More Upside Potential

• The FBM KLCI ended the session higher, lifted by gains in Petronas-linked heavyweights and bargain-hunting in Axiata. All the lower liners – the FBM Small Cap (+0.9%), FBM Fledgling (+0.1%) and FBM Ace (+0.6%) also advanced, alongside the broader market.

• Market breadth was positive as winners overturned the losers on a ratio of 422- to-359 stocks, while traded volumes added 6.2% to 2.33 bln shares, driven by the prevailing positive sentiment in the offshore markets.

• On the winners list, heavyweights include Petronas-affiliated stocks like Petronas Dagangan (+RM1.68), Petronas Chemicals (+23.0 sen) gained, followed by Hong Leong Financial Group (+34.0 sen), Hap Seng Consolidated (+19.0 sen) and Kuala Lumpur Kepong (+12.0 sen). Other advancers, meanwhile, include Magni-Tech (+38.0 sen), Batu Kawan (+30.0 sen), Deleum (+17.5 sen), Gamuda (+12.0 sen) and Heineken (+12.0 sen).

• In contrast, consumer products bellwethers like Dutch Lady (-40.0 sen) and Fraser & Neave (-10.0 sen) retreated, alongside Carlsberg (-42.0 sen), Chin Teck Plantations (-17.0 sen), and Malaysian Pacific Industries (-11.0 sen). Significant decliners among the index heavyweights, meanwhile, were Malaysia Airports (-7.0 sen), Tenaga Nasional (-6.0 sen), Ambank (-5.0 sen), Maxis (-3.0 sen) and Dialog (-2.0 sen).

• Hong Kong equities outperformed their regional peers on Wednesday after the Hong Kong Stock Exchange launched an unsolicited takeover bid for the London Stock Exchange. The Hang Seng index (+1.8%) closed strongly, alongside the Nikkei (+1.0%), which was lifted by the weaker Yen. The Shanghai Composite, however, ended lower together with the broader market in China as it continues to suffer from increased U.S. tariffs. Meanwhile, ASEAN stockmarkets were generally upbeat at the end of the session.

• Wall Street – the Dow (+0.9%), the Nasdaq (+0.7%) and the S&P 500 (+1.1%) ended on an upbeat note, boosted by expectations of lower interest rate, while investors cheered China’s move to exempt certain U.S. products from higher tariffs ahead of the U.S.-China trade negotiation next month.

• In the Eurozone, major European indexes continued to be uptrend-oriented on easing trade concerns despite fears of a hard-Brexit. The FTSE added 1.0% - led by strong gains in London Stock Exchange following a US$36.6 bln takeover bid by its Hong Kong counterpart. Similarly, both the CAC (+0.4%) and the DAX (+0.7%) also advanced.

THE DAY AHEAD

• Even after a tentative start, the key index managed to chalk-up decent gains yesterday, as expected, which we see continuing over the near term due to the calmer market environment after incremental progress is made on the U.SChina trade dispute with the former delaying the implementation of higher tariffs on China made goods by two weeks in October.

• At the same time, markets are expecting more interest rate stimuli to be announced over the near term that could provide further impetus for stock prices to head higher, in our view. The above positives will help to provide the much needed catalysts for Malaysian equities to maintain their upward trajectory which may now see the key index making a pass at the 1,610 level. Further above, the resistance is at the 1,620 level, while the supports are at 1,600 and 1,590 respectively.

• The lower liners and broader market shares are also making headway after an indifferent trend of late and we also think that the gains could persist over the near term with retail players gradually reentering the market amid the calmer market conditions.

COMPANY BRIEF

• Sime Darby Bhd has acquired the business assets and properties of three luxury car dealerships in Sydney, Australia for A$112.0 mln (about RM321.0 mln) in a bid to expand in the country's retail luxury segment. The dealerships represent the BMW, MINI, Volkswagen, Jaguar and Land Rover marques. With the purchase, Sime Darby Motors will have enhanced presence and brand visibility in Parramatta, which is one of Sydney's most recognised automotive retail locations. (The Star Online)

• Tex Cycle Technology (M) Bhd’s joint venture with UK’s Culzean Generation Ltd is likely to contribute an estimated 20.0% to its net profit beginning 2021. Tex Cycle and Culzean had recently formed a 50:50 joint venture company, Culzean W2E Ltd to build and manage renewable electrical energy plant (REEP) projects in the UK.

• The first plant will be a 2MW REEP in Ellesmere Port, Cheshire, which is expected to commence operations by end-2020. Apart from the 2MW electricity production, the plant will also process 30,000 tonnes of refuse derived fuel (RDF) per annum. Each plant will require a capital expenditure of an estimated £5.0 mln (RM25.8 mln), to be funded by UK financial houses and secured by Culzean W2E. (The Star Online)

• Icon Offshore Bhd has secured a contract from Petronas Carigali Sdn Bhd to provide an anchor handling tug and supply vessel for the latter's production operations. The RM25.6 mln contract took effect on 16th August 2019 and would be for 730 days. YTD, it has secured eight contracts worth RM174.0 mln, inclusive of extension projects. (The Star Online)

• Tadmax Resources Bhd has received the government's approval to go ahead with the development of the 1,000MW to 1,200MW combined cycle gas and turbine power plant in Pulau Indah. (The Star Online)

• Inari Amertron Bhd signed an agreement with PCL Technologies Inc to set up a joint-venture to secure, manage and manufacture optical transceivers and other related products in Penang. Under the shareholders' subscription, the entity to be formed will have an initial capital of RM20.9 mln with Inari and PCL subscribing to 30.0% and 70.0% stake in the entity respectively. (The Edge Daily)

• Hubline Bhd is acquiring a 75.0% stake in property investment company, Absolute Privilege Sdn Bhd for RM16.4 mln to secure tenancy for its dry bulk operations. Absolute Privilege’s principal assets are two pieces of land in Miri, Sarawak, occupying 8,218.2 sq.m. and 6,074 sq.m. worth RM21.6 mln and RM16.4 mln respectively. (The Edge Daily)

Source: Mplus Research - 12 Sept 2019