Poised For A Positive End To The Week

• Selling activities remain unabated as the FBM KLCI (-0.7%) took another beating to trend lower for the third consecutive session as the key index closed at a fresh four-year low yesterday. The lower liners, however, trended mostly higher as the FBM Fledgling (+0.1%) and FBM Small ACE (+0.9%) rebounded, while the broader market remained mostly negative.

• Market breadth stayed negative as losers outnumbered the winners on a ratio of 500-to-298 stocks. Traded volumes, however, rose 17.5% to 2.18 bln shares as investors continue to trim their holdings in Malaysian equities.

• More than two-thirds of the key index components fell, dragged down by Nestle (-70.0 sen), Public Bank (-42.0 sen), Hong Leong Financial Group (-18.0 sen), PPB Group (-18.0 sen) and KLK (- 14.0 sen). Amongst the biggest decliners on the broader market include Dutch Lady (-RM1.20), BAT (-30.0 sen), Heineken (-26.0 sen), Cahya Mata Sarawak (-16.0 sen) and UMW Holdings (-11.0 sen).

• Notable gainers on the broader market were Guan Chong (+19.0 sen), Pentamaster (+19.0 sen), Lafarge (+9.0 sen), Petra Energy (+9.0 sen) and SAM Engineering & Equipment (+9.0 sen). Censof added 1.5 sen after bagging a contract from the Inland Revenue Board of Malaysia. There were only four winners on the FBM KLCI – Malaysia Airport Holdings (+6.0 sen), IHH (+3.0 sen), Petronas Chemicals (+1.0 sen) and Sime Darby (+1.0 sen).

• Japanese stockmarkets spiraled down as the Nikkei (-2.0%) extended its losses on heightened global trade tension. The Hang Seng Index (+0.3%) managed to recover all its intraday losses on reports that the government might use the Emergency Regulations Ordinance to enact a ban on face masks at public gatherings to deter protesters. ASEAN stockmarkets, meanwhile, remained in red on Thursday close, while China markets remain closed for the National Day holidays.

• U.S. stockmarkets rebounded from a twoday slump as the Dow rose 0.5% after the Institute for Supply Management’s Index of the health U.S. services sector came in 52.6 – signalling the economy is still in expansion mode. Likewise, the S&P 500 added 0.8% with all eleven major sectors in the positive, led by the energy sector (+1.3%), while the Nasdaq closed 1.1% higher.

• European markets closed on a mixed note as the CAC added 0.3%, taking cue from the positive start on Wall Street. The FTSE, however, fell 0.6% after the U.K. Services PMI dropped to 49.5 in September 2019 – below market consensus of 50.3, while Germany’s stockmarkets were closed for the German Unity Day public holiday.

The Day Ahead

• After the past two day’s steep falls that left the key index falling to its fresh fouryear low, we think that there could be a rebound over the near term that will also allow the key index to end the week on a more positive note.

• We see part of the impetus coming from the overnight recovery on Wall Street, while the oversold conditions on the FBM KLCI could also prompt some bargain hunting activities to help the key index post a recovery. For now, however, we think that the recovery could be on the mild side as there remains wariness over the market’s direction. 
   
• At the same time, market interest remains on the thin side and with fresh buying remaining elusive for now, we see benign gains ahead. The near term targets are at 1,572 and 1,580 levels respectively, while the supports are at 1,557 and 1,550 respectively.

• The FBM Small Cap index has held up well despite the turbulent market environment, together with the FBM ACE index, as there continues to be rotational buying interest. The slightly improved market undertone will help to shore up the above indices further over the near term, even as fresh buying remains largely insipid over the near term.

COMPANY BRIEF

• Axiata Group Bhd is reportedly requesting its unit, edotco Group Sdn Bhd to seek deals to enter new markets or expand in Southeast Asia and South Asia and may even consider selling a stake if attractive large investment opportunities arise. (The Star Online)

• Hibiscus Petroleum Bhd is planning to participate in an oil exploration project previously awarded to its 11.7%-owned Australian associate, 3D Oil Ltd in the offshore Gippsland Basin, Australia. The group’s indirect unit, Carnarvon Hibiscus Pty Ltd (CHPL) has exercised an option to take up a 50.0% interest in the exploration permit there. (The Edge Daily)

• Maxis Bhd and Huawei Technologies Malaysia have signed an agreement for the provisioning of the 5G service network in Malaysia. (The Star Online)

• Sedania Innovator Bhd is planning to venture into the electronic sports or esports industry via a special purpose vehicle (SPV), in which it will take a 42.6% stake in and to launch a global e sports tournament and media network.

• It has entered into a share subscription agreement with iCandy Interactive Ltd and the former chief of eSports.com AG, Michael Broda, to take part in the venture. iCandy will also have a 42.6% interests in the SPV — Esports Pte Ltd (ESPL), which was incorporated in Singapore, while Broda will own the remaining 14.9% stake. (The Star Online)

• Eastland Equity Bhd plans to raise up to RM2.7 mln via a private placement of up to 10.0% of its total issued shares to third party investor(s) to be identified later. The funds received will be used to repay bank borrowings, fund working capital, as well as finance the group’s property development activities. (The Edge Daily)

• TDM Bhd has denied that a company linked to the group is involved in any open burning in Indonesia. The group reiterated that it practises the RSPO principles and is strictly governed by the no burning policy, thus there is no need for the use of fire in the preparation of new planting, replanting or any other development. (The Edge Daily)  

Source: Mplus Research - 4 Oct 2019