Renewed Optimism, But Upsides Seen Limited

• The FBM KLCI (-0.2%) retraced back into the red as investors await for the testimony of U.S. Federal Reserve Chairman Jerome Powell on the U.S. interest rate direction. The FBM Small Cap (+0.2%) and the FBM Fledging (+0.04%) continued their uptrend, but FBM ACE fell 0.4%. The majority of the broader market sectors closed negatively as well.

• Market breadth was turned negative as 434 losers outpaced 329 winners yesterday, while traded volumes decreased 7.2% to 2.24 bln shares amid the negative market sentiment.

• Underperforming heavyweights on the FBM KLCI were Petronas-related companies like Petronas Dagangan (- 54.0 sen), Petronas Chemicals (-19.0 sen) and Petronas Gas (-18.0 sen), while Tenaga Nasional and Maxis shed 10.0 sen and 6.0 sen respectively. Some of the biggest losers on the broader market were Carlsberg (-58.0 sen), British American Tobacco (-34.0 sen), Chin Teck Plantations (-28.0 sen), Kluang Rubber (-16.0 sen) and Allianz Malaysia (-14.0 sen).

• Largest gainers in the broader market today were newcomer UWC Holdings (+58.0 sen), followed by Panasonic Malaysia (+20.0 sen), KESM Industries (+19.0 sen), DUFU Technology (+13.0 sen) and Kawan Food (+11.0 sen). As for blue chip stocks, Malaysia Airport Holdings (+7.0 sen), Press Metal (+7.0 sen), Public Bank (+6.0 sen), Hap Seng Consolidated (+5.0 sen) and Hong Leong Financial Group (+2.0 sen) were among the top gainers.

• Asia’s benchmark indices were mostly negative as the Shanghai Composite slid 0.4%, while the Nikkei reversed its intraday gains to drop 0.2% amid cautiousness over Jerome Powell’s key testimony on the U.S interest rate direction. On the other hand, the Hang Seng Index rebounded to close 0.3% higher, ending a six day losing streak. ASEAN stockmarkets, meanwhile, closed mostly in the green yesterday.

• U.S stockmarkets were powered higher after the U.S. Federal Reserve Chairman Jerome Powell stood pat on his stance to adopt an easing monetary policy approach. The Dow rose 0.3%, while the S&P 500 tested the 3,000 psychological level, before staging a mild pullback to close 0.5% higher.

• Earlier, European benchmark indices – the FTSE (-0.1%), CAC (-0.1%) and DAX (- 0.5%) all erased their intraday gains to extend their losses. Market sentiment was affected by the uncertainty over the looming Brexit, coupled with the standoff between Switzerland and European Union on long-standing financial, immigration and trade ties.

THE DAY AHEAD

• With the Federal Reserve adopting a more dovish tone, there should be some near term reprieve for Malaysian equities as we see the positivity on Wall Street also permeating to the local stocks. While the strongest hint of an interest rate cut is set to buoy near term sentiments, it also underlines the increasing severity of the weakness in the U.S. economy that could also spread to the global economy, given its position as the largest economy in the world.

• Although we think there could be some near term positivity on Bursa Malaysia, we think that substantive upsides could still be elusive as valuations remain toppish. Hence, we see the 1,680-1,687 levels serving as the near term resistances with the 1,700 resistance level becoming a significant hurdle. The supports, on the other hand, are at 1,670- 1,672 levels, followed by the 1,660 level.

• The Small Cap Index is still seeing support and remains overbought, hence we continue to think that a pullback is already overdue. However, we think that the pullback could be delayed due to the renewed positivity on equities that is likely to keep the lower liners and broader market shares elevated for longer.

COMPANY BRIEF

• Boustead Heavy Industries Corporation Bhd (BHIC) has announced massive boardroom changes, which will see the size of BHIC’s board expand to nine members. Non-Executive Directors, Datuk Ishak Osman and Datuk Azzat Kamaludin have resigned and were replaced by six new Non-Executive Directors, Tan Sri Ramlan Mohamed Ali, Datuk Maznah Abdul Jalil, Fahmy Ismail, Tan Sri Aziah Ali, Dr Salihin Abang and Saadatul Nafisah Bashir Ahmad. (The Star Online)

• Paramount Corp Bhd plans to launch four new projects with an estimated gross development value (GDV) of RM783.0 mln in 2H2019. The group is confident to achieve its RM1.0 billion sales target this year, driven by new launches. (The Edge Daily)

• Media Prima Bhd’s indirect unit, Rev Asia Holdings Bhd is going ahead with its acquisition of a 52.0% equity stake in a Malay-language digital news producer, which hit a legal hiccup in April.

• Rev Asia has signed a fresh agreement with the seller, Jaffa Sany Mohd Ariffin, to buy the controlling stake in The Vocket Sdn Bhd at an unchanged price of RM2.6 mln.

• To recap, the aforementioned acquisition was halted in April when the share sale and purchase agreement signed in June 2018 was terminated due to legality issues on Vocket’s part. (The Edge Daily)

• Eonmetall Group Bhd is forming a jointventure (JV) with two other companies to purchase a parcel of land measuring 420 ac in Klang, Selangor, for RM155.7 mln. The land is currently an oil palm plantation registered under Sime Darby Plantation Sdn Bhd.

• The JV company, Sinaran Seribumi Sdn Bhd was formed by its unit Eonmetall Land Sdn Bhd with Kapar Holding Sdn Bhd and Kapar Land Sdn Bhd. Kapar Holding and Kapar Land are both in the business of manufacturing iron and steel products, as well as property dealing.

• Eonmetall owns a 23.8% shareholding in the JV company, while Kapar Holding and Kapar Land owns 41.0% and 35.2% respectively. (The Star Online)

• MTD ACPI Engineering Bhd is planning to buy two construction and property units from privately-held Putrajaya Perdana Bhd, prompting speculation of a potential reverse takeover.

• Both parties signed a Heads of Agreement (HoA) for the acquisition of Orangebeam Construction Sdn Bhd and Orangebeam Development Sdn Bhd, although the purchase consideration is yet to be determined. (The Star Online)

• I-Bhd is proposing a renounceable rights issue of three-year Redeemable Convertible Cumulative Preference Shares (RCCPS) to raise approximately RM150.0 mln. The proceeds will be used to finance its property investment/hospitality portfolio and property development businesses. (The Star Online)

• Malaysia Airports Holdings Bhd’s (MAHB) airports registered a 7.3% Y.o.Y growth in passenger volume in June 2019 to 12.1 mln — the second highest after the historical peak month of December 2018. The strong growth was driven by higher demand in air travel due to the Aidilfitri and summer holidays. (The Edge Daily)

Source: Mplus Research - 11 Jul 2019