Selling Mode Continues

• The FBM KLCI (-0.5%) was painted in red, dragged down by the weakness in the Ringgit and selected banking giants. The lower liners – the FBM Small Cap (- 0.2%), FBM Fledgling (-0.3%) and FBM ACE (-0.6%) reversed previous gains, while the majority of the broader market shares retreated, with the exception of the Energy (+0.4%) and Transportation & Logistics (+0.2%) sectors.

• Market breadth was bearish as losers overturned the winners on a ratio of 509-to-293 stocks. Traded volumes also fell by 21.1% to 1.90 bln shares as investors retreated to the sidelines amid worsening U.S.-Sino China relationships.

• Significant blue-chip losers consists of Public Bank (-18.0 sen), Malaysia Airports (-16.0 sen), PPB Group (-16.0 sen), Nestle (-10.0 sen) and Tenaga Nasional (-10.0 sen). Broader market decliners, meanwhile, were consumer products and services-related stocks like Carlsberg (-44.0 sen), Dutch Lady (- 42.0 sen), Magni-Tech (-32.0 sen) and Panasonic Manufacturing (-26.0 sen).

• In contrast, broader market gainers were Allianz Malaysia (+22.0 sen), United Plantations (+22.0 sen), Chin Teck Plantations (+20.0 sen), Greatech (+9.0 sen) and Keck Seng (+9.0 sen). The only five outperformers on the Main Board - Petronas Gas (+18.0 sen), MISC (+14.0 sen), Petronas Dagangan (+12.0 sen), Sime Darby (+4.0 sen) and Petronas Chemicals (+3.0 sen).

• Hong Kong equities tumbled, weighed down by weakness in technology-linked counters and unabated political uncertainties. The Hang Seng Index (- 0.8%) closed lower on Wednesday, together with the Nikkei (-0.6%). The Shanghai Composite (+0.4%), however, bucked the general downtrend and closed higher in the final hour, while the majority of the ASEAN stockmarkets ended in the red.
   
• Wall Street climbed, lifted by hopes of easing trade tensions. The Dow rose 0.7%, backed by gains in tech giants like Apple (+1.2%) and Microsoft (+1.9%). Meanwhile, on the broader market, the S&P 500 (+0.9%) and the Nasdaq (+1.0%) also rallied, despite giving up some of its gains in the final hour.
• Key European benchmark indexes rebounded following a report that Beijing is still open to a partial trade deal in its upcoming trade negotiations with Washington, despite the recent political disputes between the two superpowers. The FTSE closed slightly higher, intandem with gains in oil and mining stocks, while the DAX and the CAC added 1.0% and 0.8% respectively. THE DAY AHEAD

• Malaysian stocks continue to retreat amid the continuing selldown by foreign funds to leave the key index tethering at the 1,550 support level. The insipid market conditions are also sending more market players to the sidelines with market participation waning once again. Under the prevailing environment, we see the selling spree likely to persist over the near term as sentiments remain frail.

• Compounding the weakness are conflicting reports on the trade negotiations between the U.S and China that is likely to hamper any quick recovery hopes and could also further dampen the already frail market sentiments. Therefore, we expect the key index to waver again and could well breach the 1,550 level to potentially head towards the next support of the 1,548 level. Thereafter, the supports are located at 1,532 and 1,520 levels – the latter was last seen in early 2012. On the other hand, the resistances are at the 1,555 and 1,560 levels respectively.
   
• The lower liners and broader market shares are also pulling back from their recent gains as sentiments turn weaker, which we see persisting over the near term. Technology stocks that have seen strong near term gains are likely to see more profit taking moves amid the trickier market conditions.
  
  COMPANY BRIEF
• Destini Bhd has secured a five-year umbrella contract from Petronas Carigali Sdn Bhd to provide integrated well services for petroleum arrangement contractors on 20th September 2019. The contract does not constitute any commitment by Petronas Carigali to guarantee any minimum quantity of works to be performed by DOS. Any instruction for the works shall be made on a call-out basis through the issuance of work order by Petronas Carigali. (The Star Online)

• Asia Poly Holdings Bhd's indirect 51.0%- owned subsidiary, Asia Poly Bio Gas Sdn Bhd has received the Sustainable Energy Development Authority's (SEDA) feed-in approval to supply electricity in Malaysia under a 21-year contract. Asia Poly Bio Gas' renewable energy installation in Jeli, Kelantan, has an installed electricity generation capacity of 0.5 MW.

• The feed-in-tariff rate for electricity generated at the installation is 38.35 sen per kilowatt hour (kWh). The 21-year contract's effective period starts from the scheduled feed-in tariff commencement date on 30th September 2022 while the distribution licensee for the project is Tenaga Nasional Bhd. (The Edge Daily)

• Moody's Investors Service has affirmed the Baa1 issuer ratings of Sime Darby Plantation Bhd, but revised the outlook to Negative from Stable, owing to its weak credit metrics. It has also cautioned of a potential downgrade should debt levels not be addressed and highlighted the planter’s increasing exposure to environmental, social and governance (ESG) risks.

• The decision to change the outlook to negative reflects Moody’s expectations that Sime Darby Plantation’s credit metrics will remain weak over the next six to 12 months, despite the group’s planned RM1.00 bln debt reduction via asset sale proceeds in 2019. Given Sime Darby Plantation's elevated leverage, any delays in executing its asset monetization plans or the use of proceeds for purposes other than debt reduction would likely result in a negative rating action. (The Edge Daily)

• The Philippine unit of AirAsia Bhd is postponing its initial public offering (IPO) to 2020 or 2021 as it focuses on corporate reorganisation and seeking funds from existing shareholders. The low-cost airline has been looking to go public and raise around US$200.0 mln since 2015, but has shelved its plan several times because of weak markets and volatile oil prices. (The Edge Daily)

• Advancecon Holdings Bhd has bagged an RM49.4 mln subcontract job for road infrastructure projects in Sarawak from the Upper Rajang Development Agency (URDA). The job is under the URDA package 2 for road infrastructure projects in Pelagus/Baleh, proposed new road from Baleh Bridge/Rh Belaja, Ng Benin/Sk Ng. Pelagus to Pelagus Resort. The 29-month job starts on 19th October 2019 and will be completed by 18th March 2022. (The Edge Daily)

• ABM Fujiya Bhd is partnering China’s Jujiang Power Technology Co Ltd (Jeje) to explore and evaluate the possibility of setting up a new battery manufacturing plant in Malaysia worth RM500.0 mln. ABM’s unit, Amalgamated Batteries Manufacturing (Sarawak) Sdn Bhd, has inked a Memorandum of Understanding (MoU) with Jeje for the purpose. (The Edge Daily)
• CAM Resources Bhd said it is not proceeding with its planned seven megaWatt (mW) per hour renewable electrical energy power plant in Taiping, Perak. The decision came after due consideration and further reassessment on the project's feasibility, it decided not to go ahead with the project and will surrender the approved feed-in tariff (FiT) quota for the project to the Sustainable Energy Development Authority (SEDA). The cancellation was mainly to do with costs and lack of expertise. (The Edge Daily)

Source: Mplus Research - 10 Oct 2019