Dragged down by portfolio re-balancing

Market Review

Malaysia: The eleventh hour quarterly portfolio re-balancing by institutional investors sent the FBM KLCI (-1.9%) lower as the key index hovered mostly in the negative territory ahead of the extended weekend break. Consequently, the key index fell 3.3% WoW. Amidst the mixed broader market, the lower liners also trended lower.

Global markets: US stockmarkets finished mostly lower as the Dow and S&P 500 shed 0.8% and 0.2% respectively on concerns over the resurgence of Covid-19 infections in the fall and winter months, but the Nasdaq (+0.7%) closed at another fresh record high level. European stockmarkets closed lower after erasing all their intraday gains, while Asia stockmarkets ended mostly lower.

The Day Ahead

The sluggish performance on the local bourse marred by the quarterly MSCI re balancing may see recovery at the start of the week. Still, remain cautious over uncertainty on the US Federal Reserve remarks that economic outlook will remain frail with interest rates to stay low in the next two years. Nevertheless, ample of liquidity in the equities market will keep trading opportunities in a sweet spot.

Sector focus: We continue to see the construction sector playing catch-up with the recovery on the broader market as the progress of KL-SG HSR take pace. At the same time, the technology sector is expected to march higher as demand remains relatively solid at current juncture supported by the 5G trend and Malaysia’s government efforts to encourage the adoption of digitalisation.

The FBM KLCI succumbed to further selling pressure and the key index formed a bearish candle to close near the daily EMA120 level, implying that the downside risk is still prevalent. With the 1,540 level unable to hold, the 1,515 will come into play as the next support, followed by 1,500. In contrast, the resistances are at 1,560, followed by 1,580. Indicators remain weak with the MACD Histogram turning red, while the RSI continues to tread below 50.

Company Brief

Public Bank Bhd’s 2QFY20 net profit fell 24.8% YoY to RM1.00bn due to a one-off net modification loss of RM498.4mil related to Covid-19 relief measures. Revenue for the quarter slid 15.4% YoY to RM4.74 bn. No dividend was declared. (The Star)

RHB Bank Bhd’s 2QFY20 net profit dropped 34.9% to RM400.8m, mainly due to the one-off net modification loss of RM392.4m and higher allowances for credit losses on loans. Revenue for the quarter slipped 4.4% YoY to RM3.27 bn. No dividend was declared. (The Star)

CIMB Group Holdings Bhd’s 2QFY20 net profit fell 82.0% YoY to RM277.1m as it was adversely impacted by the challenging economic environment as well as the modification loss. Revenue for the quarter fell 14.0% YoY to RM3.87bn. No dividend was declared. (The Edge)

Hong Leong Bank Bhd’s 4QFY20 net profit declined 10.5% YoY, mainly due to higher allowance for impairment losses on loans, as well as other assets. Revenue for the quarter, however, grew 2.6% to RM1.20 bn. A final dividend of 20.0 sen per share was proposed. (The Edge)

Hong Leong Financial Group Bhd 4QFY20 net profit rose 12.0% YoY to RM525.1m, on higher contributions from its insurance, investment banking and stockbroking segments. Group revenue climbed 6.7% to RM1.43 bn. A final dividend of 25.0 sen per share was proposed. (The Edge)

YTL Corp Bhd’s 4QFY20 net loss widened to RM252.2m, from a net loss of RM13.8m recorded in the previous corresponding quarter, as its businesses were hit by the COVID-19 pandemic. Revenue for the quarter sank 30.8% YoY to RM3.5m. (The Edge)

DRB-Hicom Bhd’s 2QFY20 net loss stood at RM306.1m on top of revenue of RM2.00bn. No comparison was made due to change in financial year end to 31st December 2020. Separately, DRB-Hicom announced that Petroliam Nasional Bhd’s (Petronas) former president and chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin has been appointed its chairman, with the appointment to take effect on 1st September 2020. (The Edge)

The independent audit over Top Glove Corp Bhd’s labour practices has been completed, as part of its ongoing efforts to resolve the ban on exports of its products to the US. The ban, which has lasted more than six weeks, accounted for 12.5% of Top Glove’s total sales. The US is a major market accounting for 25.0% of group sales volume. It expects the audit report to be available within 10 days, for onward submission to the US CBP. (The Edge)

Datasonic Group Bhd's 1QFY20 net profit slumped 66.0% YoY to RM4.8m, as its main income-generating business — the supply of passports to the Immigration Department was halted by the implementation of the Movement Control Order (MCO) to curb the COVID-19 outbreak. Revenue for the quarter fell 32.4% YoY to RM39.4m. An interim dividend of 0.5 sen per share, payable on 1st October 2020 was declared. (The Edge)

Bumi Armada Bhd's 2QFY20 net profit rose 53.1% YoY to RM119.8m, contributed by the floating, production and offloading (FPO) operations. Revenue for the quarter grew 13.3% YoY to RM606.8m. (The Edge)

Ta Ann Holdings Bhd’s 2QFY20 net profit jumped 158.0% YoY, lifted by higher average selling prices of crude palm oil (CPO) and fresh fruit bunch (FFB) production. Revenue for the quarter grew 15.0% YoY to RM248.7m. (The Edge)

Source: Mplus Research - 1 Sept 2020