Volatility Taking Charge

• Renewed volatility sent global markets lower as the FBM KLCI (-2.2%) slipped following the tumbling of crude oil futures contract for May 2020 into the negative territory. Likewise, the lower liners - the FBM Small Cap (-2.9 %), FBM Fledgling (-1.9%) and FBM ACE (-4.4%), all retreated, while broader market was painted in red with the energy sector (- 6.1%) took the worst hit.

• Market breadth turned negative as losers overwhelmed the gainers on a ratio of 8276-to-198 stocks. Traded volumes, however, gained 9.1% to 6.53 bln shares amid the renewed selling activities.

• Major decliners on the FBM KLCI were Nestle (-RM2.00), KLK (-72.0 sen), Petronas Dagangan (-52.0 sen), Hartalega (-42.0 sen) and Public Bank (- 42.0 sen). Notable decliners on the broader market include Dutch Lady (- RM1.36), Carlsberg (-RM1.28), Panasonic (-62.0 sen), Batu Kawan (- 54.0 sen) and BAT (-60.0 sen).

• At the other side of the trade, Kobay Technology (+17.0 sen), Comfort Gloves (+15.0 sen), Latitude Tree Holdings (+13.0 sen) and Rubberex Corporation (+10.0 sen) rose on the broader market. Ajiya added 1.5 sen after reporting a strong set of quarterly earnings. Meanwhile, Maxis (+7.0 sen) was the sole advancer on the local bourse.

• Renewed volatility from Wall Street spillover to Asia stockmarkets as the Nikkei (-2.2%) extended its’ losses as concern over economic-hit Covid-19 return to the fore. Similarly, the Hang Seng Index slipped 2.2%, while the Shanghai Composite (-0.9%) erased all its’ previous session gains. Asia stockmarkets, meanwhile, was splashed in red on Tuesday’s close.

• U.S. stockmarkets suffered another whiplash as the Dow sank 2.7% battered by the plunging crude oil prices due to sluggish demand from Covid-19 pandemic. Similarly, the S&P 500 (-3.1%) tumbled with all eleven major sectors in the red again, while the Nasdaq (-3.5%) also extended its’ losses.

• Earlier, European stockmarkets - the FTSE (-3.0%), CAC (-3.8%) and DAX (- 4.0%), all erased their previous session gains, mirroring the weakness across global equities. At the same time, Germany Chancellor Angela Merkel announced that it would take at least 14 days to assess the impact of the easing measures on re-opening of economic activities.

The Day Ahead

• After the recent run-up, the FBM KLCI’s valuation trading at PER of 15.8x for 2020 is already fair, within the 15x-17x historical average. Under the prevailing renewed volatile market condition stemmed from the slumping crude oil prices, coupled with unexciting as earnings prospects due to the slower global and domestic economic environments, stocks across Bursa Malaysia will see further room for pullback.

• With the key index appears to have turning lower largely in tandem with the weakness across global equities and the 1,400 support level failed to defend, the 1,370 support level will come into play, followed by the 1.340 level. At the same time, any upsides are capped at the 1,420 level for the time being.

• Expectedly, both the lower liners and broader market shares also took a pause from their recent sharp recovery as investors booked recent profits. We reckon that market condition will remain volatile over the foreseeable future amid the lack of fresh leads.

COMPANY BRIEF

• Casino-to-hospitality conglomerate Genting Bhd and its units are planning the first group-wide salary cut since its founding in 1965. Genting is proposing as much as 20.0% temporary reduction of basic salary for employees based on their ranks, while Genting Hong Kong Ltd suggests up to 50.0% cut for those holding vice president role or higher, according to internal memo.

• Genting Hong Kong confirmed that the salary cut will be in effect until year-end, while Genting Singapore Ltd and Genting Malaysia Bhd said they have proposed similar voluntary pay cuts with varying terms. (The Star)

• AirAsia Bhd has applied for leave for a judicial review of the Malaysian Aviation Commission’s (Mavcom) imposition of a RM2.0 mln penalty on the airline for violating the Malaysian Aviation Consumer Protection Code 2016 (MACPC).

• The low-cost carrier is seeking a declaration from the High Court that the penalty and decision issued by Mavcom on 13th December 2019 were invalid and of no effect. It is also seeking further and consequential relief or directions to be made as the court deems fit. (The Edge)

• CIMB Group Holdings Bhd is believed to be the Malaysian bank that has significant exposure to troubled oil trader Hin Leong Trading, which owes almost US$4.00 bln to more than 20 banks, including DBS Group Holdings Ltd, HSBC Holdings Plc and Standard Chartered Plc. (The Edge)

• Telekom Malaysia Bhd has reported that maintenance works to restore data connectivity for the Asia-America Gateway submarine cable network linking Malaysia and other Asian countries to the US and Hong Kong have completed. (The Edge)

• Tadmax Resources Bhd has inked an agreement to sell a 25.0% stake in its Pulau Indah power plant project to Korea Electric Power Corp (Kepco) for RM41.8 mln. Under a prior heads of agreement dated 14th September 2018, Tadmax was to partner Kepco and Selangor statelinked Worldwide Holdings Bhd on the project, under a proposed shareholding ratio of 40:25:35 in Pulau Indah Power Plant Sdn Bhd (PIPP) respectively. (The Edge)

• HLT Global Bhd’s unit HL Advance Technologies (M) Sdn Bhd has entered into a distributor agreement with Accobiotech Sdn Bhd for the distribution of Covid-19 rapid test kits around the world. (The Edge)

• Dataprep Holdings Bhd has proposed a private placement exercise to raise up to RM16.7 mln for working capital, repayment of bank borrowings and future investments. It intends to issue up to 139.1 mln shares, equivalent to 30.0% of its outstanding shares, at an issue price to be determined later. (The Edge)

• Sino Hua-An International Bhd has proposed the issuance of new shares to settle its debts totalling RM5.6 mln, without incurring an additional debt obligation or interest expense. Separately, it also proposed a private placement exercise of up to 135.4 mln shares to raise total gross proceeds of RM8.5 mln, mainly for working capital purposes. (The Edge)  

Source: Mplus Research - 22 Apr 2020