Knee jerk retreat

Market Review

Malaysia: The FBM KLCI (-0.2%) slipped into red yesterday despite lingering mostly in the positive territory following the concerns over rising Covid-19 cases and fears over a second nationwide lockdown. The lower liners finished lower, while the broader market also closed mostly in red, dragged down by the healthcare sector (- 2.7%).

Global markets: US stockmarkets plummeted as the Dow (-1.3%), S&P 500 (-1.4%) and Nasdaq (-1.6%) closed lower after the stimulus negotiation was put to a halt until the conclusion of upcoming Presidential election. European stockmarkets extended their gains, while Asia equities also finished mostly in green.

The Day Ahead

The knee-jerk reaction selldown was due to the projected number of Covid-19 cases at end-October 2020 by the health director-general Tan Sri Dr Noor Hisham Abdullah. Nevertheless, speculations over MCO 2.0 have been quashed by the Prime Minister’s latest announcement may provide some alleviation to the selldown. The lower liners and broader market shares have turned downbeat which may see any gains to be tempered by quick profit taking over the near term amid the rising cases of Covid-19.

Sector focus: Amid the renewed volatility, the utilities sector that is defensive in nature due to their long term recurring income and ability to generate decent dividend yields may be in focus. Meanwhile, the higher CPO prices may also garner further trading interest within the plantation stocks.

The FBM KLCI has formed a bearish candle after rejecting the daily EMA20 level after the key index erased all its intraday gains. Under the prevailing situation, the 1,500 level will come into play again with the immediate support at 1,480, followed by 1,450. Upside wise the immediate resistances is at 1,520, followed by 1,540. Indicators remained mixed as the MACD Histogram has extended another green bar, but the RSI remains below 50.

Company Brief

AirAsia X Bhd (AAX) has announced a group-wide debt and corporate restructuring scheme, as the cash-starved budget airline seeks to avoid liquidation and restart some flight operations early 2021. The proposed a debt restructuring scheme with unsecured creditors of the Group could reconstitute RM63.5bn worth of debts, including future lease rentals, aircraft purchase commitments and advanced ticket sales, into a principal amount of up to RM200.0m

AAX also proposed a capital reduction of 90% of its issued share capital in order to offset its accumulated losses, which is equivalent to a reduction of RM1.38bn from its share capital. It has also proposed a share consolidation to combine every 10 shares into one. (The Star)

Top Glove Corp Bhd has increased the remediation sum it would pay to its migrant workers to RM136.0m. The migrant workers will receive remediation over the next 10 months, from October 2020 onwards. Top Glove has submitted the necessary information to the US Customs and Border Protection (CBP) and is following up closely with them, with a view to an expeditious resolution of the matter and revocation of the Withhold Release Order. (The Star)

SCGM Bhd, which diversified into personal protective equipment (PPE) manufacturing in March 2020, hopes to export its face masks to the US. Benxon brand face masks, produced by its wholly-owned subsidiary Lee Soon Seng Plastic Industries Sdn Bhd, have been registered with the US Food and Drug Administration for usage by the general public. (The Edge)

PUC Bhd's wholly-owned subsidiary Presto Pay Sdn Bhd has inked a memorandum of understanding with licensed telephone betting channel provider Pan Malaysian Pools Sdn Bhd (PMPSB) for the possible introduction of an alternative payment solution to the latter's business. (The Edge)

Tropicana Corp Bhd deputy chief executive officer Datuk Dickson Tan Yong Loong, who is the son of Tan Sri Danny Tan Chee Sing has resigned from his post with immediate effect. He has also resigned as a director of the group, citing “health related issue” as the reason. (The Edge)

Bintai Kinden Corp Bhd has entered into a distribution and licensing agreement with US-based firm Generex Biotechnology Corp and its subsidiary NuGenerex Immuno-Oncology Inc for their Covid-19 vaccine in Malaysia. Its subsidiary Bintai Healthcare Sdn Bhd had been granted the exclusive rights to distribute, sell and commercialise the Covid-19 vaccine. (The Edge)

Focus Dynamics Group Bhd has signed a heads of agreement with Oversea Enterprise Bhd to embark on an international expansion plan and brand enhancement strategy for the Oversea restaurant brand, which includes opening of eight new international restaurants. The agreement sees both parties collaborating resources, skillsets, investment and experience to execute an international network of new age Chinese restaurants, under the Oversea banner. (The Edge)

Source: Mplus Research - 7 Oct 2020