Base Building

• The FBM KLCI (-3.3%) started off the week on a feeble note, forming a sharp gapped down at the start of the opening bell before recovering some of its intraday losses on another round of stimulus package announced by the government. The lower liners - the FBM Small Cap (-6.1%), FBM Fledgling (- 3.5%) and FBM ACE (-4.8%), were all down, while the broader market were painted in red with the energy sector (- 8.2%) was the worst hit after crude oil prices trended lower.

• Market breadth turned negative as losers hammered gainers on a ratio of 771-to-161 stocks. Traded volumes fell 44.6% with only 2.80 bln shares exchanging hands as market participants opted to stay at the sidelines, awaiting for further stability.

• Key losers on the FBM KLCI include nestle (-90.0 sen), Petronas Dagangan (- 76.0 sen), KLK (-50.0 sen), Petronas Gas (-420.0 sen) and Maybank (-39.0 sen). Broader maket decliners on Monday were Fraser & Neave (-RM2.00), Carlsberg (-RM1.28), Panasonic (- RM1.06), Westports (-73.0 sen) and Aeon Credit (-72.0 sen).

• In contrast, Bintulu Port (+24.0 sen), MBM World (+19.0 sen), Imaspro (+8.0 sen), UMS-Neiken Group (+8.0 sen) and Sapura Industrial (+7.0 sen) advanced on the broader market. Yee Lee added 8.0 sen after announcing their plants expansion plant. There were only two advancers on the big board - Hong Leong Bank (+20.0 sen) and Hartalega (+6.0 sen).

• Asia benchmark indices resume their downtrend as the Shanghai Composite and Hang Seng Index slipped 3.1% and 4.9% respectively, taking cue from the weakness on Wall Street. The Nikkei (+2.0%), however, managed to buck the negative trend following the International Olympic Committee (IOC) announcement that the Tokyo Olympics may not be cancelled, but to be deferred instead. Asia stockmarkets, meanwhile, started off the week on a dour note.

• U.S. stockmarkets extended their losses overnight as the Dow fell 3.0% following a failure for a clearance from the Senate on a key procedural bill that would authorise giant fiscal spending to stimulate the economy. On the broader market, the S&P 500 declined 2.9%, while the Nasdaq finished 0.2% lower.

• Earlier, European stockmarkets - the FTSE (-3.8%), CAC (-3.3%) and DAX (- 2.1%), all retreated from their two-day recovery as the number of Covid-19 cases spiked over the weekend, particularly in Italy. In the meantime, Germany may issue more than €350.0 bln in new debt, while European companies have announced cost-cutting measures.

THE DAY AHEAD

• There was no reprieve on stocks across Bursa Malaysia as market sentiment took another swift change in gear. Selling activities were mainly stemmed from the rising number of Covid-19 cases across the globe that led to a slew of stimulus packages announced by central banks combat the downturn of global economic growth. At the same time, foreign selling activities that escalated on Bursa Malaysia added salt to the wound.

• With markets still attempting to find a bottom, we see the FBM KLCI will attempt to build a base for the time being. Further pullback may pressure the FBM KLCI towards the 1,250 level or even back towards the 1,210 level. In the meantime, any recovery is expected to be mild with gains to be capped at the 1,300 psychological level.

• We reckon that the broader market shares and the lower liners may continue their slide as investors were to book in recent profits. All, however was not bleak as selling activities appears to have trimmed down, judging by the decline in trading activities, and that implies that the local market is building a base over the near term.

MACRO BRIEF

• The prime minister has announced several initiatives to help alleviate the people’s burden in facing the Covid-19 pandemic. These initiatives were part of a more comprehensive Economic Stimulus Package and People’s Aid to be announced on 30th March 202

• The initiatives include;

i. Allowing members of the Employees Provident Fund (EPF) to withdraw a maximum of RM500 from Account 2 on a monthly basis for a period of 12 months beginning 1st April 2020. This is expected to benefit some 12.0 mln EPF members below the age of 55 and involve an estimated RM40.0 bln.

ii. An additional allocation of RM500.0 mln will be extended to the Ministry of Health (MOH) for the purchases of medical equipment, including ventilators, lab apparatus, personal protective equipment (PPE) and intensive care unit (ICU) equipment. On top of this, the government has set aside RM100.0 mln for MOH for the purpose of hiring 2,000 new staff especially nurses on a contract basis.

iii. Some RM130.0 mln will be channel to other states to help the state governments combat the Covid-19 pandemic. This can be used to assist small traders and hawkers who are badly affected by the outbreak, Covid- 19 patients and their families, as well as state government staff tasked to overcome this crisis.

iv. Extend the National Higher Education Fund Corporation (PTPTN) loan deferment to six months effective immediately instead of three months as announced previously. The deferment will last until 30th September 2020, involving nearly 1.5 mln PTPTN loan borrowers and an estimated loan collection of RM750.0 mln. (The Edge)

Comments

• We view the aforementioned measures to be largely neutral as the measures will only help to cushion the negative impact of Covid-19 in the economy’s deterioration. Nevertheless, bulk of the allocation will be channeled to the healthcare sector, may provide some alleviation to hospital operators such as KPJ Healthcare Bhd and IHH Healthcare Bhd. This will lead to lower capex requirement by healthcare providers to accommodate the rising demand.

• At the same time, the withdrawal of RM500 per month for certain individuals will only see minor boost on private consumption as the consumer spending will largely be cautious in view of the economy downturn. Already, certain businesses are preparing to reduce their operating expenditures by freezing hiring and opting not to renew nor extend contract workers, whilst some are considering layoffs part of their workforce.

• Although household disposal income may see some head way, we reckon the cash withdrawal, coupled with those whom opted to reduce their EPF contribution will see bulk of the additional funds channel to finance household expenses, particularly loans and borrowings in which household debt stood at a relatively high figure, at 82.2% of GDP as of end-June 2019.

COMPANY BRIEF

• Comfort Gloves Bhd’s 4QFY20 net profit rose 9.2% Y.o.Y to RM10.2 mln on higher sales. Revenue for the quarter increased 6.1% Y.o.Y to RM138.6 mln.

• For FY20, cumulative net profit grew 19.0% Y.o.Y to RM33.2 mln. Revenue for the year rose 7.7% Y.o.Y to RM510.7 mln. (The Star)

• Sunway Malls, including three malls under the portfolio of Sunway Real Investment Investment Trust (SUNREIT), are offering RM20.0 mln rent free to non-essential retailers during the 14-day Movement Control Order (MCO) period. The malls are: Sunway Pyramid, Sunway Carnival, Sunway Putra — which are under the REIT and Sunway Velocity, Sunway Big Box Retail Park, Sunway Giza and Sunway Citrine. (The Edge)

• LKL International Bhd has reported that the group is ready to fulfil the high demand for medical equipment from hospitals in Malaysia and foreign countries, in their battle against Covid- 19. The medical/healthcare beds, peripherals and accessories provider has received numerous requests for essential medical equipment from hospitals in various states across Malaysia, as well as from foreign countries including Italy, Maldives, Mauritius, Brunei and Bangladesh.

• This includes an urgent enquiry of 50,000 hospital beds to be supplied within a five-month time frame to one of the export markets, indicating the high-level urgency to expand their capacity. (The Edge)

• Fitters Diversified Bhd saw Datuk Ho Shu Keong, its independent nonexecutive director appointed in July 2019, emerge as a substantial shareholder in the fire-fighting systems specialist, after he acquired 10.0 mln shares, representing a 2.3% stake on 20th March 2020. Ho had purchased the block of shares via a direct business transaction for 20 sen apiece or a total RM2.0 mln, raising his stake in the company to 6.4% or 27.7 mln shares. (The Edge)

• PRG Holdings Bhd’s managing director of its property and construction division Datuk Wee Cheng Kwan ceased to become a substantial shareholder in the furniture company after disposing 14.05 million shares and currently representing a 3.39% stake. (The Edge)

Source: Mplus Research - 24 Mar 2020