More Recovery Prospects

• The FBM KLCI ended the week with meager gains amid thin trading volumes ahead of the long weekend. On a weekly basis, the key-index, however, snapped a two-week winning streak and closed 0.5% W.o.W lower. The lower liners also eked-out gains – led by the FBM Fledgling (+0.5%), together with the broader market, although the Financial Services (-0.2%), REITs (-0.1%) and the Healthcare (-0.4%) retreated.

• Market breadth recovered slightly as winners overtook the losers on a ratio of 404-to-338 stocks, while traded volumes fell further by 10.2% to 1.67 bln shares as investors retreated to the sidelines ahead of key U.S. employment data.

• Leading the Main Board winners were MISC (+26.0 sen), Petronas Gas (+16.0 sen), Petronas Chemicals (+12.0 sen), Axiata (+11.0 sen) and Ambank (+6.0 sen). On the broader market, BAT (+70.0 sen), Shangri-La Hotels (+25.0 sen), Lotte Chemical Titan (+16.0 sen), Greatech Technology (+10.0 sen) and Rapid Synergy (+9.0 sen) also finished higher at the closing bell.

• On the opposite side of the trade, Dutch Lady (-40.0 sen), Panasonic Manufacturing (-38.0 sen), Allianz Malaysia (-20.0 sen), Latitude (-14.0 sen) and Advanced Packaging (-11.0 sen) retreated. Meanwhile, Nestle (- RM1.10), Hong Leong Bank (-14.0 sen), Hong Leong Financial Group (-10.0 sen), Kuala Lumpur Kepong (-8.0 sen) and PPB Group (-6.0 sen) underperformed their blue-chip counterparts.

• Key Asian indexes chalked up gains on hopes of increasing stimulus from major economies in the wake of slowing global growth. The Nikkei and the Shanghai Composite added 0.6% and 0.8% respectively, the latter after the PBOC cut the reserve requirement for banks. The Hang Seng Index (-0.04%), however, declined marginally on Monday amid the ongoing political uncertainties, while the ASEAN markets finished mostly higher.

• Wall Street was mostly subdued, weighed down by the weakness in tech and healthcare-related stocks, as well as mild-profit taking activities. The Dow marked its fourth consecutive win, but on the broader market, the S&P 500 and the Nasdaq (-0.2%) retreated.

• Earlier, leading European equity markets were mostly lower, with the exception of the DAX (+0.3%) following stronger-thanexpected trade data. The FTSE (-0.6%) and the CAC (-0.3%), however, pared earlier gains and closed in the red, the former due to strengthening Pound.

THE DAY AHEAD

• We see Malaysian stocks continuing to improve amid the more positive equity market undertone that is brought about by the sustained gains in many overseas indices over the past few sessions that is should also extend to Malaysian equities.
• Global equities are also calmer as there is a minor breakthrough in the U.S-China trade impasse and renewed expectations that the U.S. Federal Reserve will further trim interest rates as a pre-emptive move to support the U.S. economy against a steeper economic slowdown.

• Still, we think that the gains on Malaysian equities will be incremental and selective as market participation is still on the thin side. As it is, many market players are on the sidelines due to the lack of fresh leads, while there were also few giveaways from the recently concluded corporate results. Hence, we see the thin market breadth likely to limit the potential upsides to the 1,610 level for now. Beyond that, the other resistance is at the 1,620 level. The supports are at 1,600 and 1,590 respectively.

• Elsewhere, conditions are similar with few impetuses and leads to entice increased retail participation. As a consequence, we also think that the near term upsides are limited among the FBM Small Cap, FBM ACE and FBM Fledgling index stocks.

COMPANY BRIEF

• The merger of Asian operations between Axiata Group Bhd and Norway's Telenor SA, Digi.com Bhd’s major shareholder has been called off. Due to some complexities involved in the proposed transaction, the parties have mutually agreed to end the discussions.
• Apart from the sheer complexity of the deal, Indonesia’s reluctance to give its blessings as it sees Norway as being part of the European Union’s (EU) pressure on palm oil imports, leaves the potential merger untenable.(The Star Online)

• DWL Resources Bhd is partnering Sri Lanka's mobile provider, Mobitel (Private) Ltd to secure government-related projects there. It will form a joint venture (JV) company with Mobitel, seeking to provide the Sri Lanka Integrated Placement Solution (SLiFPS) to the Bureau of Foreign Employment of the Government of Sri Lanka. The JV company, to be incorporated in Sri Lanka, will have an initial paid-up capital of LKR100,000 (approximately RM2,300). DTSB will initially hold a 51.0% stake, with Mobitel the rest. (The Edge Daily)

• Bumi Armada Bhd has managed to find a buyer for its Armada Perdana FPSO in Century Energy Services Ltd for US$40.0 mln (approximately RM167.2 mln). However, the Armada Perdana FPSO was previously estimated to have a book value of up to RM300.0 mln. (The Edge Daily)

• Sapura Energy Bhd’s oil & gas field — SK408 production sharing contract (PSC) development project located offshore Sarawak, will start generating earnings soon after it has signed a gas sales agreement with Petroliam Nasional Bhd (Petronas) on 6th September 2019.

• The SK408 PSC is expected to produce first gas by the end of 2019 with some 400 mln cu. ft. of natural gas per day. By 2023, the block is expected to produce up to 1,000 mln cu. ft. of natural gas per day. (The Edge Daily)

• Supermax Corporation Bhd has earmarked RM1.13 bln in capital expenditure (capex) to double its production capacity by mid-2024. The glove maker aims to raise its production to 44.06 bln pieces per year from 21.75 bln pieces as at 31st December 2018. The capex will be used to upgrade, rebuild and replace old lines and fund the construction of new plants. (The Edge Daily)  

Source: Mplus Research - 10 Sept 2019