Staying Subdue

• The FBM KLCI erased all its previous session’s gains as the key index lingered mostly in negative territory before closing 0.5% lower on Friday amid the lack of fresh catalyst. The lower liners - the FBM Small Cap (-2.1%), the FBM Fledgling (-1.0%) and the FBM ACE (- 0.9%), all tumbled, while the health care sector outperformed the negative broader market.

• Market breadth turned negative as decliners outpaced advancers on a ratio of 649-to-251 stocks. Traded volumes fell 4.9% to 2.65 bln shares as investors turning increasingly cautious following the lower liners’ recent run-up.

• More than half of the key index constituents fell, dragged down by Nestle (-RM1.00), PPB Group (-42.0 sen), Public Bank (-34.0 sen), Petronas Gas (-22.0 sen) and Malaysia Airport Holdings (-21.0 sen). Meanwhile, KKB Engineering (-13.0 sen), Rapid Synergy (-13.0 sen), Gamuda (-12.0 sen), GCB (- 12.0 sen) and Master-Pack Group (-12.0 sen) remained downbeat on the broader market.

• In contrast, notable advancers on the broader market were Aeon Credit (+16.0 sen), ABM Fujiya (+10.0 sen), Kossan (+9.0 sen), Spritzer (+9.0 sen) and Batu Kawan (+8.0 sen). Key winners on the FBM KLCI were health care giants like Top Glove (+27.0 sen), Hartalega (+17.0 sen), IHH Healthcare (+15.0 sen), while KLK and Maxis climbed 8.0 sen and 5.0 sen respectively.

• Key regional benchmark indices pulled back with the Nikkei sank 2.7% amid the sharp cut to Japan’s 4Q2019 GDP forecasts data by -1.4% on the possibility of the cancellation of Tokyo Olympics. The Hang Seng index slipped 2.3% with all ten major sectors declined, while the Shanghai Composites also slipped 1.2%. ASEAN stockmarkets were all painted in the red.

• U.S. stockmarkets ended lower as the Dow (-0.9%) extended its losses, dragged down by the coronavirus contagion fears, coupled with OPEC and its’ allies failure to strike a production deal. On the broader market, the S&P 500 (-1.7%) trended lower to slip below the 2,900 support level, while the Nasdaq ended 1.8% lower.

• Earlier, major European indices – the FTSE (-3.6%), CAC (-4.1%) and DAX (- 3.3%) all tumbled. The weakness stemmed from investors move to take cover in the perceived safety of bonds and gold.

THE DAY AHEAD

• Malaysian stocks appeared to have lost momentum on the final trading day of last week after three consecutive sessions of gains to leave the key index to close in an indifferent mode. Follow through buying was also largely absent as bouts of quick profit taking activities tempered the upsides.

• As it is, the market is finding it difficult to sustain a meaningful recovery as gains are met by the continuing sell down across the globe, a trend that has established since the Covid-19 outbreak. Adding on to the downside was OPEC and its’ allies failed to strike a deal to curb production, implying a fresh wave of supply may flood the market in April – leading to the slump in crude oil prices

• Therefore, we think the key index’s weakness will return over the foreseeable future. Under the prevailing environment, we think the market would remain downbeat with a base around the 1,495- 1,510 level. At the same time, there are few noteworthy domestic leads for market players to follow with the recently concluded results reporting season still showing weak earnings growth.

• The lower liners and broader market shares also traded in a lackluster manner as investors remain largely cautious on the market sentiment. Once again, we continue to opt for a defensive stance, favouring stocks in the glove manufacturing sector and stocks that offer higher yields in view of the low interest rate environment that saw OPR rate falling to the lowest level in a decade.

COMPANY BRIEF

• TRC Synergy Bhd has announced that the contract price for a part of the remodelled Light Rail Transit Line 3 (LRT3) has been revised to RM536.8 mln vs. its earlier price tag of RM760.6 mln. Its wholly-owned subsidiary Trans Resources Corp Sdn Bhd signed a supplemental agreement with joint venture company MRCB George Kent Sdn Bhd (MGK).

• Known as package TD2, it involves the construction of the Johan Setia depot (phase 2) and associated works for the line from Bandar Utama to Johan Setia. As a result of the amendment to the project and a new completion date of November 2023, MGK is now the main contractor appointed by Prasarana Malaysia Bhd. (The Star)

• Vsolar Group Bhd's major shareholder Asiabio Capital Sdn Bhd has reduced its undertaking commitment to subscribe for the company's rights shares by more than half to RM3.0 mln from RM6.3 mln previously. The move is in view of the recent market price performance of Vsolar shares, which has been on a downward trend. (The Edge)

• Sinotop Holdings Bhd plans to acquire a 30.0% stake in Television Airtime Services Sdn Bhd (TAS) for RM7.0 mln, which it intends to satisfy by cash and share issuance. The proposed acquisition comes with a profit after tax guarantee of not less than RM9.0 mln over three years.

• TAS currently own 20.0% stakes in egovernment solutions provider, Dapat Vista (M) Sdn Bhd (DVSB). While the remainder stake in DVSB is held by HeiTech Padu Bhd, TAS is in the midst of acquiring 60% from Heitech Padu that will raise its DVSB stake to 80.0%. (The Edge)

• The Employees Provident Fund (EPF) board has re-emerged as a substantial shareholder in MyEG Services Bhd, over a year after it ceased as the e-government service provider's substantial shareholder in December 2018. This comes after EPF bought 3.0 mln MyEG shares on 4th March 2020, which raised its share tally in MyEG to 173.7 mln shares, representing a 5.0% stake. (The Edge)

• Datuk Ong Choo Meng is now Rubberex Corp (M) Bhd's largest shareholder with a 31.3% stake, just 1.7% shy of the 33.0% threshold that would trigger a mandatory general offer for the remaining shares he does not own in the company.

• This follows an execution of a share sale agreement on 28th February 2020, which gave him 26.7% in Rubberex, a stake he raised further via a series of share acquisitions he undertook last week. Ong is a non-independent executive director at Hextar Global Bhd, and a nonindependent and non-executive director at SCH Group Bhd. (The Edge)

Source: Mplus Research - 9 Mar 2020