Selling Somewhat Overdone

• The selling continued on the FBM KLCI, weighed down by the weaker Ringgit and energy prices amid fears of slowing demand. The lower liners retreated on follow-through selling pressure, together with all of the broader market constituents.

• Market breadth was still negative as decliners beat the advancers on a ratio of 738-to-281 stocks. Traded volumes also rose by 4.9% to 3.95 bln shares on as investors fled risky assets in favor of safe haven assets.

• Significant key-index laggards on Monday include Nestle (-RM1.10), Hap Seng Consolidated (-23.0 sen), Kuala Lumpur Kepong (-22.0 sen), Hartalega (- 12.0 sen) and Hong Leong Bank (-12.0 sen), while other losers were Dutch Lady (-98.0 sen), KESM Industries (-87.0 sen), Panasonic Manufacturing (-54.0 sen), Allianz (-48.0 sen) and Heineken Malaysia (-44.0 sen).

• On the positive side of the trade, BLD Plantation (+40.0 sen), Kluang Rubber (+18.0 sen), Dufu Technology (+17.0 sen), Hume Industries (+15.0 sen) and Hong Leong Industries (+12.0 sen). Bursa Malaysia movers, meanwhile, were MISC (+13.0 sen), Digi (+6.0 sen), Maxis (+5.0 sen), Hong Leong Financial Group (+2.0 sen) and Press Metal (+2.0 sen).

• Chinese stockmarkets plunged after an extended Lunar New Year holiday, tracking the weakness in global equities. The Shanghai Composite (- 7.7%) was beaten down, although losses were cushioned by increased fiscal stimulus by the PBOC, in a bid to boost liquidity and stability in the market. The Hang Seng Index eked out gains, supported by gains in Tencent and AIA Group, but the Nikkei (-1.0%) closed in the red, alongside majority of the ASEAN markets.

• Wall Street - the Dow (+0.5%), the S&P 500 (+0.7%) and the Nasdaq (+1.3%) recoup last sessions’ losses and closed higher as investors cheered stronger-than expected manufacturing growth, albeit gains were still capped by ongoing concerns of increasing death tolls due to the Wuhan virus outbreak.

• U.K. stockmarkets rebounded on Monday on easing coronavirus fears as the FTSE posted 0.6% gains on its first trading session after Brexit. Both the DAX and the CAC also closed 0.5% higher as investors digested fresh economic data.

The Day Ahead

• Downward pressure stemmed from the coronavirus outbreak continues to dictate market sentiment as the FBM KLCI recorded its’ ninth straight losing streak yesterday. Although there were signs of mild bargain hunting activities, the resumption in trading of Chinese equities that took a sharp dive saw the weakness permeated to most of its’ regional peers.

• Under the prevailing environment, we expect the downside bias to remain but after its streak of losses, we think the sell down is nearing overdone. Therefore, we think that the selling could abate over the near term and the losses could be cushioned by fresh bouts of bargain hunting activities. On the downside, the 1,515 level is likely to provide a firmer support, followed by the 1,500 level. The resistances, meanwhile, are at 1,535 and 1,550 respectively.

• The lower liners and broader market shares have also managed to recoup most of their intraday losses yesterday. We may see fresh buying to take place from majority of the stocks that sank into the oversold position. For now, the recovery is expected to be mild in absence of fresh leads, whilst the coronavirus outbreak situation remained unresolved.

COMPANY BRIEF

• Ideal United Bintang International Bhd's sub-subsidiary Solaris Consortium Sdn Bhd has signed a memorandum of understanding with the Penang Port Commission (PPC) to redevelop Swettenham Pier Cruise Terminal in Penang on a built, operate and transfer basis. The development measures 2.4-ac on PPC’s land that entails redesigning and refurbishing the three buildings namely Godown 5, Godown 7 and Godown 8 located at the six century-old seafront between the pier and Tanjung City Marina.

• Phase 1 of the project is expected to be completed by 2021, while Phases 2 and 3 will be completed in 2022. Upon completion, the development is expected to have a total lettable area of 60,900 sqf. The expansion works of the terminal will also allow it to cater for up to 1.7 mln passengers a year and accommodate up to 12,000 passengers at any one time. (The Star Online)

• AirAsia Group Bhd group CEO Tan Sri Tony Fernandes and group executive chairman Datuk Kamarudin Meranun have relinquished their executive roles for an indicative two-month period, amid a corruption probe in relation with AirAsia’s purchase of Airbus aircraft which has now garnered the attention of at three Malaysian authorities. (The Edge Daily)

• Datasonic Group Bhd has been awarded a facial recognition e-gate supply contract worth RM7.0 mln by the Ministry of Home Affairs. Datasonic won the one-year contact, which starts on 15th February 2020, through an open tender participated by 18 companies on October 2019. Concurrently it is required to furnish a performance bond amounting to RM348,656 to the ministry for a two-year period ending on 14th February 2022. (The Edge Daily)

• DRB-Hicom Bhd’s 50.1%-owned Proton Holdings Bhd recorded a total of 8,506 new registrations of its vehicles in January 2020, representing a 20.2% Y.o.Y jump. The automaker’s market share rose by 4.9% to 19.5%, compared to the same period last year. (The Edge Daily)

• Fraser & Neave Holdings Bhd’s (F&N) 1QFY20 net profit grew 4.5% Y.o.Y to RM128.4 mln, driven by better operating profit from its Thai operations that offset decline in its Malaysian business. Revenue for the quarter rose 10.0% Y.o.Y to RM1.11 bln. (The Edge Daily)

• Kinsteel Bhd has been granted a further three-month extension by Bursa Malaysia Securities Bhd, until 30th April 2020, to submit a regularisation plan to the relevant authorities. This marks the third postponement by the Practice Note 17 (PN17) company. (The Edge Daily)

• LPI Capital Bhd’s 4Q2019 net profit added 3.1% Y.o.Y to RM86.6 mln, thanks to better results from its general insurance business. Revenue for the quarter rose 2.6% Y.o.Y to RM399.3 mln.

• For 2019, cumulative net profit gained 2.7% Y.o.Y to RM322.4 mln. Revenue for the year added 5.9% Y.o.Y to RM1.60 bln. A dividend of 43 sen per share for the quarter was announced. (The Edge Daily)

• Mudajaya Group Bhd’s indirect 18.9%- owned Indian associate RKM Powergen Pte Ltd has commenced power supply of 550MW to PTC India Ltd. This supply supplements RKM’s current power sales of 350MW to Uttar Pradesh Power Corporation Limited (UPPCL), bringing the total power sales from the 1,440MW coal-fired plant to a total of 900MW. (The Edge Daily)  

Source: Mplus Research - 4 Feb 2020