Downside Pressure Returns On Trade Angst

• The FBM KLCI (+0.4%) extended its gains, mirroring the mostly positive performance across its regional peers after recovering all its intraday losses last Friday. Consequently, the key index snapped a six-week losing streak, rising 0.6% W.o.W. The lower liners closed mostly higher as the FBM Small Cap (+0.8%) and FBM Fledgling (+0.3%) advanced, while the broader market finished mostly positive.

• Market breadth, however, stayed negative as losers led the gainers on a ratio of 400-to-381 stocks. Traded volumes declined 1.5% 2.01 bln shares.

• More than two-thirds of the key index constituents rose, led by KLK (+18.0 sen), followed by Top Glove (+17.0 sen), Hong Leong Financial Group (+16.0 sen), Petronas Dagangan (+14.0 sen) and Tenaga (+10.0 sen). Meanwhile, Allianz (+80.0 sen), Panasonic (+40.0 sen), Ajinomoto (+32.0 sen), Amway (+20.0 sen) and KLCC (+23.0 sen) anchored the broader market winners list. Master-Pack Group jumped 23.0 sen after reporting a strong set of quarterly earnings.

• Significant decliners on the broader market include BAT (-60.0 sen), Heng Yuan (-19.0 sen), Time dotCom (-15.0 sen), Aeon Credit (-12.0 sen) and PMB Technology (-9.0 sen sen). Big board decliners were Maxis (-16.0 sen), Hap Seng (-8.0 sen), Hong Leong Bank (-2.0 sen) Dialog (-2.0 sen) and AmBank (-1.0 sen).

• Asia’s benchmark indices advanced as the Nikkei (+0.4%) extended its gains ahead of the conclusion of central bankers meeting at Jackson Hole. Likewise, both the Shanghai Composite and the Hang Seng Index added 0.5% each as the former saw the Chinese Yuan weakening to its lowest level since March 2008. ASEAN equities also closed mostly higher last Friday.

• U.S. stockmarkets ended the week on a volatile manner as the Dow dived 2.4% lower after U.S. President Donald Trump raised its tariffs on Chinese goods. Likewise, the S&P 500 sank 2.6% with all eleven major sectors in the red, while the Nasdaq tumbled 3.0%.

• Earlier European stockmarkets – the FTSE (-0.5%), the CAC (-1.1%) and the DAX (-1.2%), all finished lower after erasing all their intraday gains on the heightened Sino-U.S. trade tension. In the meantime, the G7 meeting concluded without a joint communique for the first time in its 44-year history due to the ongoing trade war.

THE DAY AHEAD

• With U.S. markets taking a tumble as the U.S-China trade war ratchets up a notch, we see stocks on Bursa Malaysia following suit and poised for another dip to start the week. As it is, the wariness over the market’s direction will once again leave market players on the defensive side and this is likely to lead to fresh profit taking actions after last Friday’s gains.

• The renewed selling is also set to reverse the FBM KLCI’s ongoing recovery process and leave sentiments on the wayside again. Still, there could be pockets of rotational interest as investors could pick-up stocks that reported stronger sets of earnings, albeit the slew of results released thus far has been on the mixedto-lower side.

• The renewed selling pressure could also see the 1,600 points level under threat again and if it gives way, the next supportis pegged at the 1,590 level. The resistances, meanwhile, remain at 1,610 and 1,620 respectively.

• We also think that the FBM Small Cap stocks and the other lower liners stocks will be similarly affected by the weaker sentiments. This also means that their minute recovery at the end of last week could also become undone as we think that profit taking activities are likely to set-in again.

COMPANY BRIEF

• DRB-Hicom Bhd returned to the black with a 1QFY20 net profit of RM46.2 mln, from a net loss of RM66.6 mln in the same period a year earlier, as revenue gained 29.0% Y.o.Y to RM3.44 bln, from RM2.65 bln previously. The upbeat results were mainly due to improved sales in the automotive sector and the group expects the segment to remain resilient, supported by Proton’s improved models and new models by other marques in its portfolio. (The Star Online)

• Boustead Heavy Industries Corp Bhd‘s (BHIC) 2Q2019 net profit contracted 59.0% Y.o.Y to RM2.9 mln, from RM7.2 mln in the last corresponding period, despite higher revenue following lower contributions from joint-venture (JVs), higher finance costs and negative contributions from its associates widened. Quarterly revenue was up 10.0% Y.o.Y at RM53.9 mln, from RM49.2 mln previously. (The Edge Daily)

• Dayang Enterprise Holdings Bhd posted a 42.0% Y.o.Y growth in its 2Q2019 net profit to RM55.1 mln, from RM38.9 mln a year ago, lifted by higher profit margin and revenue, coupled with lower finance costs and expenses. Revenue also gained 12.0% Y.o.Y to RM247.2 mln, from RM221.3 mln earlier.

• In addition to the aforementioned reasons, the group’s bottomline also benefited from the reversal of impairment loss on property, plant and equipment of RM2.8 mln, which the group booked an impairment loss allowance of RM7.1 mln previously. (The Star Online)

• Pharmaniaga Bhd’s 2Q2019 net profit surged 72.1% Y.o.Y to RM9.3 mln, compared to RM5.4 mln in the same quarter last year, on the back of higher demand for its products in Indonesia and a lower tax bill, while revenue inched higher by 3.3% Y.o.Y to RM601.9 mln, from RM582.7 mln last year. The pharmaceutical group has declared a second interim dividend of 2.5 sen (2Q2018: 4.0 sen), payable on 11th October 2019.

• Cumulative 1H2019’s net profit, meanwhile, also grew 25.8% Y.o.Y to RM28.9 mln, from RM23.0 mln, due to stronger revenue contribution, lower operating expenses and taxation. Revenue rose 15.6% Y.o.Y to RM1.39 bln, from RM1.2 bln last year. (The Edge Daily)

• Petronas Dagangan Bhd has recorded a 45.0% Y.o.Y decline in its 2Q2019 net profit to RM172.8 mln, from RM314.4 mln in the previous year, dragged down by lower margins for its retail and commercial operations, despite a 4.5% Y.o.Y increase in revenue to RM7.61 bln, from RM7.28 bln a year earlier. (The Star Online)

Source: Mplus Research - 26 Aug 2019