Volatility To Stay

• The FBM KLCI (+0.1%) edged higher after erasing all its intraday losses, lifted by Petronas Chemicals after EPF has raised their stake to 8.0% in the former. The majority of lower liners ended on an upbeat tone after rebounding from intraday low. The broader market meanwhile, was generally positive at Thursday’s closing bell.

• Market breadth recovered as advancers overturned the decliners on a ratio of 516-to-350 stocks. Traded volumes, however, fell 7.0% to 2.78 bln shares as selling activities accelerated.

• Leading the FBM KLCI winners lists were Petronas Chemicals (+16.0 sen), Public Bank (+10.0 sen), Maybank (+6.0 sen), Tenaga Nasional (+6.0 sen) and Press Metal (+5.0 sen). Notable gainers on the broader market include Fraser & Neave (60.0 sen), Carlsberg (+58.0 sen), Heineken Malaysia (+58.0 sen), Ayer (+21.0 sen) and KKB Engineering (+17.0 sen)

• On the opposite trade, broader market losers were BAT (-24.0 sen), Genting Plantations (-21.0 sen), United Malacca (-10.0 sen), Amway (-9.0 sen) and Mesiniaga (-9.0 sen). Meanwhile, less than half of the key-index members declines, mainly Nestle (-30.0 sen), PPB Group (-26.0 sen), Hong Leong Bank (- 22.0 sen), Hap Seng Consolidated (-13.0 sen) and Petronas Gas (-12.0 sen).

• Asian equities rallied on Thursday as the U.S. markets turn sharply higher overnight, despite the Covid-19 cases showing no signs of slowdown. The Nikkei was boosted by 1.1% with ten major sector rose. The Hang Seng index and the Shanghai Composite also surged 2.1% and 2.0% respectively ASEAN equities closed higher, but the Jakarta Composite slipped 0.3%.

• The Dow slammed 3.6% lower as Covid- 19 fears, erasing most of the previous sessions’ election results induced rally. In addition, the U.S. Dollar retreated against the Japanese Yen and Euro Currency had impacted to the decline on both the S&P 500 (-3.4%) and Nasdaq (-3.1%).

• European shares posted losses for the fourth consecutive session on the back of concern over Covid-19’s impact over global economy growth as the FTSE fell 1.6% to 6,705.43 points, while the DAX (- 1.5%) turned lower. The CAC (-1.9%) also ended negatively, together with its European peers.

The Day Ahead

• A calmer market condition propelled the FBM KLCI higher for the third straight session as investors continue to nibble on the recent slump. The recent recovery was mainly in line with the gains across global equities stemmed by the U.S. political developments, coupled with the measures undertaken by several central banks across the globe. Nevertheless, we remain cautious on the recent rebound as foreign funds continue offload their holdings in the Malaysian equities.

• It appears that the volatility on Wall Street remain unabated – continues to demonstrate wild swings, fuelled by concerns over the Covid-19 outbreak. Under the prevailing market conditions, we think that stocks across Bursa Malaysia may take a hit as the key index’s recent streak of recovery could stall. For now, the 1,455 level will continue to play a major role as the support level. In the meantime, we see any gains to be measured towards the 1,495 and 1,510 levels respectively. Elsewhere, the quest of rebound for the lower liners might also take a breather on the back of a potential pullback in the cards. As it is, we adopt a defensive stance, favouring stocks in the glove manufacturing sector as well as stocks that offer higher yields, to cushion the impact of volatility, coupled with the low interest rate environment.

COMPANY BRIEF

• Globalmariner Offshore Services Sdn. Bhd has filed a suit seeking RM74.8 mln from TH Heavy Engineering Bhd, its 80.0%-owned Floatech (L) Ltd and nine others. To recap, TH Heavy said Globalmariner was a 20.0% shareholder of Floatech.

• Globalmariner was previously TH Heavy's consultant on the acquisition of floating, production, storage and offloading (FPSO) vessel and was also involved as TH Heavy's project management team for the Layang FPSO project. (The Star)

• Careplus Group Bhd has determined the final disposal consideration for its 50.0% stake in loss-making subsidiary Careplus (M) Sdn Bhd (CMSB) at RM27.0 mln versus its previous indicative consideration of RM26.8 mln. Careplus is expected to record a pro forma gain on the proposed disposal of RM16.3 mln. (The Edge)

• Automated test equipment manufacturer, Pentamaster Corporation Bhd has proposed a one-for-two bonus issue of up to 237.4 mln new shares to be undertaken at a date to be determined later. Barring any unforeseen circumstances the exercise is expected to be completed before the end-June 2020. (The Edge)

• Dagang NeXchange Bhd (DNeX) has secured a five-year pan Malaysia umbrella contract from Petronas Carigali Sdn Bhd for drilling works, which involve providing equipment and services for directional drilling, measurement while drilling, and logging while drilling. The contract, which was awarded to its 97.5%-owned unit DNEX Oilfield Services Sdn Bhd, is on a call out basis until 15th January 2025. (The Edge)

• Integrated engineering supporting services provider UWC Bhd’s 2QFY20 net profit surged 18.7% Y.o.Y to RM13.3 mln, mainly attributed to the stronger demand for its test equipment from semiconductor and life science industries. Revenue for the quarter improved 17.1% Y.o.Y to RM54.9 mln.

• The group’s 1HFY20 net profit amounted to RM24.5 mln on the back of revenue at RM101.8 mln. There are no comparative figures for the corresponding period of the preceding year as this is the fourth interim financial report on the consolidated results for the period ended 31st January 2020. (The Edge)  

Source: Mplus Research - 6 Mar 2020