Signs of recovery

Market Review

Malaysia: Although the FBM KLCI (-0.5%) was traded lower for the fourth straight session, losses were narrowed owing to gains in financial giants following the Securities Commission move to increase the gearing limit for Malaysian real estate investment trusts from 50.0% to 60.0% till 31st December 2022. The lower liners fell, while the broader market was mostly lower.

Global markets: US stockmarkets rallied overnight as the Dow jumped 1.1% on the stronger-than-expected consumer price index data that rose 0.6% YoY in June 2020 against consensus estimates of 0.3%, coupled with the higher crude oil prices following the larger-than-expected inventory drawdown. European stockmarkets extended their gains, but Asia stockmarkets ended mixed.

The Day Ahead

We reckon that a recovery may kick off supported by the gains across financial stocks that may provide some cushion the pullback in glove heavyweights. Likewise, investors will also be taking the opportunity to bargain hunt on beaten down stocks backed by the higher-than-average liquidity, but we caution that quick profit taking activities are still on the horizon.

Sector focus: While the gains in financial stocks may provide some cushion to the FBM KLCI, the energy sector may warrant another look after Brent oil prices closed above USD45 bbl. Long-term investors may opt for REIT stocks in view of the financing capping adjustment from SC to sustain their working capital.

The FBM KLCI has formed a hammer candle above the daily EMA60 level after recovering most of its intraday losses yesterday. Consequently, we expect a potential recovery towards the immediate resistance at 1,590, followed by 1,615. On the downside, the immediate support remained pegged at 1,550, followed by 1,540. Albeit that, indicators are still weak with the MACD continues to tread below the Signal Line, while the RSI remains below 50.

Company Brief

Rubberex Corporation (M) Bhd has signed a distribution agreement with a unit of Titijaya Land Bhd, aiming to export gloves, personal protection equipment and medical products to China via Sinopharm Medical Equipment QuanZhou Co Ltd. (The Edge)

Muda Holdings Bhd’s wholly-owned unit Federal Packages Sdn Bhd (FPSB) has acquired a 60.0% stake in Perak-based Quantum Total Packages Sdn Bhd (QT), a corrugated cartons and boards manufacturer for RM15.0m. The acquisition will facilitate Muda group’s aspiration to further expand its corrugated carton industry and to increase consumption of the group’s industrial grade paper. (The Edge)

Green Packet Bhd has proposed a private placement to raise up to 10.0% of its outstanding issued share capital, which is up to RM98.9m to fund its cloud business, based on the theoretical issue price of 52 sen a share. From the proceeds, up to RM96.2m has been allocated for purchase of IT infrastructure and RM2.5m for working capital. (The Star)

Ni Hsin Resources Bhd’s wholly-owned unit Ni Hsin Food & Beverages Sdn Bhd (NHSB) has signed a two-year agreement today with Fiatec Biosystem Sdn Bhd, which is engaged in innovating and developing health food and technology and providing customised health food solution, to develop health and bioenergy products for its new food and beverage (F&B) business. The new segment is expected to start generating revenue for Ni Hsin from 1Q2021 onwards. (The Edge)

Solarvest Holdings Bhd's subsidiary Solarvest Asset Management Sdn Bhd (SAMSB) has obtained a two-year moneylender licence from the Ministry of Housing and Local Government (KPKT). The licence allows SAMSB to undertake moneylending services in relation to solar panel leasing and other related activities. The two-year licence is effective from 6th August 2020 and is renewable upon the submission of an application to KPKT. (The Edge)

Bertam Alliance Bhd’s unit Bertam Development Sdn Bhd has accepted the letter of award yesterday from Teamcons Resources Sdn Bhd worth RM22.9m for the provision of maintenance and replacement of water tanks services in Sabah. The contract is to be provided in six locations in Sabah, namely Kota Kinabalu, Kudat, Kota Belud, Sandakan, Lahad Datu and Tawau. The contract is expected to commence one week from yesterday and be completed on 20th December 2021. (The Edge)

Source: Mplus Research - 13 Aug 2020