Pullback Beckons

The FBM KLCI (+0.4%) started off the week on a buoyant mode as the key index extended its’ gains on the back of the mixed regional peers. The lower liners - the FBM Small Cap (+1.0%), FBM Fledgling (+0.1%) and FBM ACE (+0.2%), all managed to hold on their gains, while broader market ended mostly higher, led by the transportation & logistics sector (+1.8%) .

• Market breadth remained positive as gainers edged the losers on a ratio of 504-to-434 stocks. Traded volumes fell 5.3% to 5.99 bln shares on signs of mild profit taking activities.

• Leading the FBM KLCI winners list was Nestle (+RM2.20), followed by Hong Leong Financial Group (+36.0 sen), Hap Seng Consolidated (+27.0 sen), Malaysia Airport Holdings (+26.0 sen) and Genting (+17.0 sen). Amongst the biggest gainers on the broader market include consumer products stocks like Panasonic (+RM1.70), Dutch Lady (+RM1.68), Carlsberg (+RM1.38) and Heineken (+72.0 sen). KKB Engineering added 13.0 sen after bagging a contract from Sarawak Energy.

• Bursa (-15.0 sen) sank after the Securities Commission observed some governance lapse in the former, while other decliners on the broader market were Latitude Tree Holdings (-30.0 sen), Hong Leong Industries (-12.0 sen), KLCC (-10.0 sen) and Serba Dinamik (-10.0 sen). Key losers on the FBM KLCI were Petronas Dagangan (-30.0 sen), Maxis (- 14.0 sen), Petronas Gas (-12.0 sen), RHB Bank (-10.0 sen) and Tenaga (-10.0 sen).

• Asia benchmark indices ended mostly lower as the Nikkei fell 1.2% amid the weak exports data that slumped -11.7% Y.o.Y in March 2020. The Hang Seng Index slipped 0.2% after enduring a rocky trading session, but the Shanghai Composite (+0.5%) trended higher for the third straight session after cutting the one-year loan prime rate by 20 basis points. Asia stockmarkets, meanwhile, closed mixed yesterday.

• U.S. stockmarkets took a beating overnight as the Dow slipped 2.4% on the tumbling crude oil prices futures contract in May 2020 that sank into the negative territory for the first time in history. On the broader market, the S&P 500 fell 1.8% with all eleven major sectors in the red, while the Nasdaq (-1.0%) also retreated.

• Earlier, European stockmarkets - the FTSE (+0.5%), CAC (+0.7%) and DAX (+0.5%), all extended their gains after recovering all their intraday losses. Gains were underpinned by optimism that the infection of Covid-19, which hit the hardest in the Eurozone appears to have taper over the past couple of days.

The Day Ahead

• It was a tale of two half on the local bourse as the FBM KLCI was initially traded sharply higher before profit taking activities took charge in the second half of the trading session. We remain no change to our views that the Malaysian stocks are increasingly toppish and warrant a consolidation. At the same time, the weakness on Wall Street, coupled with the slumping crude oil prices may add to further woes on the key index’s performance over the near term.

• Amid the increasing challenging conditions, a pullback may leave the key index to be supported at the 1,400 level. In the event the aforementioned level fails to hold, the next support is located at the 1,370 level. On the contrary, the 1,420-1,455 levels serve as the resistances.

• At the same time, we reckon that a pullback is also due for the lower liners and broader market shares to take a breather from their overbought position. A pullback will be a healthy move for investors to digest their recent gains before making move for further recovery.

COMPANY BRIEF

• KKB Engineering Bhd has bagged a contract worth RM15.0 mln from Sarawak Energy Bhd for the supply and delivery of steel poles for one year. (The Sun)

• A joint venture (JV) between Gamuda Bhd and BMD Constructions Pty Ltd has been invited to tender for a motorway connecting to the south of Sydney, Australia, costing about A$2.6 bln (RM7.27 bln). The project, which will allow motorists to bypass up to 23 sets of traffic lights on the Princes Highway and take up to 2,000 heavy vehicles off surface roads per day, will create around 5,300 jobs. (The Edge)

• UEM Edgenta Bhd has teamed up with Kaodim Sdn Bhd to kick-start a collaboration between them, with an immediate pilot roll-out to a client of UEM Edgenta with a nationwide presence. Under the collaboration, Kaodim will provide an enterprise platform solution for UEM Edgenta’s vendor procurement and delivery of services, the first-of-its-kind in the asset management and infrastructure solutions space. (The Edge)
• FGV Holdings Bhd has voluntarily ceased operations at five palm oil mills within the Sahabat region in Lahad Datu, Sabah, after police enhanced the Movement Control Order (MCO) in the area following the detection of 11 Covid-19 cases. (The Edge)

• Nexgram Holdings Bhd has teamed up with Indonesia’s PT Mitra Abadi Propertindo Utama (MAPU) to sell medical test kits in Indonesia and other Southeast Asian markets. MAPU has estimated that it will require 500,000 sets of detection and diagnostic kits and 500,000 sets of rapid test kits in 2020. (The Edge)

• M3 Technologies (Asia) Bhd and AT Engineering Solutions Sdn Bhd, a unit of AT Systematization Bhd (ATS), have inked a Memorandum of Collaboration for the supply, provision enhancements and value additions to the anti-epidemic integrated disinfection chambers in the fight against Covid-19. (The Edge)

• Ajiya Bhd’s 1QFY20 net profit surged 295.2% Y.o.Y to RM3.1, partly due to higher interest and other income received. Revenue for the quarter, however, fell 4.6% Y.o.Y to RM77.5 mln. (The Edge)  

Source: Mplus Research - 21 Apr 2020