Pullback In Place

• The FBM KLCI (+1.3%) was powered sharply higher yesterday, boosted by the country’s 1Q2020 GDP data that expanded +0.7% Y.o.Y which was stronger than consensus estimates. The lower liners, however, finished mostly lower as the FBM Small Cap and FBM Fledgling shed 0.5% and 0.4% respectively, while the healthcare sector (+7.5%) remained upbeat as the demand for healthcare-related products and services would continue to rise.

• Market breadth stayed negative as losers overpowered the gainers on a ratio of 558-to-395 stocks. Traded volumes jumped 50.0% to record high of 9.59 bln shares due to strong buying momentum but subsequently hammered by relatively large selling activities in the second half of the trading session.

• Asia benchmark indices ended mostly lower as the Nikkei and Hang Seng Index fell 0.5% and 0.3% respectively on concern over the resurgence of Covid- 19. The Shanghai Composite, however, rose 0.2% anchored by healthcare and consumer staples stocks. Asia stockmarkets, meanwhile, closed mostly higher yesterday.

• U.S. stockmarkets endured another rout as the Dow slipped 2.2% after U.S. Federal Reserve Chairman Jerome Powell painted a grim picture on economy health. On the broader market, the S&P 500 (-1.8%) aw all eleven major sectors in the red, while the Nasdaq (- 1.6%) also faltered.

• Earlier, European stockmarkets - the FTSE (-1.5%), CAC (-2.9%) and DAX (- 2.6%), all tumbled on concern the overly optimistic over the re-opening of economy. At the same time, the former was also hit by the sluggish 1Q2020 GDP that contracted -2.0% Y.o.Y which could see upcoming quarter data to worsen.

The Day Ahead

• Although the 1QGDP data was strongerthan-expected, the aforementioned figure is still the weakest since 3Q2009. We think that yesterday’s upward move may warrant quick profit taking on the FBM KLCI as investors would turn their attention back towards the new waves of Covid-19 infections that may see the debate of economy re-opening too soon.

• Expectedly, the FBM KLCI reacted positively to the GDP data released yesterday. Still, the key index is trading within the consolidation band and we continue to see the sideways trend to linger. A breakout above the 1,400 psychological level may see the key index to re-test the 1,430 level. Downside risk remains pegged at the 1,360 level.

• With the toppish conditions, we think that the lower liners may warrant a pullback over the near term as demonstrated in the second half of the trading session yesterday. Nevertheless, the firm trading interest continues to linger within the healthcare sector which may see gains extending over the foreseeable future.

MACRO BRIEF

• Malaysia's 1Q2020 GDP growth expanded only +0.7% Y.o.Y, significantly impacted by the measures to contain the Covid-19 pandemic but Bank Negara Malaysia expects the adverse effects to be seen more in the second quarter. The slower growth was a surprise as economists were expecting a -1.5% Y.o.Y decline, based on a median forecast of 12 economists polled by Reuters. On quarterly seasonally-adjusted basis, the economy contracted by -2.0% Q.o.Q. (The Star)

COMPANY BRIEF

• Taliworks Corp Bhd’s 1Q2020 net profit rose 36.0% Y.o.Y to RM15.9 mln, due to completion of the disposal of receivables due from Air Selangor to a special purpose vehicle under an asset-backed securitisation exercise late of last year. Revenue for the quarter, however, slipped 5.3% Y.o.Y to RM84.2 mln. The group has declared its first payout of the year of 1.65 sen a share, payable on 19th June 2020. (The Star)

• AirAsia Group Bhd is looking at the possibility of increasing future airfares, following the implementation of the Conditional Movement Control Order (CMCO). Discussions are ongoing on the matter, adding that if there is an increase it would not be significant. (The Edge)

• Green Packet Bhd’s Kiplepay Sdn Bhd has inked an agreement with Tencent to provide e-KYC (Electronic Know Your Customer) services. The KipleID e-KYC will be offered to businesses, especially banks and financial institutions. KiplePay will leverage on Tencent’s facial recognition and machine learning capabilities to build a localised e-KYC solution in Malaysia through the KipleID e-KYC. (The Edge)

• Kumpulan Powernet Bhd (KPower) has secured an RM208.0 mln contract from Ghaurishankar Power Development Pvt Ltd (GDP) to build a mini hydropower plant in Solukhumbhu, Nepal. The job is expected to be completed within 36 months. KPower and GDP will enter into a definitive agreement within 60 business days from the date of acceptance of the award. (The Edge)

• Magna Prima Bhd’s major shareholder Top Fresh Foods (M) Sdn Bhd has raised its deemed interest in the company by 1.5 mln shares, following an off-market acquisition on 12th May 2020, bringing its total indirect or deemed interest in Magna Prima to 72.1 mln shares, representing a 21.5% stake. Top Fresh Foods also has a direct interest of 16.6 mln shares or 5.0% in Magna Prima.

• The acquired shares were of deemed interest by virtue of the interest held by the common directors and shareholders of Top Fresh Foods and Fantastic Realty Sdn Bhd. The common shareholder of Top Fresh Foods and Fantastic Realty is Lee Hing Lee. Lee Aik Chong is also a shareholder in Top Fresh Foods. (The Edge)

• My EG Services Bhd (MyEG) has not entered into any collaboration with the Social Security Organisation (Socso) in relation to the launch of its one-stopportal for employers to manage COVID-19 screenings of their workforce. That said, MyEG did receive a letter dated 8th May 2020 from the Department of Labour Peninsular Malaysia expressing its support for the company's initiative, as well as its digital certificate related to the Prihatin Screening Programme.

• The Prihatin Screening Programme is a COVID-19 screening programme for employees of companies that are allowed to operate during the Movement Control Order (MCO), including foreign workers. Screening is free for Socso contributors, with the screening costs to be borne by Socso. (The Edge)

• Star Media Group Bhd has confirmed that its chief executive officer (CEO) Andreas Vogiatzakis had resigned to pursue other interests. Following Vogiatzakis’s resignation, effective 16th May 2020, Star Media will set up a temporary special committee until a suitable candidate has been found. The committee will comprise three non-executive directors - Datuk Fu Ah Kiow, Datuk Dr Mohd Aminuddin Mohd Rouse and Chan Seng Fatt. (The Edge)

• Widad Group Bhd inked a collaborative agreement with disinfectant, antimicrobial and environmental product distributor Stoika Sdn Bhd (SBB) to sell, market and distribute the latter’s SPDRO antimicrobial solution and SDST anti-microbial coating. Widad said the move is expected to enhance its integrated facilities management service offerings, and has the potential of expanding its revenue and customer base. (The Edge)

• Vstecs Bhd has reclassified its three sen final dividend for FY19 as second interim dividend after postponing its annual general meeting to June 2020, as a result of the MCO. The dividend will be paid on 17th June 2020. (The Edge)  

Source: Mplus Research - 14 May 2020