Limited Gains Amid Trade Uncertainties

• The FBM KLCI snapped its losing streak after trading mostly in the positive territory, supported by gains in IHH Healthcare, alongside the lower liners – the FBM Small Cap (+0.4%), the FBM Fledgling (+0.1%) and the FBM Ace (+0.1%). Majority of the broader market also tracked the key-index and closed higher, with the exception of Technology (-0.3%), Energy (-0.3%) and Utilities.

• Market breadth turned positive as advancers overtook the decliners on a ratio of 421-to-379 stocks. Traded volumes, however, fell 11.0% to 2.37 bln shares amid extended foreign selling.

• Main Board winners include Petronas Dagangan (+80.0 sen), IHH Healthcare (+15.0 sen), Press Metal (+11.0 sen), Kuala Lumpur Kepong (+10.0 sen) and Malaysia Airports (+6.0 sen). Broader market gainers, meanwhile, were Quality Concrete (+25.0 sen), Batu Kawan (+24.0 sen), Sarawak Oil Palms (+20.0 sen), Mega First Corporation (+18.0 sen) and Carlsberg (+16.0 sen).

• On the losing end, broader market decliners include Panasonic Manufacturing (-58.0 sen), Ajinomoto (- 32.0 sen), BAT (-30.0 sen), Favelle Favco (-12.0 sen) and Shangri-La Hotels (-12.0 sen). Nestle (-40.0 sen), Tenaga Nasional (-18.0 sen), Petronas Gas (-8.0 sen), Hong Leong Bank (-6.0 sen) and PPB Group (-4.0 sen) also weighed on the blue-chip gauge.

• Japanese equities mostly retreated, as the Nikkei (-0.1%) remained downward pressured, weighed down by losses in industrial and healthcare sectors. In contrast, the Hang Seng Index rebounded from its intraday low – led by gains in selected heavyweights amid light window-dressing activities, while the Shanghai Composite held on to its fifthday winning streak and closed 0.2% higher. Most ASEAN stockmarkets also followed suit and closed in the green.

• U.S. stockmarkets closed with minor gains after the U.S. Federal Reserve signaled that it is unlikely to raise its interest rates next year; easing concerns of a tighter monetary policy following the recent upbeat jobs data. The Dow, gained 0.1%, while on the broader market, the S&P500 and the Nasdaq added 0.3% and 0.4% respectively.

• Earlier, major European benchmark indices – the FTSE (+0.03%), the CAC (+0.2%) and the DAX (+0.6%) also ended positively on renewed hopes of a potential trade deal between Washington and China, ahead of the mid-December tariffs deadline on Chinese-made goods.

THE DAY AHEAD

• Despite the generally mixed-to-lower market environment, the key index managed to sprang higher yesterday amid the buying on selective index heavyweights that could mark the start of an overdue rebound from oversold. Albeit yesterday’s rebound was mild, the recovery may power the key index higher as investors bargain hunt from the recent pullback. The accommodative stance from the U.S. Federal Reserve may also provide some support to the rebound.

• We expect the recovery to remain intact taking the key index towards the 1,580 level, but upsides may be capped by the unrelenting foreign fund selling, coupled with the uncertainty over the implementation of next wave of tariffs in Chinese goods over the weekend. Hence, bouts of profit taking may take precedence, limiting the gains. On the downside, the recent low at 1,550 level could hold over the near term.

• In the meantime, the lower liners and broader market shares are turning toppish amid the surge at the start of the month with retail participation also turned cautious on the recent run-up. Despite that, the rotational interest may keep the FBM Small Cap, FBM Fledgling and FBM ACE indices afloat.

COMPANY BRIEF

• BIMB Holdings Bhd has proposed a group restructuring exercise to unlock value for its shareholders and transfer its listing status to its subsidiary, Bank Islam Malaysia Bhd. This listing will allow Bank Islam to better position itself in the Islamic finance and Islamic capital market and capitalise on the growth of both markets in its efforts to expand its customer base.

• The restructuring will involve a proposed placement of new shares to raise RM800.0 mln. Together with internal cash, the proceeds will go towards settlement of outstanding sukuk with Lembaga Tabung Haji. Meanwhile, the group will also undertake a scheme of arrangement (SOA) to pay warrant holders a cash consideration for the cancellation of their exercise rights in respect to the warrants.

• As part of the restructuring, BIMB will undergo an internal reorganisation whereby its stockbroking and leasing subsidiaries will be sold to Bank Islam, based on the latest audited net asset value of the units. Subsequently, BIMB's entire shareholdings in Bank Islam and Syarikat Takaful Malaysia Keluarga Bhd (STMKB) will be distributed by way of distribution-in-specie to the shareholders of BIMB.

• BIMB will undergo a capital reduction while Bank Islam will undertake a share consolidation. This is in order to match BIMB's outstanding shares so that the distribution will be on a one-for-one basis. BIMB's listing status will then be transferred to Bank Islam, which will emerge as the one and only pure-play full-fledged Islamic financial institution to be listed in the region and enhance its corporate stature. (The Star Online)

• Velesto Energy Bhd has bagged a US$30.0 mln contract from Abu Dhabi's Mubadala Petroleum LLC to provide jackup drilling rig to undertake drilling services for the Pegaga development drilling programme. Velesto’s indirect wholly-owned subsidiary Velesto Drilling Sdn Bhd has received a letter of award from Mubadala Petroleum’s entity MDC Oil & Gas (SK 320) Ltd for the proposed services.The contract is to drill seven firm wells with an expected commencement date envisaged for 2Q2020. (The Edge Daily)

• Damansara Realty Bhd (DBhd) and its Johor-based partner have launched its latest commercial development in Tampoi, Johor Bahru, Business Boulevard @ Central Park.The project worth an estimated gross development value of more than RM150.0 mln is the third instalment of Aliff Square and will comprise 68 units of freehold commercial shop-office lots to be developed in four phases over the next five years. (The Edge Daily)

• M3 Technologies (Asia) Bhd has fixed the issue price for the placement of 58.4 mln placement shares at 3.6 sen per share. The issue price represents a discount of 10.0% to the five-day volume weighted average price (VWAP) of its shares up to 10th December 2019 of four sen. Based on the issue price, the company could raise up to RM2.1 mln via the placement exercise. (The Edge Daily)

Source: Mplus Research - 12 Dec 2019