Still Searching For A Fresh Direction

• The FBM KLCI (+0.1%) recouped all its intraday losses to close marginally higher, boosted by the portfolio rebalancing activities from institutional players last Friday. Still, the key index fell 0.2% W.o.W. The lower liners – the FBM Small Cap (+0.1%), FBM Fledgling (+0.3%) and FBM ACE (+1.1%), all trended higher, while the broader market closed mostly positive, led by the health care sector (+1.0%).

• Market breadth was negative as losers outpaced advancers on a ratio of 394- to-380 stocks, while 449 stocks closed unchanged. Traded volumes, however, added 35.8% to 3.10 bln shares on the portfolio rebalancing activities from institutional players.

• Maybank (+9.0 sen) led the local bourse winners list, followed by Ambank (+8.0 sen), Petronas Gas (+8.0 sen), Tenaga (+8.0 sen) and Hap Seng Consolidated (+7.0 sen). Notable gainers on the broader market were Scientex (+43.0 sen), Carlsberg (+36.0 sen), Dutch Lady (+28.0 sen), KLCC (+17.0 sen) and Muhibbah Engineering (+17.0 sen).

• Consumer products giants like Ajinomoto (-38.0 sen), BAT (-32.0 sen) and Fraser & Neave (-18.0 sen) fell, while Shangri-La slipped 17.0 sen. KESM Industries fell 2.0 sen after delivering a weak set of quarterly earnings. Meanwhile, Nestle (-60.0 sen) continue to top the key index decliners list, while KLK (-34.0 sen), Hong Leong Financial Group (-12.0 sen), DIGI (-9.0 sen) and Hong Leong Bank (-8.0 sen) were among the biggest losers.

• Asian benchmark indices finished mostly higher as the Nikkei (+0.2%) chalked up minor gains after Japan’s inflation rate slowed to +0.5% Y.o.Y in August 2019. The Shanghai Composite (+0.2%) extended its gains, but the Hang Seng Index (-0.1%) remain bogged down by uncertainties over its political crisis. ASEAN stockmarkets, meanwhile, closed mostly higher last Friday.

• U.S. stockmarkets retreated as the Dow (- 0.6%) extended its losses on the prolonged trade uncertainty after a Chinese delegation canceled plans to visit farms in Montana. Likewise, the S&P 500 fell 0.5%, dragged down by the consumer discretionary sector (-1.2%), while the Nasdaq finished 0.8% lower.

• Major European indices advanced as the CAC and DAX gained 0.6% and 0.1% respectively, taking cue from the mostly positive sentiment in Asian stockmarkets. The FTSE, however, fell 0.2% on the on-going uncertainties surrounding Brexit.

The Day Ahead

• Although the key index managed to head higher last Friday, the market’s undertone remains one of wariness in the absence of a definitive market direction. There are also few impetuses to provide the much needed lift to the market to tip higher and under the prevailing environment, it appears that the indifferent trend is likely to prevail for longer.

• The wariness is due in part to the impending decision on Malaysian government bond’s inclusion in the World Government Bond index next month as their exclusion could result in a selldown of MGS that could also lead to a fresh bout of capital flight and the corresponding weakness to the Ringgit.

• At the same time, there are also fewer corporate developments to attract fresh buying in Malaysian stocks and this is likely to keep the FBM KLCI rangebound within the 1,590 and 1,610 levels over the near term. Beyond the above levels, the other support and resistance levels are at 1,580 and 1,620 respectively.

• Similarly, many lower liners and broader market shares trapped in a sideway trend and are also looking for fresh catalysts to allow them to break out of the indifferent trend. With no fresh compelling leads, however, we see the FBM Small Cap, FBM Fledgling and FBM ACE Market stocks to likely remain rangebound for now.

COMPANY BRIEF

• Sunway Bhd is planning to buy 47 parcels of prime freehold land totalling 11.8 ac. in Mutiara Bukit Jalil for RM15.0 mln. The group has inked a contract with Sterling Paradise Sdn Bhd for the proposed land acquisition, which will come with an approved development order. Moving forward, Sunway plans to launch the project with a planned gross development value (GDV) of RM36.7 mln by the 2H2020 with completion slated for 2026. (The Star Online)

• Poh Huat Resources Holdings Bhd‘s 3QFY19 net profit grew 22.5% Y.o.Y to RM11.3 mln, from RM9.2 mln a year ago, owing to an increase in shipment of furniture from both its Malaysia and Vietnam operations as the US-China trade war resulted in orders moving from China to Southeast Asia. Quarterly revenue, meanwhile, gained 13.7% Y.o.Y to RM164.9 mln, from RM145.0 mln last year.

• Subsequently, cumulative 9MFY19 net profit rose 37.3% Y.o.Y to RM36.1 mln, from RM26.3 mln in the previous corresponding period, while revenue grew 17.7% Y.o.Y to RM508.9 mln, from RM432.4 mln earlier. The group has also declared a second interim dividend of two sen per share, payable on 14th November 2019. (The Star Online)

• KNM Group Bhd has been awarded a US$5.4 mln (RM22.4 mln) contract to supply shell and tube heat exchangers to an oil refinery run by Thai Oil Public Co Ltd in Thailand's Sri Racha district within the province of Chonburi.

• The purchase order (PO) from PSS Netherlands B.V. Sharjah Branch for a clean fuel project at the oil refinery, is for a period of not exceeding 10 months from the date of the PO. (The Edge Daily)

• Unisem (M) Bhd has postponed the planned closure of its plant in Batam, Indonesia to March 2020, instead of 30th September 2019 to service final orders for some customers, albeit the operations at the plant have reportedly been scaled back. (The Edge Daily)

• MAA Group Bhd is planning to acquire a 90.0% equity interest in Scholastic IB International Sdn Bhd (SIB) for RM27.0 mln in cash, from Scholastic Ventures Sdn Bhd and PAC Edu KL Sdn Bhd, which holds 51.0% and 39.0% respectively. The remaining 10.0% interests, meanwhile, is owned by the Johannians Leadership Foundation. The proposed acquisition is expected to give the group a stable stream of income and profits, moving forward. (The Star Online)

• Willowglen MSC Bhd has clinched a contract worth RM13.8 mln to provide maintenance for an Integrated Security and Operation Surveillance System to SP PowerAssets Ltd, a Singapore company. The project is not renewable and will run from 1st October this year until 30th September 2020. (The Edge Daily)

• TH Plantations Bhd has extended the suspension of its Chief Financial Officer (CFO), Mohamed Azman Shah Ishak by an additional 10 days to 30th September 2019, in a bid to further evaluate Mohamed Azman’s reply to the showcause letter issued to him and also to facilitate the necessary action to conclude the matter. (The Edge Daily)  

Source: Mplus Research - 23 Sept 2019