Silver Lining Ahead

• The FBM KLCI (-1.6%) continue its’ free fall for the sixth straight session, taking cue from the continuous selling activities on Wall Street overnight, coupled with the rising risk of recession. The lower liners - the FBM Small Cap (- 6.9%), FBM Fledgling (-5.2%) and FBM ACE (-6.7%), all remain down beat, while the broader market were painted in red with the energy sector (-9.3%) being the worst performer after crude oil prices sank to the lowest level since 2002.

• Expectedly, market breadth remained negative as losers trounced gainers on a ratio of 849-to-170 stocks. Traded volumes, however, rose 19.4% to 4.17 bln shares as selling activities remain unabated.

• Nestle (-RM1.20) topped the local bourse’ decliners list, followed by Hong Leong Financial Group (-82.0 sen), Malaysia Airport Holdings (-55.0 sen), Hong Leong Bank (-44.0 sen) and Public Bank (-36.0 sen). Notable decliners on the broader market were Panasonic (- RM2.50), Carlsberg (-RM1.60), Heineken (-RM1.60), Batu Kawan (-RM1.42), and Aeon Credit (-RM1.13).

• On other side of the trade, significant advancers on the broader market include MPI (+28.0 sen), Country Height Holdings (+15.0 sen), Eurospan Holdings (+14.0 sen), Sand Nisko Capital (+12.0 sen) and Kluang Rubber (+9.0 sen). Outperformers on the FBM KLCI were IHH (+35.0 sen), PBB Group (+30.0 sen), Hartalega (+18.0 sen), Sime Darby Plantations (+18.0 sen) and Top Glove (+10.0 sen).

• Asia benchmark indices continued their downtrend on concern over the economic impact from Covid-19 pandemic continue to pile pressure on sentiment as the Nikkei contracted 1.0%. The Shanghai Composite fell 1.0%, while the Hang Seng Index dipped 2.6%. Asia stockmarkets, meanwhile, finished mostly lower yesterday.

• U.S. stockmarkets managed to recover from their intraday losses as the Dow gained 1.0% on mild bargain hunting activities, particularly in energy and technology shares as investors continue to monitor on developments in regards to Covid-19. On the broader market, the S&P 500 added 0.5%, while the Nasdaq jumped 2.3%.

• Earlier, European stockmarkets - the FTSE (+1.4%), CAC (+2.7%) and DAX (+2.0%), all rebounded as the former was boosted by the Bank of England’s surprise interest rate cut to 0.1% increased the bond-buying program to by additional £200.0 bln to £645.0 bln. At the same time, the European Central Bank has outlined a “Pandemic Emergency Purchase Programme” that will use €750.0 bln to purchase securities to help support the European economy.

The Day Ahead

• There is no change to our near term view as we continue to think that the market is still dour with measures undertaken by financial institutions failed to provide a lift. After shedding close to 250 points in recent weeks, we reckon a rebound is due on the FBM KLCI on the back of stimulus measures announced by central banks across the globe, including Bank Negara’s move to cut the statutory reserve requirement ratio by 100 basis points.

• Although we think that a rebound is already due after the FBM KLCI’s incessant falls, any rebound is likely to be weak. Therefore, the 1,250 level will serve as the immediate hurdle for now. In the meantime, the continuing weakness is likely to see the FBM KLCI attempting to find support at the 1,200 level, but if it gives way, the 1,150 level could serve as the next major support.

• Elsewhere, we re-iterate our stance on the weak sentiments dominating the lower liners and broader market shares, in tandem with the insipid conditions among the index heavyweights. Although valuations have turned appealing, a firm recovery is still off the table for the time being.

COMPANY BRIEF

• WCT Holdings Bhd has secured a RM1.20 bln construction contract from Jendela Mayang Sdn Bhd (JMSB) for the development of Pavilion Damansara Heights Development Parcel 2. The contract is expected to be completed within a period of 42 months, commencing in May 2020. (The Star)

• Top Glove Corp Bhd's 2QFY20 net profit rose 9.4% Y.o.Y to RM115.7 mln, thanks to tax incentives from ongoing expansion and increased sales volume. Revenue for the quarter rose 6.0% Y.o.Y to RM1.23 bln.

• For 1HFY20, cumulative net profit gained 5.2% Y.o.Y to RM227.1 mln. Revenue for the period added 0.7% Y.o.Y to RM2.44 bln. (The Edge)

• Genting Malaysia Bhd (GENM) has entered into a subscription agreement with Nasdaq-listed Empire Resorts Inc to inject US$40.0 mln (RM174.8 mln) into the latter, through subscribing to Empire Resorts Series G Preferred Stock, with a maturity date of 31st December 2038. The salient terms of the Series G Preferred Stock are that it is senior to Empire’s common stock, it is convertible at any time on or after 31st December 2030 and prior to the maturity date at a conversion price of US$20 per common stock, and it has an automatic conversion on maturity date at US$20 per common stock. (The Edge)

• Kejuruteraan Asastera Bhd (KAB) has called off its solar energy investment venture with LeveragEdge Sdn Bhd (LSB). Upon the termination, LSB shall refund the initial deposit of RM1,000 to KAB within three working days and the HoA shall have no further force or effect and neither party shall have claim whatsoever against the other, whether directly or indirectly in respect of the HoA. (The Edge)

• Censof Holdings Bhd was forced to liquidate an additional 61.5 mln shares, equivalent to a 3.5% stake in Dagang Nexchange Bhd (DNeX) on 19th March 2020, due to another round of margin call. The original cost of investment for the 61.5 mln DNeX shares was RM12.5 mln. As such, the share disposal is expected to book a total loss of RM16.6 mln at group level and loss of RM8.2 mln at company level. (The Edge)

• FGV Holdings Bhd’s plantation segment has resumed activities with a minimum number of workers, supported by the logistics and support businesses sector. FGV referred to the Ministry of Plantation Industries and Commodities’s statement, which provided an exemption for the agricultural and commodity sectors to operate during the Movement Control Order. (The Edge)  

Source: Mplus Research - 20 Mar 2020