Still In Red

• Tracking the weakness on Wall Street overnight, the FBM KLCI took another swipe as the key index closed 0.5% lower alongside with the weakness across its regional peers yesterday. The lower liners also ended mostly lower as the FBM Small Cap and FBM Fledging shed 0.8% and 0.3% respectively, while the broader market were painted in red with the technology sector (-1.4%) took the biggest loss.

• Market breadth remained negative as losers overpowered winners on a ratio of 603-to-259 stocks, while 401 stocks traded unchanged. Traded volumes, however, rose 3.8% to 2.75 bln shares as profit taking activities escalated.

• Petronas Dagangan (-60.0 sen) led the local bourse decliners list, followed by Hong Leong Financial Group (-42.0 sen), Public Bank (-30.0 sen), Hong Leong Bank (-24.0 sen) and Hartalega (-19.0 sen). BAT (-RM1.24) remains as the broader market biggest loser, while Carlsberg (-44.0 sen), Syarikat Takaful (- 29.0 sen), Genting Plantations (-20.0 sen) and Lingkaran Trans Kota (-20.0 sen) fell.

• Significant advancers on the broader market were Manulife (+23.0 sen), Lysaght Galvanized (+15.0 sen), Adventa (+12.5 sen), Kuchai Development (+12.0 sen) and CCM (+11.0 sen). Meanwhile, Tenaga (+20.0 sen), RHB Bank (+6.0 sen), Maxis (+5.0 sen), Am Bank (+2.0 sen) and MISC (+2.0 sen) advanced on the key index.

• Asian benchmark indices were downbeat as the Nikkei fell 0.9% on weakness in banking shares as the financial sector continues to struggle with the low interest rates environment. The Shanghai Composite declined 0.7%, while were no trading in Hong Kong equities after the government announced warning of tropical storm signal. ASEAN stockmarkets, meanwhile, closed mostly lower yesterday.

• U.S. stockmarkets extended their losses overnight as the Dow sank 1.1% after the U.S. Federal Reserve trimmed its benchmark interest rate by 25 basis points and signals a less aggressive stance on future rate cuts. Likewise, the broader market saw the S&P 500 declined 1.2% with all eleven major sectors in the red, while the Nasdaq finished 1.1% lower.

• Earlier, European benchmark indices closed mostly higher as the CAC and DAX added 0.1% and 0.3% respectively after the Eurozone 2Q2019 GDP expanded 0.2% Y.o.Y – matching economists’ expectations. The FTSE, however, fell 0.8%, dragged down by the uncertainty over Brexit deal progress.

THE DAY AHEAD

• Bursa Malaysia continues to grapple with the fresh uncertainties over the prolonged U.S.-Sino trade war, coupled with the less dovish stance from the U.S. Federal Reserve with global equities reacting negatively to the aforementioned event overnight. As it is, we expect Bursa Malaysia to see continuous downward pressure.

• The ongoing market uncertainties is expected to leave the key index drifting lower amid the lack of fresh buying interest, whilst the prospect of insipid earnings growth return to the forefront ahead of a barrage of corporate earnings this month.

• With the 1,637 immediate support level gave way yesterday, the next support levels are now pegged at the 1,630 level, followed by 1,616 level. On the flipside, bargain hunting activities from the recent pullback will see gains capping towards the 1,650 and 1,660 levels respectively.

• Selling activities on the local bourse spillover to the lower liners as the profit taking activities escalated. In view of the fresh global trade uncertainties, we reckon the recent weakness will remain unabated. Any reprieve is expected to be temporary with little buying interest from retail players due to the renewed weak market sentiments.

COMPANY BRIEF

• Press Metal Aluminium Holdings Bhd inked a power purchase agreement (PPA) with Syarikat SESCO Bhd — a unit of Sarawak Energy Bhd — to secure more power for capacity expansion in Sarawak. The agreement entails the long-term access of up to approximately 500MW of electricity for 15 years. The first drawdown of 300MW will commence by October 2020 and the balance 200MW will be made available on a reasonable endeavour basis by SESCO.

• Subsequently, the additional power allocation will enable Press Metal to build a third aluminium smelter in Samalaju Industrial Park, Sarawak, which will potentially increase its total smelting capacity up to 1.1 mln tonnes per annum upon full power drawdown, from the current 760,000 tonnes per annum. (The Star Online)

• Zelan Bhd is expected to receive 264.6 mln dirhams (RM297.6 mln) from Meena Holdings LLC after the International Court of Arbitration, International Chamber of Commerce (ICC) ruled that its termination of contract was valid.

• To recap, the group had initiated arbitration proceedings against Meena over breaches and defaults of the latter under a contract for the development of the Meena Plaza project in Abu Dhabi, the United Arab Emirates on 18th August, 2016. Currently, Zelan is seeking advice from its solicitors on the enforcement of the arbitration award with the purpose of recovering the awarded sums. (The Edge Daily)

• Chin Teck Plantations Bhd's 3QFY19 net profit plunged 62.4% Y.o.Y to RM7.8 mln, from RM20.7 mln a year ago, mainly due to lower revenue and other income. Revenue also fell 15.5% Y.o.Y to RM33.5 mln, from RM39.6 mln last year.

• Even so, the group declared a second interim dividend of eight sen per share, as well as a special dividend of two sen per share, payable on 30th August, 2019. Moving forward, weak average selling prices of crude palm oil is expected to weigh on the group’s performance. (The Edge Daily)

• YTL Hospitality Real Estate Investment Trust’s (YTL REIT) 4QFY19 net property income grew 3.7% Y.o.Y to RM60.3 mln, from RM58.11 mln a year ago, due to higher master leases, mainly from the acquisition of The Green Leaf Niseko Village in September 2018. Its realised income also gained 6.8% Y.o.Y to RM35.8 mln, from RM33.5 mln previously, while quarterly revenue increased 1.8% Y.o.Y to RM118.7 mln, from RM116.6 mln before.

• The trust declared a final income distribution per unit of 2.1 sen and foresees a satisfactory performance for FY20, after considering the strength of the real estate portfolio invested. (The Edge Daily)

• Barakah Offshore Petroleum Bhd is aborting its proposed debt settlement schemes of both the group and its wholly-owned subsidiary PBJV Group Sdn Bhd following the recent suspension of latter's licence by Petroliam Nasional Bhd (Petronas).

• The licence suspension will prevent PBJV from undertaking and bidding for new contracts from Petronas, its subsidiaries and any petroleum arrangement contractors (PACs) during the suspension period, although it is allowed to continue and complete its existing and ongoing contracts. (The Edge Daily)

• Pintaras Jaya Bhd has clinched another nine new piling contracts collectively worth RM156.0 mln (S$51.0 mln) since April 2019. The projects will kick off in July 2019 and August 2019, with contract periods varying from two to six months. (The Edge Daily)

• Trive Property Group Bhd has terminated its plan to undertake research and development; assembly and production; as well as distribution and marketing of photovoltaic products such as solar cells, solar panels or solar modules in a jointventure (JV) with China-based Jiangxi Fujing New Energy Technology Co Ltd (JFNET). Both parties have mutually terminated the JV signed on 10th November, 2017, with no reason for the termination given. (The Edge Daily)

• Lotte Chemical Titan Holding Bhd's (LCT) 4QFY19 net profit narrowed 66.7% Y.o.Y to RM104.9 mln, from RM315.0 mln in the last corresponding year, due to tighter margins amid lower ASPs. Revenue for the current quarter also dipped 6.5% Y.o.Y to RM2.13 bln, from RM2.28 bln a year ago. (The Star Online)

Source: Mplus Research - 1 Aug 2019