Geopolitical Concerns To Weigh On Sentiments

• The FBM KLCI finished broadly unchanged after clawing back earlier losses, in the absence of fresh trading catalysts and weaker crude oil prices. The lower liners also tracked the keyindex and closed higher on Friday after a last-minute recovery led by the FBM Ace, while the majority of the broader market ended positively.

• Market breadth was still bullish as winners outranked the losers on a ratio of 450-to-324 stocks, while traded volumes jumped 11.8% to 1.89 bln shares, amid buying-interest in O&Grelated stocks.

• Gains in the Main Board were mainly supported by Nestle (+RM1.20), Petronas Dagangan (+20.0 sen), Hap Seng Consolidated (+13.0 sen), Ambank (+12.0 sen) and Kuala Lumpur Kepong (+10.0 sen). BAT (+RM1.70) advanced after announcing plans to trim its workforce and simplify its organisation structure amid mounting debt pressures and illicit cigarettes sales, followed by other broader market gainers like Carlsberg (+28.0 sen), KESM Industries (+26.0 sen), Fraser & Neave (+20.0 sen) and Hengyuan Refining (+19.0 sen).

• On the downside, Dutch Lady (-58.0 sen), Ajinomoto (-26.0 sen), Allianz Malaysia (-20.0 sen), Shangri-La Hotels (-17.0 sen) and Batu Kawan (-8.0 sen) retreated. Large-cap losers, meanwhile, consists of Malaysia Airports (-13.0 sen), Petronas Chemicals (-10.0 sen), Hong Leong Bank (-8.0 sen), MISC (-6.0 sen) and Genting Malaysia (-3.0 sen).

• Key regional benchmark stockmarkets were mostly bearish on Monday, although losses were capped by strong gains in the energy sector, following drone strikes against Saudi Arabia’s oil processing facilities over the weekend. Japanese markets were closed for a holiday. The Shanghai Composite (-0.8%) and the Hang Seng index, meanwhile, ended slightly weaker on renewed concerns of the slowing Chinese economy. In contrast, ASEAN stockmarkets were mixed.

• Wall Street - the S&P 500 (-0.3%) and the Nasdaq (-0.3%) ended lower, while the Dow snapped its winning streak, weighed down by heightened political uncertainties in the Middle East following concerns on the potential crude oil supply disruption.

• Notable European indexes retreated at Monday’s closing bell after the recent attack on Saudi Aramco’s oil facility rattled the markets. The FTSE fell 0.6%, although losses were limited due the rally in oil majors like BP and Shell. The DAX and the CAC, meanwhile, were slightly worst off; closing lower by 0.7% and 0.9% respectively.

The Day Ahead

• Malaysian equities remains rangebound as the prevailing impetuses have failed to entice fresh buying interest to haul-up equity prices. At the same time, market participation has been thin and this is further dampening the market’s upward potential.

• For the near term, however, we still see the insipid trend continuing as geopolitical concerns in the Middle East has heightened. While oil and gas stocks may see increased following due to the strengthening oil prices, conditions elsewhere may be weighed-down by the higher fuel cost, particularly those that are strongly dependent on energy. Therefore, we see the cautious undertone continuing to sap market interest and the key index could again drift below the 1,600 points level, with the next support pegged at the 1,590 level. The resistances are at 1,610 and 1,620 respectively.

• As the index heavyweights dithered, the broader market shares have gained ground of late. However, the fresh market uncertainties could also weigh on their near term performance as we think that quick profit taking activities may set-in amid the increasing market uncertainties.

COMPANY BRIEF

• Petronas Chemicals Group Bhd (PetChem) has completed the acquisition of Da Vinci Group BV after fulfilling the conditions required in the share purchase agreement to complete the acquisition. The acquisition provides a compelling entry point for PetChem to grow into silicones business and enhance its competitive position in attractive endmarkets such as personal care, construction, paints and coatings, electronics, automotive and healthcare, particularly in Asia Pacific region. (The Star Online)

• UEM Sunrise Bhd’s agreement with Ascendas Hospitality Trust to sell the service apartment component of the former’s Aurora Melbourne Central mixed development in Melbourne has fallen through. The agreement has been terminated on a mutual basis following disagreements over the specifications of certain aspects of the apartments earmarked for sale.

• The group said it has received several inquiries about the property, including a written expression of interest from another potential buyer. It is currently evaluating the proposals and hopes to conclude the sale of the service apartments in 4Q2019. (The Edge Daily)
• Ni Hsin Resources Bhd is looking to work together with Satumarin Sdn Bhd to venture into the oil and gas (O&G) industry. Satumarin is involved in providing professional offshore marine services and logistics support, project management and marine technical consultancy services to the O&G industry. The two parties have jointly agreed to commence discussions and negotiations on the details of the structures and terms of the collaboration, which Ni Hsin said will be mutually beneficial and synergistic. (The Edge Daily)

• Malaysia Steel Works (KL) Bhd (Masteel) has proposed a private placement of up to 42.5 mln shares to Macquarie Bank Ltd as the group looks to raise cash to repay its bank borrowings. Masteel will issue up to 42.5 mln placement shares, which represent about 10.0% of its total number of issued shares. The placement is expected to be implemented in multiple tranches within 12 months from the date on which the conditions precedent in the subscription agreement are fulfilled. (The Edge Daily)

• Marine & General Bhd has bagged a contract from Hess Exploration and Production Malaysia B.V. worth approximately RM12.9 mln with an additional RM6.5 mln for an optional extended term. The contract award by Hess is for the provision of a 120 tonne anchor handling tug supply vessel to support Hess' Malaysian drilling operations. The contract is for a primary duration of 12 months from 11th July 12019, with an option for Hess to extend for an additional six months. (The Edge Daily)

• Taliworks Corporation Bhd has received the Individual License pursuant to Section 9 of the Water Services Industry Act 2006 from the Minister of Water, Land and Natural Resources. The agreements entered into by Taliswork in relation to the operations and maintenance of the Sungai Selangor Water Treatment Plant Works Phase 1 (SSP1) have become unconditional and have been completed. With the completion of the agreements, Sungai Harmoni will start operating and maintaining the SSP1 under the Bulk Water Supply Agreement from 13th September 2019. (The Edge Daily)  

Source: Mplus Research - 17 Sept 2019