Consolidation Beckons

• The FBM KLCI (+0.6%) shrugged off the downbeat sentiment in the offshore markets and closed higher, boosted by strong gains in the crude oil prices, although the lower liners were mostly in the red, with the exception of the FBM Ace (+0.8%). On a weekly, the key-index also inched higher, while, the broader market tracked the FBM KLCI on Friday; closing in the positive territory – led by the Construction sector.

• Market breadth was mildly positive as gainers trounced the losers on a ratio of 492-to-447 stocks. Traded volumes, however, rose by 6.6% to 3.58 bln shares, boosted by buying-interest in O&G stocks.

• Significant chart-toppers include Hong Leong and Petronas-affiliated counters like Hong Leong Financial Group (+40.0 sen), Petronas Gas (+20.0 sen), Petronas Dagangan (+16.0 sen) and Hong Leong Bank (+14.0 sen), as well as PPB Group (+14.0 sen). Sin stocks like Carlsberg (+80.0 sen) and Heineken Malaysia (+22.0 sen) closed higher on Friday, followed by Allianz (+30.0 sen), Genting Plantations (+24.0 sen) and Fraser & Neave (+22.0 sen).

• In contrast, Dutch Lady (-14.0 sen), JCBNext (-11.0 sen), Guan Chong Bhd (- 9.0 sen), Master-Pack Group (-9.0 sen) and Lotte Chemical Titan (-7.0 sen) retreated. Underperforming Main Board constituents, meanwhile, were Kuala Lumpur Kepong (-10.0 sen), Tenaga Nasional (-4.0 sen), Malaysia Airports (- 2.0 sen) and Ambank (-2.0 sen).

• Key regional indices closed mostly lower although the pullback was minor; spooked by rising U.S.-Iran tensions after a U.S.-led air strike killed a top Iranian official. The Nikkei was closed for the holidays, while the Shanghai Composite inched lower in the eleventh hour, weighed down by extended selling pressure in Kweichow Moutai. The Hang Seng Index also lost 0.3% amid ongoing political instability, while most ASEAN stockmarkets finished with minor gains.

• U.S. stockmarkets took a dive from the all-time high levels as the Dow sank 0.8% following the renewed geopolitical political tension in the Middle East after Iranian military leader, Qassim Suleimani was killed by a U.S. airstrike. Likewise, the S&P 500 slipped 0.7%, while the Nasdaq finished 0.8% lower.

• Earlier, major European indices finished mostly higher after recovering all their intraday losses to climb into the positive territory in the eleventh trading hour. The FTSE (+0.2%) and CAC (+0.04%) extended their gains as the former was lifted by oil & gas giants like BP (+2.8%) and Royal Dutch Shell (+1.9%), but the DAX sank 1.3%.

The Day Ahead

• Following the retracement across global equities due to the renewed political uncertainty in the Middle East, we think that Bursa Malaysia may kick start the week on a dour note, marking a pullback from a strong two-day start of the year. A pullback will allow the gains to be digested as well as allow the key index to take a breather after the steep gains since last month and to allow the market to gear up for the next wave upwards.

• Therefore, we think that further upsides will become increasingly difficult to come by as a pullback looms with the 1,618- 1,623 levels the next resistances. The main support, meanwhile, is pegged at 1,590 level.  Amid the overbought position, we also think the lower liners and broader market shares are likely to see profit taking activities escalating after their hefty gains recently. However, the rotational plays, particularly in energy stocks following the sharp uptick in crude oil prices will still persist amid a still positive market undertone and this could still keep short-term players invested for longer.

COMPANY BRIEF

• Tadmax Resources Bhd has received a letter of notification from the Ministry of Energy, Science, Technology, Environment and Climate Change to proceed with the development of a 1,200MW combined-cycle gas turbine power plant (CCGT) at Pulau Indah, Selangor.
• The construction period will be approximately three years and the scheduled commercial of the CCGT is envisaged on 1st January 2024. The parties to the project are in accordance to the heads of agreement (HOA) executed on 14th September 2018.

• As outlined by the HOA, Tadmax will hold a 40.0% stake in the project while Worldwide Holdings Bhd and Korea Electric Power Corp will own 35.0% and 25.0% respectively. (The Star Online)

• FGV Holdings Bhd has entered a two-year MoU with MMC Corp Bhd’s Johor Port Bhd to explore buying a 25.0% stake in Fauji Akbar Portia Marine Terminals (FAP), a dry bulk terminal in Port Qasim, Pakistan. FAP extended the invitation to select a potential investor to acquire the stake in order to fund its expansion plan. Johor Port and FGV’s 65:35-owned JV in Pakistan will form another JV to prepare and submit its interest in acquiring the stake. (The Edge Daily)

• Guocoland (Malaysia) Bhd’s 68.0%- owned GLM Emerald Industrial Park (Jasin) Sdn Bhd is selling a plot of 263.8 ha freehold agricultural land in Jasin, Melaka for RM119.3 mln, which will net the group a RM35.4 mln gain. The bulk of the sale proceeds will be used for working capital and/or be distributed to GLM Emerald Industrial Park's shareholders. The disposal is expected to be completed in 1H2020. (The Edge Daily)

• Kejuruteraan Asastera Bhd (KAB) is going to acquire a 30.0% stake or 37,500 shares of in the enlarged issued share capital of LeveragEdge Sdn Bhd (LSB) for RM2.1 mln, to enter the solar energy industry. KAB entered an HoA with LSB and LSB director Loo Chun Keat on 3rd January 2020. LSB provides solar photovoltaic and energy efficiency solutions while Loo is an existing director in LSB. (The Edge Daily)

• London Biscuits Bhd’s external auditor Messrs Nexia SSY PLT (Nexia) resigned on 3rd January 2020, as the audit firm does have enough resources to provide reasonable professional due care to the company and its subsidiaries. Nexia was reappointed at London Biscuits AGM on 29th March 2019 until its next AGM. London Biscuits will take the necessary steps to appoint another firm as its external auditor for the financial year ended 30th September 2019 (FY19). (The Edge Daily)

• Tan Sri Syed Mohd Yusof Tun Syed Nasir has resigned from his position as YLI Holdings Bhd’s independent and nonexecutive chairman today. MD Datuk Samsuri Rahmat will replace Syed Mohd Yusof as chairman. Executive director Seah Heng Ching will become YLI’s new MD. Former Royal Malaysian police counter-terrorism unit head Datuk Jalaludin Ibrahim has been appointed as its independent and non-executive director. Meanwhile, executive director Ali Sabri Ahmad resigned on 3rd January 2020.

• Ali Sabri has ceased to control any voting shares in YLI’s largest shareholder Suasana Karisma Sdn Bhd, which holds a 31.6% stake. Seah has become a substantial shareholder in YLI through Suasana Karisma, with Samsuri maintain his stake in the vehicle. (The Edge Daily)  

Source: Mplus Research - 6 Jan 2020