKIN) it was installing for the Immigration Department, has just been awarded another contract by Putrajaya. The RM22.9 mln contract is to supply Microsoft software licences, products and services to the Ministry of Education, under the Master Licensing Agreement (MLA) 3.0, for a one-year period. (The Edge Daily)

• Merge Energy Bhd was awarded a contract worth RM26.0 mln from Pengurusan Aset Air Bhd (PAAB) to undertake connection and installation works for the Langat 2 water treatment plant. Scheduled for completion on 23rd July 2020, the group will be undertaking connection works to the existing system and mild steel pipe installations as part of the Langat 2 water treatment plant and water reticulation system in Selangor and Kuala Lumpur. (The Edge Daily)

• Dialog Group Bhd has been awarded a master service agreement from Petroliam Nasional Bhd (Petronas) in-relation to plant maintenance and turnaround works for the national oil firm’s plants, groupwide. The contract covers integrated plant turnaround works and daily mechanical static maintenance work and is valid for a period of five years, with an option to extend by Petronas. (The Edge Daily)

• Utusan Melayu (Malaysia) Bhd has announced the sale of a second apartment unit in Jakarta to help fund its voluntary separation scheme (VSS). The Practice Note 17 (PN17) status company is selling the unit to an individual buyer for 4.65 bln rupiah (RM1.4 mln), and is expected to result in a net gain of RM84,011. (The Edge Daily)

• FGV Holdings Bhd has halted its plan to jointly-develop a model to ensure palm oil sustainability with US consumer goods giant Procter & Gamble (P&G) and five other organisations. This follows the expiry of the Memorandum of Understanding (MoU) entered into between FGV together with P&G as well as World Resources Institute (WRI), Malaysia Institute for Supply Chain Innovation (MISI), Wild Asia, Proforest Initiative and Daemeter. The MoU, signed on 31st December, 2015, was to facilitate collaboration in developing the Smallholder Supply Chain Risk Assessment Model (SHRAM). (The Edge Daily)

• Ranhill Holdings Bhd has obtained a twoyear contract worth RM151.5 mln for non-revenue water (NRW) reduction in Johor. The project, which is expected to be completed by 30th June 2021, was a related party transaction as it was awarded by its 80.0%-owned subsidiary Ranhill SAJ Sdn Bhd (RanhillSAJ), after a competitive open tender process. (The Edge Daily)

Source: Mplus Research - 2 Jul 2019