Economy Recovery In Sight

• The FBM KLCI (+2.1%) rallied after recovering all its intraday losses as the key index advanced for the sixth straight session led by gains from banking heavyweights yesterday. The lower liners - the FBM Small Cap (-0.6%), FBM Fledgling (-1.0%) and FBM ACE (-3.0%), however, all retreated, while the broader market closed on a mixed note.

• Market breadth stayed positive as advancers edged the decliners on a ratio of 564-to-526 stocks. Traded volumes fell 2.2% to 9.42 bln shares but remains above the historical average.

• Asia benchmark indices continue to build onto their previous session gains as the Nikkei rose 1.3% amid the optimism over the reopening of economy. The Hang Seng Index climbed 1.4% to close above the 24,000 psychological level, while the Shanghai Composite (+0.1%) recorded its fifth straight winning streak on the recovery in Caixin Services and Composite data that rose to the expansion level at 55.0 and 54.5 respectively in May 2020. Asia stockmarkets, meanwhile, ended higher yesterday.

• U.S. stockmarkets rallied overnight as the Dow jumped 2.1% to close above the 26,000 psychological level on the back of the stronger-than-expected Institute for Supply Management (ISM) data in May 2020 that improved to 45.4. The S&P 500 (+1.4%) saw only the healthcare sector (-0.2%) underperformed, while the Nasdaq gained 0.8% higher.

• Earlier, European stockmarkets - the FTSE (+2.6%), CAC (+3.4%) and DAX (+3.9%), all extended their gains in tandem with gains across global

markets. Gains were also underpinned by the recovery in Markit Services and Markit Composite PMI that rose to 30.5 and 31.9 respectively in May 2020, beating consensus estimates.

The Day Ahead

• Despite enduring a choppy trading session in the first half of the trading session, the FBM KLCI was quick to recover all its intraday gains as investors remain upbeat on the reopening of economic activities, coupled with in anticipation of The Short-Term Economic Recovery Plan for June to December 2020 that will be announced this month. The initial pullback was triggered by the profit taking in glovemakers heavyweights but was subsequently cushioned by the strong buying interest in financial stocks yesterday.

• Although the key index has recovered more than 300 points since mid-March 2020, we think that the buying momentum is not tapering at any time following the recovery in commodity prices (both the crude oil and crude palm oil), coupled with the stronger Ringgit against the Greenback. While global economy data is pointing to a recovery, the key index may charge higher towards the 1,560 resistance level, while the support is now pegged at the 1,500 psychological level.

• It appears that the rotational play is still taking place on the lower liners as traders were quick lock in their gains in the healthcare stocks and switched to various sectorial plays. In the meantime, buying momentum remain evident on oil & gas stocks as oil prices remain upbeat in anticipation over the impending OPEC meeting that could yield deeper cuts.

COMPANY BRIEF

• Prestariang Bhd has disposed its remaining 6.9% stake in OpenLearning Ltd (OLL) for A$1.9 mln (RM5.5 mln). The company plans to utilise its entire proceeds from the disposal within one month as rolling working capital to finance sales of the software & services business of the group. (The Star)

• Sapura Energy Bhd has secured oil and gas related contracts across the Asean region worth a combined RM766.0 mln. The projects includes pipeline works in Brunei, Singapore and Thailand, a contract to retire an offshore asset in Thailand, as well as an umbrella contract from Hess Exploration and Production Malaysia BV for transport and installation of offshore facilities in Malaysia. (The Star)

• ARB Bhd has inked a business partnership as well as an outsourcing agreement with Singapore-based Asterisk Computer (Far East) Pte Ltd (Asterisk) for the deployment of enterprise application software (EAS) solutions in Malaysia and Singapore. Under the outsourcing agreement, Asterisk will engage ARB's unit Databook Pte Ltd to design, develop and implement EAS solutions and to provide enterprise solutions related consulting services to Asterisk on project basis. (The Edge)

• Ho Hup Construction Company Bhd, which bagged RM102.5 mln worth of jobs for the East Coast Rail Link (ECRL) project recently, aims to allocate a substantial portion of the contract value to local vendors. The group’s construction team is now finalising with local vendors and suppliers for the necessary engineering equipment, materials and   other supplies for the jobs. (The Edge)
• My EG Services Bhd has incorporated a new wholly-owned subsidiary known as MYEG Medical Services Sdn Bhd to market medical products and services in the country including health screening solutions and management services. This follows last month’s launch of the egovernment service provider's one-stop portal for employers to register and manage the COVID-19 health screening of their workforce. (The Edge)
• Yee Lee Corp Bhd, which has received a voluntary general offer from its founder and executive chairman Datuk Lim Ah Heng @ Lim Kok Cheong and several joint offerors reported that the offer has turned mandatory after one of the offerors upped its stake to beyond the 33.0% threshold. Langit Makmur Sdn Bhd had acquired 463,000 new Yee Lee shares from the open market at the offer price of RM2.06 per share, thus raising its stake to 33.2%.

• Langit Makmur is a special-purpose vehicle incorporated by Singapore-based Dymon Asia Private Equity (SE Asia) Fund II Pte Ltd, and one of the joint offerors in the takeover bid that also includes Lim's wife Datin Chua Shok Tim @ Chua Siok Hoon, and his son, Yee Lee executive director and group managing director Lim Ee Young. (The Edge)

• Xidelang Holdings Ltd has inked an agreement with Seacera Group Bhd's unit Seacera Polymer Sdn Bhd for the distribution of the former's non-medical purpose protective clothing products in the country. Under the distribution agreement, Seacera has the exclusive right to resell and distribute the products nationwide, which would be manufactured by Xidelang's existing production facilities. (The Edge)

• The Ministry of Communications and Multimedia has cancelled its order made on 15th May 2020 to award portions of the 700 megahertz (MHz) band to DiGi.Com Bhd, Maxis Bhd, Telekom Malaysia Bhd (TM), Altel Communications Sdn Bhd and Axiata Group Bhd. The cancellation is due to technical issues, laws and the need to follow a clear process. (The Edge)  

Source: Mplus Research - 4 Jun 2020