Weakness prevails

Market Review

Malaysia: The FBM KLCI (-1.9%) was downbeat as the key index languished in the negative territory, dragged down by concerns over the potential rise in impairment loans post moratorium period, coupled with the rising number of Covid-19 cases that may derail the economy recovery. The lower liners, however, rebounded, while the technology (+4.9%) and health care sector (+4.4%) outperformed the negative broader market.

Global markets: US stockmarkets extended their gains overnight as the Dow climbed 0.9% on the optimism over the upcoming stimulus bill which offset the rising geopolitical tension with China. European stockmarkets were buoyed by the solid IHS Purchasing Managers data that rose to 51.8 in July 2020 – the first expansion since February 2019, but Asia stockmarkets closed mixed.

The Day Ahead

We reckon that the FBM KLCI will remain in the consolidation mode with mild bargain hunting activities to take precedence. Any weakness is likely to be cushioned by gains in glove heavyweights. On the other hand, the lower liners, particularly FBM ACE stocks will be spurred by the record high trading volumes.

Sector focus: The rising number of Covid-19 cases which sent several countries or states across the globe re-imposing lockdowns will continue to spur demand for healthcare-related products. We also continue to favour the technology stocks following the record closing on Nasdaq overnight, while plantation stocks should take pace with CPO prices rising back above RM2,700 per tonne.

The FBM KLCI gapped down and subsequently closed below the daily EMA9 level after lingering mostly in the negative territory. We now see the 1,600 as the immediate resistance, followed by 1,615. With the 1,585 level fails to hold, the immediate support is revised downwards to 1,560, followed by 1,530. Indicators are turning weaker with the MACD Histogram extended another red bar and remains below the Signal Line, while the RSI has tripped below 50.

Company Brief

AirAsia Group Bhd plans to resume flights between Malaysia and Singapore in mid-August, following news that both Malaysia and Singapore have agreed on the Reciprocal Green Lane scheme to allow essential business and official travelling between the two countries. This will be followed by other international destinations, subject to approvals from authorities. (The Edge)

Boustead Holdings Bhd’s delay in RM9.0b warship project that was awarded to a unit of the company in 2011 has resulted in the intention of the Ministry of Defence to salvage at least two of six littoral combat ships (LCS) construction. The ministry is considering allocating the contract balance of up to RM3.0bn to either instruct Boustead Naval Shipyard Sdn Bhd (BNSSB) to complete two of the six vessels, or to have two vessels completed by vessel designer France's Naval Group, via a deed of assignment with BNSSB. The ministry intends to issue a letter of demand and to fine BNSSB in relation to the project (The Edge)

Sunway Real Estate Investment Trust’s (REIT) net property income (NPI) for 4QFY20 fell 30.2% YoY to RM77.6m on the back of lower revenue following the government's implementation of the different stages of the Movement Control Order. Revenue for the quarter fell 28.8% to RM104.9m. For 2HFY20, it is proposing a distribution per unit (DPU) of 2.38 sen. (The Edge)

Tasek Corp Bhd's controlling shareholder Hong Leong Asia Ltd now has a 97.2% stake in the company at the close of the unconditional voluntary takeover offer (VGO). The VGO at RM5.80 per share, which was launched by Hong Leong Asia's investment vehicles HL Cement (Malaysia) Sdn Bhd and Ridge Star Ltd, was to pave way for a privatisation exercise. Tasek Corp shares will be suspended on 11th August 2020. (The Edge)

TDM Bhd's (TDM) US$50.0m disposal of its loss-making subsidiaries PT Rafi Kamajaya Abadi and PTA Sawit Rezeki to PT Aragon Agro Pratama has fallen through. TDM decided to withdraw its acceptance of the offer, which expired on 31st July 2020, after considering that the execution deadline for the conditional sale and purchase agreement had been extended several times since the offer was accepted on 28th August 2020, and the uncertainties posed by the Covid-19 pandemic that had affected the buyer, PT Aragon Agro Pratama, from finalising the deal. (The Edge)

Unisem (M) Bhd's (Unisem) net profit 2QFY20 has jumped more than twofold to RM34.0m, driven by higher sales volume and foreign exchange gains. Revenue rose to RM310.1m. An interim dividend of two sen per share, payable on 3rd September 2020 was declared. (The Edge)

Source: Mplus Research - 4 Aug 2020