No End To Weakness

• The FBM KLCI was traded in a positive manner as the key index gained 0.8% on Tuesday. Adding on the positive sentiment was announcement of Bank Negara Malaysia decided to reduce the Overnight Policy Rate (OPR) by 25 basis points to 2.5%. The lower liners – the FBM ACE (-0.2%) and the FBM Fledgling (-0.2%) slipped, while the FBM Small Cap (+0.1%) reported gains at Tuesday’s close.

• Market breadth has recovered moderately as winners defeat the losers on a ratio of 456-to-410 stocks. Traded volumes, however, dropped 28.8% to 3.09 bln shares as selling activities accelerated.

• More than half of the key index components advanced, led by Public Bank (+68.0 sen), followed by Hong Leong Bank (+58.0 sen), Nestle (+50.0 sen), KLK (+20.0 sen) and RHB Bank (+15.0 sen). On the broader market gainers were Heineken (+RM1.16), BAT (+84.0 sen), Carlsberg (+72.0 sen), Allianz (+46.0 sen) and KESM Industries (+38.0 sen)

• In contrast, notable decliners on the broader market were Batu Kawan (-44.0 sen), Aeon Credit (-40.0 sen), Panasonic Manufacturing (-38.0 sen), Master-Pack Group (-30.0 sen) and Ta Ann Holdings (-19.0 sen). Meanwhile, the Main board losers were Malaysia Airports Holdings (-13.0 sen), CIMB (-10.0 sen), IHH (-8.0 sen), Maxis (-7.0 sen) and Hartalega (- 3.0 sen).

• Asia benchmark indices closed mostly lower as the Nikkei (-1.2%) fell with only the communication services sector rose. The Shanghai Composite gained 0.7%, but the Hang Seng Index (-0.03%) remains bogged down. ASEAN equities, meanwhile, ended mostly higher yesterday.

• U.S. stockmarkets turned downbeat as the Dow (-2.9%) erased most of its’ previous session gains amid the unexpected move from the U.S. Federal Reserve to cut the benchmark interest rate by 50 basis points. On the broader market, the S&P 500 slipped 2.8% to barely hold above the 3,000 psychological level, while the Nasdaq dive 3.0% lower.

• Leading European equity markets mostly higher was the DAX that added 1.1% to 11,985.4 points, while the CAC outperformed its benchmark peers to close 1.1% higher. The FTSE rose 0.4% led by gains in industrials sector.

The Day Ahead

• The FBM KLCI re-acted positively on the firmer performance on Wall Street overnight but sentiment remained cautious on the developments over the Covid-19. In the meantime, Bank Negara has announced 25 basis points of interest rate cut to cushion the downside risk of Covid-19 outbreak on the economy’s growth also contributed to the positive performance on the local bourse. This marks the second time the Malaysia central bank has trim the benchmark interest rate in 2020 – a move in line with dovish measures undertaken by several central banks across the globe.

• With volatility appears to be unabated following the slump on Wall Street overnight, the weakness may permeate to the local bourse with key index likely to head towards the support located at the 1,455 level. At the same time, we remain cautious that any recovery will be mild with key resistance on the local bourse pegged at the 1,495 and 1,510 levels respectively.

• The lower liners were traded in an indifferent manner as quick profit taking activities sent all three indices to erase all their intraday gains. The conclusion of quarterly financial reporting season saw earnings growth remain lackluster, suggesting that market sentiment could remain downbeat over the foreseeable future. For that, we adopt a defensive approach, favouring the REIT sector for the yield play against the low interest rate environment.

COMPANY BRIEF

• The newly-launched Tuanku Muhriz Power Station at Jimah has the capacity to generate 2,000 megawatts (MW) of electricity, enabling Tenaga Nasional Bhd (TNB) to generate 25,981 MW of electricity in peninsular Malaysia. The RM12.0 bln power station, covering approximately 104-ha. and formerly known as Jimah East Power, is 70.0% owned by TNB, with Japanese companies Mitsui and Co Ltd and Chugoku Electric Power each holding a 15.0% stake.

• The plant, which has been fully operational since 27th December 2019 is TNB’s third coal-fired plant to use ultrasuper critical (USC) technology, which contributes to the national grid system’s stability. The other two are Manjung 4 and Manjung 5 at the Sultan Azlan Shah Power Station in Lumut, Perak. (Bernama)

• Malayan Banking Bhd (Maybank) has announced a 25 basis points reduction in its Base Rate (BR) and Base Lending Rate (BLR) effective 5th March 2020 following Bank Negara Malaysia's decision to cut the overnight policy rate (OPR) by 25 basis points to 2.5%.
• Maybank’s BR will be lowered from 2.75% p.a. to 2.50% per annum while its BLR will be revised from 6.40% p.a. to 6.15% per annum. Similarly, the Islamic Base Rate and Base Financing Rate will be reduced by 25 basis points from 2.75% per annum to 2.50% per annum and from 6.40% per annum to 6.15% per annum respectively. In line with the revision, Maybank and Maybank Islamic’s deposit rates will also be adjusted downwards by 25 basis points effective the same day. (The Star)
• Ranhill Holdings Bhd has secured three contracts worth a total of RM110.1 mln including an RM87.9 mln pipereplacement job in Johor, to build an extension Package Plant at Sultan Iskandar Water Treatment Plant (RM20.0 mln) and to supply five portable water treatment plants (RM2.3 mln). (The Edge)

• Paramount Corp Bhd has set its property sales target at RM1.00 bln for the financial year ending 31st December 2020, helped by some RM1.20 bln worth of launches planned for the year. Last year, the group sold some RM692.0 mln worth of properties, below its RM1.00 bln target on the weak demand for its commercial properties. (The Edge)

• Bermaz Auto Bhd’s wholly-owned subsidiary Bermaz Motor Sdn Bhd is introducing a range of 2020 Mazda vehicle models with updated features and conveniences, in conjunction with Mazda Motor Corp's (Mazda Japan) 100th anniversary celebration. (The Edge)

• CB Industrial Product Holding Bhd (CBIP) has acquired the remaining 0.6% stake in palm oil trader TPG Oil and Gas Sdn Bhd for RM7.0 mln. TPG Oil and Gas (TPGOG) is now the wholly-owned subsidiary of CBIP. (The Edge)

• TDM Bhd has proposed to raise up to RM38.0 mln in a private placement to fund its ongoing projects such as the expansion of its healthcare business and the construction of staff quarters, as well as the acquisition of THP-YT Plantation Sdn Bhd. (The Edge)

• Cabnet Holdings Bhd has bagged a subcontract worth RM11.9 mln to undertake extra-low voltage works and a fully-integrated environmental monitoring and control system. The subcontract is set to be completed on 31st October 2022. (The Edge)

• FGV Holdings Bhd has appointed Datuk Najmuddin Abdullah as group chief strategic communication officer. Before this, he was heading strategic communications at MRT Corporation Sdn Bhd, and prior to that at Malaysia Airlines Bhd. (The Edge)

• Axiata Group Bhd's unit edotco Group Sdn Bhd has partnered with the Telecom Infra Project (TIP) to advance connectivity in urban and underserved areas and communities. With this partnership, edotco will deploy and test OpenRAN 4G sites at selected high traffic areas in Malaysia, and to conduct trials of Open Radio Access Network technologies and innovative smart poles with shortwave radio capabilities. (The Edge)

• Straits Inter Logistics Bhd signed a binding definitive agreement with Labuan Port Authority to operate and manage the Labuan Liberty Terminal, after announcing the six-year contract in January. The contract serves as an opportunity for the company to venture into port management services, which complements its existing oil trading and bunkering services business. (The Edge)  

Source: Mplus Research - 4 Mar 2020