Beyond 1,600

Market Review

Malaysia: The FBM KLCI (+0.9%) started off the week on a buoyant manner after lingering in the positive territory for the entire trading session yesterday, mainly boosted by the extended gains in glove heavyweights. The lower liners also marched higher. Although the broader market finished mostly lower, the healthcare (+4.3%) continues to outperform, rising for the eleventh straight session.

Global markets: US stockmarkets finished mixed after shaving off their intraday gains; the Dow rose 0.04%, but the S&P 500 fell 0.9% on the back of concern over the prospects of re-opening of economy. European stockmarkets marched higher, while Asia stockmarkets staged a swift recovery from last Friday pullback.

The Day Ahead

Investors will digest the barrage of corporate earnings releases from US, of which analysts are predicting -44.6% YoY in earnings contraction in 2QFY20. Back home, rotational play will continue amongst the lower liners, while the extended rise on glove heavyweight shares will continue to anchor the performance on the local bourse. At the same time, investors will be keeping an eye on Malaysia’s unemployment rate for May 2020, after record high at 5.0% registered in April 2020.

Sector focus: While the healthcare sector will continue to be in favour, we think that the technology sector may also edge higher as companies around the world embarks on digital transformation and automation.

The FBM KLCI has gapped up to close the 1,600 psychological level as the key index has formed another bullish candle yesterday. Following the breakthrough above the aforementioned level, we expect the upward momentum to continue as the key index looks to re-test the immediate resistance at 1,615 over the foreseeable future, followed by 1640. Downside risk is now pegged at 1,570, followed by 1,550. Indicators are still positive as the MACD Histogram has extended another green bar, but the RSI remains overbought.

Company Brief

Lambo Group Bhd’s unit purchased 22.8m shares of ACE Market-listed Focus Dynamics Group Bhd from the open market from 6th July 2020 to 10th July 2020. Lambo’s unit, Oriented Media Holdings Ltd in Hong Kong had purchased the shares for RM25.7m at an average price of RM1.12 each from the open market. The purchase of shares was financed from its own funds. (The Star)

Tex Cycle Technology (M) Bhd's joint venture company Culzean W2E Ltd has entered a memorandum of understanding with Medisoft Ltd to collaborate on a waste processing project. Among the terms of the agreement, Culzean will be responsible for ongoing maintenance of HTI Plant to ensure it is operational for a minimum of 7,500/hr while Medisoft will be responsible for tendering for collection contracts to meet the requirements of wastes for the plant. (The Star)

Can-One Bhd is buying two plots of freehold land in Klang for RM103.6m or RM35 psf, to be used as a new manufacturing hub and warehousing facility. The acquisition of the plots, measuring 68.0-ac. is also aimed at relocating some of the group’s operations in the Klang Valley and consolidating them in one location, to improve operating efficiency. (The Edge)

Kejuruteraan Asastera Bhd (KAB) has reported that the parties which its subsidiary is suing for alleged breach of terms in work orders, have filed a counterclaim seeking RM17.8m in damages. The parties are ICEE International Sdn Bhd, ICEE Energy Services Sdn Bhd and Prabodh Kumar Kantilal. KAB intends to summarily strike out the counterclaim. (The Edge)

Saudee Group Bhd has proposed the acquisition of two meat trading firms for RM20.0m in a move to expand its offerings, especially the premium product range. The purchase consideration of RM10.0m for each firm will be settled via the issuance of 31.3m new Saudee shares at 32 sen apiece. (The Edge)

Texchem Resources Bhd has received an unusual market activity enquiry from Bursa Malaysia Securities over the spike in the company’s share price and volume. In response, the group reported that the trading activity might be due to an article published by a person named Calvin Tan Eng with regards to the company venturing into formulating latex glove chemical. It added that the article had extracted the information from the company’s magazine “Texview”, a regular quarterly in-house publication, which was made available in the company’s website in early November 2019. (The Edge)

Tata Sons plans to quit its budget airline venture with AirAsia Group Bhd as the Covid-19 pandemic batters the aviation business. Malaysia's AirAsia Bhd owns 49.0% of AirAsia India, the maximum foreign ownership allowed in an Indian airline, while the remainder is held by Tata Sons. (The Edge)

Top Glove Corp Bhd is set to build two factories every year to keep pace with global demand for rubber gloves, amid increased usage in the medical industry and heightened hygiene awareness among people due to the Covid-19 pandemic. Meanwhile, Top Glove has overtaken utility giant Tenaga Nasional Bhd (TNB) as the third-largest company on Bursa Malaysia in terms of market capitalisation, after its shares price closed RM2.08 or 9.5% higher at its record high of RM24.00 today. At its closing price, Top Glove is valued at RM64.7bn. The market capitalisation of the glove maker is higher than TNB’s market capitalisation of RM64.6bn. (The Edge)

Tune Protect Bhd’s group chief executive officer Khoo Ai Lin has resigned from her position to pursue new opportunities. The resignation will take effect on 31st July 2020. (The Edge)

Source: Mplus Research - 14 Jul 2020