Volatility Returns

• Tracking the sharp gains on Wall Street overnight, the FBM KLCI (+0.9%) staged a quick recovery as the key index lingered in the positive territory for the entire trading session yesterday. Market sentiment also turned upbeat – the FBM Small Cap, FBM Fledgling and FBM ACE, all rose, while the broader market finished on a positive note with the exception of the financial services sector (-0.4%)

• Market breadth stayed positive as gainers outnumbered losers on a ratio of 510-to-397 stocks. Traded volumes gained 1.3% to 4.47 bln shares as investors bargain hunt on recent beaten down stocks.

• Anchoring the winners on the blocal bourse was PPB Group (+60.0 sen), followed by MISC (+48.0 sen), KLK (+42.0 sen), Petronas Chemicals (+37.0 sen) and Top Glove (+18.0 sen). Notable gainers on the broader market include Carlsberg (+66.0 sen), PPB Group (+60.0 sen), Fraser & Neave (+52.0 sen) and MPI (+50.0 sen). Scientex added 41.0 sen after delivering strong set of quarterly earnings.

• In contrast, Genting Plantations (-28.0 sen) and UWC (-17.0 sen), UMW Holdings (-16.0 sen), Pentamaster (- 15.0 sen) and Greatec (-12.0 sen) fell on the broader market. There were only five decliners on the key-index, namely Nestle (-80.0 sen), Hong Leong Financial Group (-10.0 sen), Public Bank (-10.0 sen), Am Bank (-5.0 sen) and Axiata (-3.0 sen).

• Major Asian bourses were downbeat as volatility kicks in amid the unabated concern over Covid-19 outbreak with the Nikkei sinking 2.3% yesterday. The Shanghai Composite slipped 0.9%, while the Hang Seng Index finished 0.6% lower ASEAN equities, meanwhile, finished mostly lower yesterday.

• Wall Street endured another rout overnight as major indices dipped into the bear market territory after the World Health Organization declared Covid1-19 as a pandemic. The Dow sank 5.9%, while the S&P 500 slipped 4.9% with all eleven major sectors in the red, while the Nasdaq finished 4.7% lower.

• Major European equities – the FTSE (- 1.4%), CAC (-0.6%) and DAX (-0.4%), all retreated, in tandem with the weakness across global equities. This came despite Bank of England’s move to cut their interest rates, coupled with expectations that the European Central Bank may roll out further stimulus measures.

The Day Ahead

• Strong gains in selected index heavyweights shored the FBM KLCI = higher as the key index outperformed its’ yesterday. We take the recent recovery as a mere technical rebound, deeming it as a dead cat bounce as we expect the recovery to be short lived and weakness to resume. The selling pressure on Wall Street that pushed major indices into the bear market territory may see weakness permeates to the Asia stockmarkets today.

• With conditions appears more choppy, we reckon that Bursa Malaysia is likely to kick start the day on a sluggish note. Renewed volatility may pressure the local bourse towards the recent support level at 1,415. Should that level failed to hold, further weakness will be located at the 1,400 level. We continue to expect a recovery will be mild amid the lack of fresh catalyst. The lower liners and broader market shares continue to see nibbling but the rebound was accompanied by quick profit taking activities. Market sentiment remains choppy as we reckon any further recovery may continue to see quick profit taking activities on the horizon. Amid the renewed market choppiness, we advocate a defensive stance, favouring the REIT sector, while the unabated Covid-19 situation may see glove manufacturers continue their upward trajectory.

COMPANY BRIEF

• Scientex Bhd’s 2QFY20 net profit rose 32.2% Y.o.Y to RM97.5 mln, driven by higher sales and favourable product mix in the manufacturing segment, as well as increased property development billings. Revenue for the quarter increased 19.3% Y.o.Y to RM914.4 mln.

• For 1HFY20, cumulative net profit rose 40.0% Y.o.Y to RM178.4 mln. Revenue for the period added 21.0% Y.o.Y to RM1.79 bln. (The Star)

• Eversendai Corp Bhd has secured RM490.1 mln worth of projects in the Middle East including a 55-storey luxurious commercial tower in Morocco and two commercial towers in Qatar, which is expected to benefit from investments made in preparation for the 2022 FIFA World Cup and Qatar National Vision 2030.

• The group also won a facility control centre and an administrative building project for a well-known metro station in Saudi Arabia as the country’s economy appears to be the most active player in the Middle East construction sector. Eversendai’s outstanding construction order book stands at a near all-time high of RM2.69 bln. (The Edge)
• Kejuruteraan Asastera Bhd (KAB) has secured a contract worth RM28.6 mln from China Construction Development (Malaysia) Sdn Bhd.

• The contract is from 11th March 2020 until 9th January 2024. KAB said it will act as subcontractor for design, supply, delivery, installation, testing and commissioning, and maintenance of electrical and extra low voltage services works for Agile Tropicana Development Sdn Bhd on three blocks of serviced apartments in Kuala Lumpur. (The Edge)

• Malaysia Airports Holdings Bhd (MAHB) saw a 23.4% Y.o.Y decline in the number of passengers to 6.2 mln that travelled through its airports in February as the Covid-19 outbreak weighed on passenger traffic. Both international and domestic travellers saw reductions. (The Edge)

• Multi Sports Holdings Ltd plans to acquire shareholdings in Malaysian shoe wholesaler RESTA Enterprise Sdn Bhd via a sale share agreement (SSA) to be executed at a later date. The Practice Note 17 company announced that the proposed deal will enable it to turn itself around. RESTA is a shoe wholesaler in Malaysia established in 2001 and focuses on school shoes with the brand ABARO. It is also the owner of the brand VION, which focuses on Malaysian women’s shoes. (The Edge)

• Sime Darby Plantation Bhd may undertake corporate exercises, including request for proposals to seek consultancy and financial advice, in relation to its business operations in Indonesia. The plantation company is in the ordinary course of reviewing its assets and such a corporate exercise would be taken to help the company make decisions later. (The Edge)  

Source: Mplus Research - 12 Mar 2020