More Moderate Conditions

• The FBM KLCI gapped-up and closed higher on Monday, boosted by global trade optimism and expectations of increased government support for Malaysian businesses. All the lower liners climbed, with the FBM ACE (+0.7%) at the helm, together with all the twelve broader market sub-sectors.

• Market breadth was positive as winners beat the losers on a ratio of 487-to-367 stocks, while traded volumes spiked 30.8% to 2.99 bln shares on easing global trade tension and Budget euphoria.

• More than half of the key-index constituents rallied, led by Nestle (+40.0 sen), Hong Leong Bank (+28.0 sen), Hong Leong Financial Group (+28.0 sen), Petronas Gas (+28.0 sen) and Petronas Dagangan (+26.0 sen). On the same note, broader market outperformers were BAT (+36.0 sen), AME Elite Consortium (+25.0 sen), Fraser & Neave (+24.0 sen), Heineken Malaysia (+20.0 sen) and Dufu (+19.0 sen).

• In contrast, Genting Plantations (-18.0 sen), Allianz (-16.0 sen), Scientex (-14.0 sen), Shangri-La Hotels (-14.0 sen) and Dutch Lady (-12.0 sen) retreated. Meanwhile, the only three decliners on Bursa Malaysia were Tenaga Nasional (- 8.0 sen), Top Glove (-2.0 sen), Ambank (-1.0 sen) and IOI Corporation (-1.0 sen).

• Japanese stockmarkets closed for the public holiday, while the majority of the Asian shares rallied after the U.S. and China reached a temporary trade truce last Friday. The Shanghai Composite extended its winning streak into the fifth-straight session, while the Hang Seng index closed 0.8% higher, alongside the broader ASEAN markets. 
   
• Wall Street - The Dow (-0.1%), the S&P 500 (-0.1%) and the Nasdaq (-0.1%) retreated in-tandem with the rebound in gold prices amid mild profit-taking activities as Washington and Beijing attempts to iron out the finer details of the long-anticipated initial trade deal.

• Earlier, key European indices also retreated, weighed down by uncertainties of the U.S.-China trade agreement ahead of the corporate earnings season. The FTSE fell 0.5% amid the unabated political turmoil surrounding Brexit, while the DAX and the CAC closed down by 0.2% and 0.4% respectively.

The Day Ahead

• It has been a while since the key index managed to tip higher with substantive gains yesterday amid the improved sentiments for equities. The improvement also allowed the key index to stage a rebound from its bout of oversold.

• With the market conditions improving, there appears to be more upside potential over the near term as bargain hunting is appearing after the recent selldown. However, we also think that the gains may be tempered by the still uncertain developments in the U.S-China trade front where details of the supposed agreement are still scarce.

• Therefore, we think that there could be some mild hesitation that could limit the near term gains. On the upside, we think the key index could retest the 1,572 resistance, which is followed by the 1,575 level. The supports, on the other hand, are at 1,560 and 1,550 respectively.

• Elsewhere, the broader FBM Small Cap index is seemingly hitting a near term ceiling after it recent gains that have left it overbought as well. Therefore, we think the near term tentativeness will increase with a pullback also a possibility to adjust from overbought. The same conditions could also extend to the other lower liners with increased cautiousness.

COMPANY BRIEF

• Ni Hsin Resources Bhd will invest a total of RM10.0 mln in Satumarin Sdn Bhd in a bid to expand into the marine, oil and gas sector. It has agreed to acquire 490,000 shares or 49.0% stake in the oil and gas marine services provider for RM735,000 cash and will further invest RM9.3 mln in the company over a period of five years.
   
• Satumarin is expanding into new specialised services and aims to be the leading marine specialist player in the region and is venturing into new market sector such as marine warranty survey – an essential service to reduce the risk of loss or damage in high value marine construction and transportation projects. (The Star Online)

• Carlsberg Brewery Malaysia Bhd has appointed Stefano Clini as its Managing Director, effective 26th October 2019, who will succeed outgoing Managing Director Ted Akiskalos. Currently, Clini is Managing Director of Carlsberg Vietnam Breweries Ltd, a position held since September 2017. (The Edge Daily)

• Enra Group Bhd is acquiring a 15 year-old oil and chemical tanker with a net tonnage of 10,216 tonnes for US$9.3 mln or RM38.9 mln cash from Copenhagenbased Maersk Product Tankers A/S, for the purchase of the tanker known as Maersk Edgar. (The Edge Daily)

• G3 Global Bhd has submitted a tender offer to Technology Park Malaysia for the development of a piece of land there. It was responding to a report which mentioned G3 and its partners had secured a piece of land in TPM to build their iconic AI park. (The Edge Daily)

• HB Global Ltd, a China-based frozen food maker, will no longer be classified as a PN17 company effective 15th October 2019 after Bursa Malaysia had approved an application by the company for a waiver from complying with Paragraph 8.04(3)(a) and Practice Note 17 of the Main Market listing requirements. (The Edge Daily)

• Axis Real Estate Investment Trust (Axis REIT) is planning to acquire a singlestorey warehouse-cum-office building in Johor for RM65.0 mln cash from Rancak Beta Sdn Bhd. It will be funded by its existing bank financing and it will not assume any liability pursuant to the property. Thus, the proposed debt financing will increase Axis REIT’s gearing ratio to 38.7% of audited total assets as at 31st December 2018. (The Edge Daily)  

Source: Mplus Research - 15 Oct 2019