Delayed Recovery To Provide Lift

• The key index endured a choppy trading session before closing marginally lower as the FBM KLCI (-0.01%) retreated from its previous session’s rally. The weakness on the local bourse also extended to the lower liners – the FBM Small Cap (-0.2%), FBM Fledgling (- 0.4%) and FBM ACE (-0.4%) all fell, while the broader market finished mixed.

• Market breadth turned negative as decliners overcome advancers on a ratio of 431-to-308 stocks, while 427 stocks traded unchanged. Traded volumes fell 25.7% with only 1.85 bln shares exchanging hands as quick profit taking activities emerged.

• Key losers on the local bourse were Axiata (-23.0 sen), Nestle (-20.0 sen), KLK (-18.0 sen), Hong Leong Financial Group (-16.0 sen) and Hap Seng (-15.0 sen). Major decliners on the broader market include BAT (-64.0 sen), Fraser & Neave (-42.0 sen), Shangri-La (-24.0 sen), Aeon Credit (-14.0 sen) and Hong Leong Industries (-14.0 sen).

• On the flipside, notable gainers on the broader market were Oriental Interest (+16.0 sen), G3 Global (+13.0 sen), Carlsberg (+12.0 sen) and Padini (+10.0 sen). Petra Energy added 4.5 sen after bagging a contract from Petronas. Meanwhile, MISC (+33.0 sen), Petronas Dagangan (+16.0 sen), AmBank (+13.0 sen), Hong Leong Bank (+8.0 sen) and Maxis (+8.0 sen) advanced on the FBM KLCI.

• Asian benchmark indices finished mostly higher, tracking the gains on Wall Street overnight as the Nikkei jumped 2.1% to reclaim the 21,000 psychological level after the Japanese Yen weakened against the Greenback. The Shanghai Composite added 1.0%, but the Hang Seng Index fell 0.03% despite erasing all its intraday losses .ASEAN equities, meanwhile, closed mostly higher yesterday.

• U.S. stockmarkets rallied overnight as the Dow jumped 1.4% after both U.S. and China officials reportedly ready to resume trade negotiations. On the broader market, the S&P 500 rose 1.3%, while the Nasdaq surged 1.8% to close above the 8,000 psychological level.

• Major European indices closed mostly higher as the CAC and DAX climbed 1.1% and 0.9% respectively, taking cue from the positive sentiment across global equities. The FTSE, however, fell 0.6% on the rising British Pound against the Greenback as the prospect of no-deal Brexit.

The Day Ahead

• Despite the positivity of most global equity markets yesterday, Malaysian equities bucked the trend to head lower as fresh buying interest remains thin to leave the key index on a drifting mode. As it is, market players are still experiencing trepidation on the Bursa Malaysia’s near term direction after the recent results failed to instill confidence on the sustainability of corporate earnings growth for the rest of the year.

• While we think that the cautiousness on Malaysian stocks will persist, we also expect bouts of bargain hunting activities could set-in to allow the key index to firm up over and potentially end the week on a more positive note. We think that potential meeting between the U.S. and China to discuss their trade dispute, coupled with still steady U.S economic data, the near term market undertone is more encouraging and this could help to shore up the FBM KLCI over the near term.  Therefore, we again expect the 1,600 points level to be breached and the FBM KLCI could head towards the 1,605 level, before taking a stab at the 1,610 level. On the downside, the supports are at the 1,580-1,590 levels.

• Bursa Malaysia’s broader market and lower liners also failed to gain ground yesterday amid the return of the cautious undertone. However, we also think that the reprieve is delayed and could now materialise to allow the key index to end the week positively, riding on the improved equity market conditions globally.

COMPANY BRIEF

• Power Root Bhd wants to sell more of its rainforest herbs-infused coffee in China to boost its earnings this year. The group will sell its products online focusing on suppliers, flagship and specialty stores China. (The Edge Daily)

• Lotte Chemical Titan Holding Bhd‘s (LCTitan) US-based joint-venture (JV) company, Lotte Chemical USA Corp's (LC USA) ethane cracker and monoethylene glycol (MEG) plants had started commercial operations in August 2019 on an integrated basis. LC USA is a 40:60 JV between LCTitan and Lotte Chemical Corp. (The Edge Daily)

• French insurer AXA SA and Affin Bank Bhd are reportedly exploring options that include a potential sale of their life and general insurance business in Malaysia or about US$650.0 mln. The financial firms are seeking around US$500.0 mln on AXA Affin General Insurance Bhd, while they are looking to raise as much as US$150.0 mln from AXA Affin Life Insurance Bhd in a transaction.

• Affin and AXA could be joining owners of AmGeneral Insurance Bhd, as well as other foreign players including Prudential Plc and Zurich Insurance Group AG, in seeking to pare stakes in their Malaysian units, following the Government’s decision to enforce ownership cap more strictly. (The Star Online)

• The external auditors of APFT Bhd have declared doubts over the group’s ability to continue as a going concern as they are unable to issue an opinion on the group’s financial statements for the period 1st February 2018 to 30th April 2019.

• The auditor, Messrs PKF found that the group’s and the company's current liabilities exceeded their current assets by RM10.2 mln and RM8.1 mln respectively, in addition to a shareholders’ deficit of the group and the company of RM3.7 mln and RM2.8 mln as of 30th April 2019.

• These conditions indicate that material uncertainty exists that may cast significant doubt on the Group’s and Company’s ability to continue as going concern.” Meanwhile, its ability to remain as a going concern also hinges on the timing and successful formulation and implementation of its regularisation plan, as well it achieving sustainable and viable operations. (The Edge Daily)

• Priceworth International Bhd fell into the red with a 4QFY19 net loss of RM90.4 mln, from a net profit of RM3.5 mln previously, due to temporary interruptions in its logging operations and the impairment on goodwill. Revenue also narrowed 66.4% Y.o.Y to RM14.5 mln, from RM43.0 mln in the previous corresponding period.

• Consequently, full-year net loss was at RM144.0 mln, compared to a net profit of RM13.8 mln in the previous year, while revenue fell 80.6% Y.o.Y to RM33.6 mln, from RM173.4 mln previously. (The Edge Daily)

• Maxwell International Holdings Bhd has terminated its Memorandum of Agreement (MoA) with three shoe players that were previously aimed at improving its financial performance. There were no reasons given for the termination of the MoA with Mohd Faizol Abdul Karim, NTH Global Sdn Bhd and Opera Marketing Sdn Bhd. (The Edge Daily)  

Source: Mplus Research - 6 Sept 2019