Rallying Oil Price Sustained Recovery

• The FBM KLCI (+0.6%) staged a mild recovery from its previous session slump on mild bargain hunting activities following the rebound in crude oil prices. The lower liners - the FBM Small Cap (+4.0%), FBM Fledgling (+1.6%) and FBM ACE (+1.9%) all marched higher, while energy sector (+14.2%) rallied following reports that China will step up their purchase of crude oil.

• Market breadth turned positive as gainers outnumbered the losers on a ratio of 671-to-203 stocks. Traded volumes climbed 8.5% to 5.15 bln shares as investors were quick to nibble on beaten down stocks.

• Two-third of the key index components advanced, led by Nestle (+RM1.70), followed by Petronas Dagangan (+RM1.32), Petronas Gas (+34.0 sen), Public Bank (+12.0 sen) and Genting (+12.0 sen). Amongst the biggest gainers on the broader market were QL Resources (+40.0 sen) and Fraser & Neave (+34.0 sen), while oil & gas players like Heng Yuan (+32.0 sen), Serba Dinamik (+29.0 sen) and Petron Malaysia (+29.0 sen) rose on higher crude oil prices.

• Notable decliners on the broader market were Panasonic (-50.0 sen), EIG (-12.0 sen), Wang Zheng (-12.0 sen), Tasek Corporation (-10.0 sen) and Apollo Food (-6.0 sen). Meanwhile, PPB Group (-12.0 sen), Hong Leong Financial Group (-10.0 sen), Hong Leong Bank (-5.0 sen), Hap Seng Consolidated (-5.0 sen) and Am Bank (-2.0 sen) fell on the local bourse.

• Asia benchmark closed mixed as the Nikkei (-1.4%) extended its’ losses taking cue from the weakness on Wall Street overnight. The Hang Seng Index added 0.8%, while the Shanghai Composite jumped 1.7% led by gains in energy stocks following reports that China may take advantage of the current low crude oil prices to step up their purchases. Asia stockmarkets, meanwhile, finished mixed yesterday.

• U.S. stockmarkets endured a choppy trading session before marching higher as the Dow rose 2.2% as the rally in crude oil prices offset the record high number of unemployment claims that hits 6.6 mln applicants. On the broader market, the S&P 500 gained 2.3% with all eleven major sectors in the green, led by the energy sector (+9.1%), while the Nasdaq climbed 1.7%.

• Earlier, major European stockmarkets - the FTSE (+0.4%), CAC (+0.4%) and DAX (+0.3%), all staged a mild recovery after recouping all their intraday losses. Gains were mainly spurred by news that Saudi Arabia and Russia is looking to end the price war that has attributed to the recent massive plunge.

The Day Ahead

• Yesterday’s gains on Bursa Malaysia were unexpected, suggesting that investors were quick to react on the streak of positive news. The firmer crude oil prices, coupled with the stronger Ringgit against the Greenback shored up investors’ confidence as buying momentum took center stage. At the same time, the World Health Organization (WHO) expects the number of Covid-19 cases in Malaysia to peak in mid-April reduced the possibility of another extension of MCO.

• Under the prevailing situation, we think that the FBM KLCI will continue to undergo a consolidation phase, ranging between the 1,300 and 1,350 levels. Should the key index managed to break through the 1,350 level, the immediate resistance is located at the 1,360 and 1,400 levels respectively. However, should the 1,300 psychological level fails to hold, the support is pegged at the 1,250 level.

• The recovery on the lower liners and broader market were more prevalent, given the magnitude of the slump last month. For now, the recovery is expected to prolong, but this will be accompanied by quick profit taking activities. We also see the emergence of buying momentum in energy shares amid the on-going recovery in crude oil prices.

COMPANY BRIEF

• Kossan Rubber Industries Bhd’s wholly-owned subsidiary Ideal Quality Sdn Bhd (IQ) is selling an estimated 39.0-ha (390,397 sqm) vacant freehold industrial land in Kuala Langat, Selangor, for RM153.4 mln to raise funds to finance the expansion of the group's rubber glove production in Bidor, Perak. IQ has inked a conditional sale and purchase agreement with the buyer Best Eternity Recycle Technology Sdn Bhd (BERT) for the disposal. (The Edge)

• Alam Maritim Resources Bhd has bagged an RM24.8 mln work order for the charter of anchor handling tug supply (AHTS) vessels to Petronas Carigali Sdn Bhd. Its wholly-owned Alam Maritim (M) Sdn Bhd was awarded the contract, which will be for up to 460 days from 11th February 2020. (The Edge)

• ViTrox Corporation Bhd has proposed a final dividend of 2.8 sen per share for the financial year ended 31st December 2019, pending shareholders’ approval at its forthcoming annual general meeting. In total, ViTrox’s total dividend disseminated for the year amounts to 4.3 sen per share compared with 5.75 sen per share in 2018. (The Edge)

• AirAsia Group Bhd chief executive officer Tan Sri Tony Fernandes is currently in discussion with the Government to obtain a loan for the budget airline as a means to further support its current cash position amid a tough operating environment.

• AirAsia’s net cash position stood at RM2.20 bln as of end-2019. The group recently grounded operations for a month amid the Movement Control Order imposed from 18th March 2020 to 14th April 2020. (The Edge)

• Scomi Energy Services Bhd (SESB) and its subsidiaries, which have been served with winding up petitions, today applied for a judicial management (JM) order at the High Court. The application for the JM order immediately puts into effect a moratorium from the start of the application until the granting or dismissal of the application. During the period, no resolution can be passed or order made for the winding-up of SESB and its subsidiaries. (The Edge)

• A wholly-owned subsidiary of JCY International Bhd has been allowed to operate during the Movement Control Order (MCO) period by the Ministry of International Trade and Industry (MITI). JCY received a letter from MITI on March 26 allowing JCY HDD Technology Sdn Bhd to operate within the period but must ensure that only 50% of its workforce operates (The Edge)

• AEON Co (M) Bhd’s mall operator AEON Retail (Malaysia) will grant a 28-day rental waiver to its tenants throughout the partial lockdown or Movement Control Order (MCO) period that began on 18th March 2020 and scheduled to end on 14th April 2020. The offer is for non-essential businesses that are unable to operate during this period, but they will be assessed on a case-tocase basis, and subject to terms and conditions. The waiver will be enforced at all 28 Aeon Malls and 18 Aeon BiG Mall Hypermarkets, nationwide. (The Edge)

• PN17 company Kinsteel Bhd whollyowned subsidiary Kin Kee Steel Service Centre Sdn Bhd (KKSSC) has inked a letter of intent to start negotiations with Tianjin Qiangbang Industrial Co Ltd to form a joint venture company (JVC) to run a steel mill at Gurun, Kedah. Under the proposal, KKSSC is expected to hold a 45.0% shareholding in the JVC. (The Edge)

• Berjaya Corporation Bhd (BCorp) has now set its sights on Greenland for a luxury hotel and apartment project in the country’s capital of Nuuk, according to a Norwegian news report. BCorp founder and executive chairman Tan Sri Vincent Tan Chee Yioun had initially planned to have the hotel built at the Kolonihavnen harbour but was rejected by local authorities. (The Edge)  

Source: Mplus Research - 3 Apr 2020