Market Review

Malaysia: The FBM KLCI (-1.4%) endured a rout as early gains were quickly wiped out, dragged by the persistent weakness in selected index heavyweights yesterday. The selling activities also permeated to the lower liners, while the broader market finished mostly in the red with the exception of the telecommunications & media (+0.7%) and REIT (+0.2%) sector that is defensive in nature.

Global markets: US stockmarkets were battered overnight as the Dow sank 2.8%, dragged down by selloff in technology stocks, coupled with concerns over the delay in further stimulus package from the Congress. European stockmarkets were also downbeat after erasing all their intraday gains, while Asia stockmarket ended mostly lower yesterday.

The Day Ahead

It appears that the downside momentum may linger given that the FBM KLCI failed to build onto its previous session gains. We opine that the renewed volatility across global equities may send the local bourse to end the week on a soft footing. Meanwhile, the lower liners could also be due for a pullback, premised to their toppish valuations.

Sector focus: Given the renewed market volatility, the telecommunication and media sector which is relatively resilient in nature could outperform the negative broader market. We also see that the higher CPO prices that traded above the RM2,800/MT may spur some trading interest within the plantation sector.

With the lack of follow-through buying support, the FBM KLCI has reversed all its previous session gains as the key index formed a bearish engulfing candle, implying that further weaknesses are in the cards. For the time being, the 1,500 will serve as the immediate support, followed by 1,480. In contrast, upsides are limited towards 1,555 and 1,580. Indicators have turned weak again with the MACD Histogram turning red, while the RSI continues to tread below 50.

Company Brief

UWC Bhd's 4QFY20 net profit jumped 85.2% YoY to RM18.7m on higher demand from customers in the semiconductor industry and expanding life-science business. Revenue for the quarter grew 30.9% YoY to RM61.4m. A dividend of two sen per share, payable 8th October 2020 was declared. (The Star)

Ho Wah Genting Bhd has called off its proposed placement of up to 63.7m irredeemable convertible preference shares (ICPS) shares to 15 investors, including its substantial shareholder Ho Wah Genting Sdn Bhd (HWGH) for 49.7 sen per ICPS share. It will still issue 40.3m new ordinary shares at 49.7 sen apiece to settle RM20.0m worth of debts owed to HWGH and Prime King Investment Ltd. (The Edge)

Tropicana Corp Bhd issued RM100.0m worth of sukuk out of its RM1.50bn Sukuk Wakalah programme to repay borrowings and defray financing expenses. The Islamic bond has five-year tenure, senior ranking and a security cover of 1.5x. The Sukuk Wakalah programme has been assigned a credit rating of A+IS with a stable outlook by the Malaysian Rating Corp Bhd. (The Edge)

K-One Technology Bhd has received the greenlight from the Medical Device Authority to supply nasal swabs in Malaysia. It plans to sell the swabs on their own or in a bundle with vials, depending on the requirements of end users. This follows its May announcement that it would be venturing into nasal swab manufacturing in light of the COVID-19 pandemic. (The Edge)

Axis REIT is to buy a single-story warehouse located on 8,732.6 sq m of leasehold industrial land in Section 15, Shah Alam for RM11.9m from Melewar Industrial Group Bhd. The purchase is aimed at strengthening its portfolio of industrial properties. Axis REIT will use a financing facility from existing credit lines to buy the warehouse. As such, its gearing ratio will increase to 29.0% of its audited total assets as of 31st December 2019. (The Edge)

Astro Malaysia Holdings Bhd is ramping up to provide its most far-reaching coverage of the Premier League football competition that begins on 12th September 2020. As the official and exclusive Premier League broadcaster in Malaysia, it will televise all 380 matches live on television and on Astro Go. (The Edge)

Tenaga Nasional Bhd (TNB) is projecting a slightly lower electricity tariff next year following the current reduction in production costs for coal and gas. This would depend on the Energy Commission, which will submit any tariff proposals to the Cabinet. The proposal would also be based on the movement and projection of coal and gas prices until the end of the year. The commission is expected to announce a new electricity tariff at the end of the year for January-June 2021 following Cabinet approval. (The Edge)

Hibiscus Petroleum Bhd has won three licences from the UK Oil and Gas Authority. One license is for Block 21/24d, located 4km away from the Teal Manifold of the Anasuria Cluster. Another license is for Block 21/19c and Block 21/20c which are contiguous with the Cook field. The third licence is for Block 15/17a which is 8km away from the Marigold field operated by the group. (The Edge)

Source: Mplus Research - 4 Sept 2020