Dour Trend To Return

• The FBM KLCI chalked up minor gains yesterday after the sharp selldown a day earlier, lifted by the rebound in the regional markets and temporary trade optimisms. The lower liners – the FBM Small Cap (+0.9%), the FBM Fledgling (+0.6%) and the FBM Ace (+0.6%) also gained, while all the broader market constituents closed higher.

• Market breadth turned positive as winners overtook the losers on a ratio of 450-to-319 stocks. Traded volumes also added 9.7% to 2.41 bln shares, supported by bargain-hunting in the lower liners.

• Leading the FBM KLCI gainers were Dialog (+14.0 sen), CIMB Bank (+9.0 sen), Sime Darby Plantation (+7.0 sen) and Kuala Lumpur Kepong (+6.0 sen). Petronas Chemicals also recovered 7.0 sen after declining previously, due to soft quarterly earnings. Other the broader market, frontrunners include Carlsberg (+72.0 sen), Heitech Padu (+27.0 sen), Heineken Malaysia (+22.0 sen), LPI Capital (+22.0 sen) and Batu Kawan (+16.0 sen).

• In contrast, Complete Logistics (-10.0 sen), Dutch Lady (-10.0 sen), Panasonic Manufacturing (-10.0 sen), Malaysian Pacific Industries (-8.0 sen) and Shangri-La Hotels (-8.0 sen) retreated. The five key-index laggards, meanwhile, were Nestle (-40.0 sen), Petronas Dagangan (-32.0 sen), PPB Group (-8.0 sen), Ambank (-2.0 sen) and Genting Malaysia (-1.0 sen).

• Notable Asian benchmark indices posted minor gains after Washington signalled a potential de-escalation in its long-standing trade war with China. The Nikkei (+1.0%) gained, together with the Shanghai Composite (+0.4%), despite the Chinese retail sales and industrial data missed expectations. The Hang Seng Index (+0.1%) slipped in the eleventh hour, albeit still closing higher as investors await the 2Q2019 earnings announcement of Tencent, while ASEAN stockmarkets were mostly positive.

• U.S. stocks were sent careening following weaker-than-expected Chinese economic data and spiked fears of an upcoming recession after the U.S. Treasury yield fell to its multi-year lows and became inverted. The recovery in the Dow was short-lived as the Main Board tanked 3.1% to close below the 25,500 psychological level, together with the Nasdaq (-3.0%) and the S&P 500 (-2.9%). • Earlier, U.K. equities were broader weaker as investors digested fresh economic data globally. The FTSE was trimmed 1.4%, albeit slightly cushioned by gains in Admiral after the insurer reported stronger corporate earnings. The DAX and the CAC followed suit, losing 2.2% and 2.1% respectively as banking heavyweights tanked.

THE DAY AHEAD

• After a stable session yesterday, the selling pressure is expected to return to Bursa Malaysia after global equities were routed overnight as bond yields remain inverted – heightening recession fears and dampening sentiments on equities. Even with the U.S. delaying further tariffs on China-made goods, market conditions will remain guarded as the trade squable shows no signs of easing and the issue could remain long-drawn.

• Meanwhile, Malaysian stocks are unlikely to find much solace as the broad market sentiments are staying cautious, due in part to the ongoing threats to the global economic environment and the still unresolved trade spat between the U.S. and China that is likely to keep sentiments in check for longer. There are also few noteworthy leads on the local front to shore up market confidence and this is set to sent the key index below the 1,600 level once again. The supports are now at 1,590 and 1,580 levels, while the resistances are at the 1,610 and 1,620 respectively.

• Similarly, we see yesterday’s gains among the lower liner and broader market shares giving way to renewed selling as sentiments turn wary again. We see more retail players trimming their positions and retreating to the sideline until the selldown subsides.

COMPANY BRIEF

• Fajarbaru Builder Group Bhd and a Chinese company is teaming up to participate in a tender called by the Energy Commission to develop a 40MWac solar photovoltaic project in Pekan, Pahang. Fajarbaru, had on 14th August 2019, entered into a joint venture agreement with China Gezhouba Group (Hong Kong) Overseas Investment Co Ltd to pursue the project.

• Fajarbaru will have a 57% stake in the joint venture company, with China Gezhouba holding the rest. In the event of the successful award, the parties are desirous of jointly executing the design, construction, completion and maintenance of all the work required under the contract being signed between the parties and Tenaga Nasional Bhd. (The Star Online)

• Malaysian Bulk Carriers Bhd’s 2Q2019 net loss narrowed to RM6.9 mln vs. a net loss of RM151.3 mln recorded in the previous corresponding quarter, on the back of rising freight rates. Revenue for the quarter rose 19.6% Y.o.Y to RM68.7 mln.

• For 1H2019, cumulative net loss narrowed to RM17.7 mln vs. a net loss of RM165.6 mln recorded in the previous corresponding period. Revenue for the period gained 18.9% Y.o.Y to RM132.8 mln. (The Star Online)

• Public Bank Bhd’s 2Q2019 net profit declined 4.5% Y.o.Y to RM1.33 bln, following a 0.25% reduction in the overnight policy rate in May 2019 to 3.0%. Net interest income (NIM) fell 1.5% Y.o.Y to RM1.85 bln.

• For 1H2019, cumulative net profit slipped 2.1% Y.o.Y to RM2.74 bln. NIM fell 1.2% Y.o.Y to RM3.73 bln. A first interim dividend of 33 sen per share, payable on 10th September 2019, was declared. (The Edge Daily)

• S P Setia Bhd’s 2Q2019 net profit sank 68.7% Y.o.Y to RM138.7 mln due to a one-off provisional fair value gain amounting to RM343.8 mln from the remeasurement of an existing equity stake in Setia Federal Hill Sdn Bhd recorded in 2Q2018. Revenue for the quarter, however, rose 44.3% Y.o.Y to RM1.34 bln.

• For 1H2019, cumulative net profit slid 62.0% Y.o.Y to RM191.6 mln. Revenue for the period, however, added 39.2% Y.o.Y to RM2.20 bln. (The Edge Daily)

• MISC Bhd’s 2Q2019 net profit rose 24.5% Y.o.Y to RM399.8 mln, from a higher number of operating vessels. Revenue for the quarter increased 0.9% Y.o.Y to RM2.16 bln.

• For 1H2019, cumulative net profit rose 44.1% Y.o.Y to RM910.3 mln. Revenue for the period gained 6.7% Y.o.Y to RM4.44 bln. An interim dividend of seven sen per share, payable on 18th September 2019, was declared. (The Edge Daily)

• Malayan Flour Mills Bhd (MFM) 2Q2019 net loss stood at RM580,000 vs. a net profit of RM4.8 mln in 2Q2018, following losses sustained in its poultry integration segment. Revenue for the quarter, however, climbed 14.2% Y.o.Y to RM625.5 mln.

• For 1H2019, cumulative net profit surged 202.8% Y.o.Y to RM19.3 mln on stronger contribution from its flour and grains trading segment and its share of profit from joint venture. Revenue for the period increased 13.4% Y.o.Y to RM1.26 bln. An interim dividend of 1.2 sen, payable on 13th September 2019, was declared. (The Edge Daily)

• Mega First Corp Bhd announced that two of its units have called off a mixed development project located in Kinta, Perak in joint venture with Menteri Besar Incorporated (Perak), but that an indirect subsidiary has been given the option to secure a significant plot of land for a solar photovoltaic plant. Under the option agreement, the unit is entitled to lease and or to buy the land from MBI Perak until 31st December 2020. (The Edge Daily)

Source: Mplus Research - 15 Aug 2019