Stocks To Spring Up Again

• The FBM KLCI (+0.1%) staged a mild recovery after trading in a choppy trading session following the release of the country’s 3Q2019 economic data. Despite that, the local bourse fell 0.9% W.o.W, owing to the earlier weakness in the middle of the week. The lower liners finished mostly higher as the FBM Fledgling and FBM ACE gained 0.2% and 0.5% respectively, while the broader market closed mixed.

• Market breadth stayed negative as decliners outnumbered the advancers on a ratio of 423-to382 stocks, while 454 stocks traded unchanged. Traded volumes, however, rose 22.0% to 2.69 bln shares as trading activities were centered on the lower liners.

• Key winners on the FBM KLCI were IHH (+11.0 sen), Tenaga (+8.0 sen), AmBank (+5.0 sen), Petronas Chemicals (+4.0 sen) and CIMB (+2.0 sen). Notable advancers on the broader market were Fraser & Neave (+26.0 sen), Heineken Malaysia (+16.0 sen), Apex Healthcare (+14.0 sen), Batu Kawan (+10.0 sen) and Carimin Petroleum (+8.0 sen).

• In contrast, BAT (-18.0 sen), Ayer Holdings (-14.0 sen), Dutch Lady (-12.0 sen), Harrison Holdings (-11.0 sen) and Telekom (-7.0 sen) slipped on the broader market. Nestle (-RM1.30) continue to top the local bourse decliners list, followed by Petronas Dagangan (-20.0 sen), KLK (-12.0 sen), Malaysia Airport Holdings (-7.0 sen) and DiGi (-6.0 sen).

• Asia’s benchmark indices rebounded as the Nikkei rose 0.7% on the weaker Japanese Yen. Despite the 3Q2019 GDP sank 2.9% Y.o.Y – the first contraction since 3Q2009, the Hang Seng Index (+0.01%) managed to hold onto its gains, while the Shanghai Composite slipped 0.6% as new home price growth stood at 7.8% Y.o.Y – the slowest pace in 14 months. ASEAN stockmarkets, meanwhile, finished mostly higher last Friday.

• U.S. stockmarkets finished at fresh record high levels as the Dow (+0.8%) rose above the 28,000 psychological level, boosted by renewed trade hopes between the U.S. and China, coupled with the strong retail sales data that rose 0.3% Y.o.Y in October 2019. Similarly, the S&P 500 added 0.8% with ten of the eleven major sectors in the positive, while the Nasdaq closed 0.7% higher.

• Earlier, major European indices – the FTSE (+0.1%), CAC (+0.7%) and DAX (+0.5%) all advanced, taking cue from the positive performance across Asian equities. Market sentiment was also boosted by the optimism over the progress in the U.S.-China trade negotiations.

The Day Ahead

• Conditions on Bursa Malaysia are still essentially mixed with the index heavyweights seeing support, while the lower liners and broader market shares are consolidating amid their toppish conditions. That being said, there could still be renewed interest on Bursa Malaysia stocks after global stocks rallied last Friday on optimism over an initial trade deal between the U.S. and China.

• We think that the positivity in global equities will permeate to Malaysian stocks at the start of the week as the key index stocks play catch up to the overseas gains and this could provide some fresh impetus for it to re-challenge the 1,600 resistance level. However, we also see the 1,600 level as the major resistance for now as we expect selling into strength activities to provide a lid on the upside potential over the near term. The other resistance is at the 1,610 level, while the supports are pegged at the 1,590 and 1,580 levels respectively.

• We also think that the lower liners and broader market shares could mount further gains on the improved market undertone that could instigate bouts of fresh buying interest. However, we also think that the upsides will be accompanied by bouts of quick profit taking activities that could also limit their upsides.

MACRO BRIEF

• Malaysia's economy expanded by 4.4% Y.o.Y in 3Q2019, which was line with a Bloomberg survey, but slower than 2Q2019’s 4.9% Y.o.Y improvement due to slower growth in the service (+5.9% Y.o.Y vs. 6.1% Y.o.Y in 2Q2019) and manufacturing (3.6% Y.o.Y vs. 4.3% Y.o.Y in 2Q2019) sectors. The construction sector was contracted 1.5% Y.o.Y on lesser work on residential and nonresidential buildings.

• Private final consumption expenditure grew by 7.0% Y.o.Y (2Q2019: +7.8% Y.o.Y) driven by the consumption of food & non-alcoholic beverages, transport and restaurants & hotels to lead the gains. Meanwhile, inflation rose 1.3% Y.o.Y in 3Q2019. (The Star Online)

COMPANY BRIEF

• Press Metal Aluminium Holdings Bhd has signed an agreement to acquire a 25.0% equity stake in PT Bintan Alumina Indonesia (PT BAI) for US$80.2 mln (RM333.4 mln).

• The latter, which is building a mln-tonne alumina refinery plant in Indonesia’s Bintan island, with plans for a second phase, will provide Press Metal with a long-term supply of alumina via the purchase of not less than 50.0% of alumina produced before completion of the project and up to 1.5 mln tonnes upon completion of the acquition. (The Star Online)

• UWC Bhd is proposing a one-for-two bonus issue of 183.4 mln shares. This follows the group’s reporting of its 1QFY20 net profit of RM11.2 mln, on the back of revenue worth RM46.9 mln. UWC has also declared a final dividend of three sen per share for FY19, payable on 30th January 2020. (The Edge Daily)

• Willowglen MSC Bhd’s 3Q2019 net profit jumped 30.6% Y.o.Y to RM3.2 mln, from RM2.5 mln a year ago, backed by higher profit margins, despite a 6.4% Y.o.Y fall in revenue to RM29.1 mln, from RM31.1 mln earlier.

• Consequently, cumulative 9M2019 net profit also surged 50.3% Y.o.Y to RM11.1 mln, from RM7.4 mln last year, although revenue lost nearly 11.0% Y.o.Y to RM87.1 mln, from RM97.8 mln in the previous corresponding year. (The Edge Daily)

• PIE Industrial Bhd’s 3Q2019 net profit spiked 78.8% Y.o.Y to RM17.5 mln, from RM9.8 mln in the same period last year, on the back of lower administrative and distribution expenses, higher gain from forex transactions and higher income from other investments. Revenue for the quarter, however, fell 4.6% Y.o.Y to RM166.5 mln, from RM174.4 mln previously.

• Similarly, 9M2019 net profit rose 20.9% Y.o.Y to RM28.1 mln, compared to RM23.3 mln last year, while revenue climbed 8.1% Y.o.Y to RM498.7 mln, from RM461.3 mln in 9M2018. (The Star Online)

• A Klang-based property developer, PNSB Acmar Sdn Bhd has filed a lawsuit worth RM711.8 mln against Prasarana Malaysia Bhd and Sunway Construction Group Bhd (SunCon), claiming that the LRT3 project construction works have encroached into its development site. (The Edge Daily)

• GDB Holdings Bhd has been awarded a contract worth RM67.9 mln to undertake construction works as the main contractor for the Hap Seng Star Mercedes-Benz 3S (sales, service and spare parts) Autohaus at Setia Alam, Selangor. (The Edge Daily)

• India’s Supreme Court refused to remove a barrier to the takeover of embattled hospital chain Fortis Healthcare Ltd by Malaysian operator IHH Healthcare Bhd, which is already Fortis’ largest shareholder with a 31.0% equity stake.

• The court held Fortis’ founders — Malvinder Singh and Shivinder Singh — guilty of contempt of court and indicated that it could start similar proceedings against the company, according to a judgment on 15th November 2019.

• The decision effectively stops IHH’s open offer to Fortis shareholders which would have brought its holdings in India’s second largest hospital company to above 50.0%. (The Star Online)  

Source: Mplus Research - 18 Nov 2019