Tripping below the 1,530 support

Market Review

Malaysia:. The FBM KLCI (-0.8%) drifted lower for the fourth consecutive session, dragged by weakness in selected planation and oil & gas heavyweights yesterday. The lower liners also turned weaker, while the broader market closed mostly negative with the plantation sector (-1.6%) underperformed.

Global markets:. Wall Street edged higher after recovering from their intraday lows as investors scoop up on beaten down stocks and the Dow (+0.8%) experienced a broad-based rebound. The European stock markets, however, ended mixed, while Asia stock markets closed mostly negative.

The Day Ahead

The FBM KLCI remained negative as investors continued to trade cautiously under the interest rate upcycle as well as intensifying inflationary pressure environment. We expect a range-bound trading on the local bourse prior to a series of economic data releases for the week including Malaysia’s unemployment rate, European Central Bank interest rate decision, as well as inflation data from China and US. Nevertheless, the overnight jump on Wall Street may shed a light on the local bourse, especially in the technology sector. Commodities wise, the Brent crude oil traded above USD120, while the CPO price hovered above RM6,500.

Sector focus:. We believe the elevated crude oil and CPO prices should bode well for respective sectors’ earnings, eventually lifting share prices. Also, we expect traders to focus on the technology stocks given the rebound in Wall Street. Meanwhile, the consumer, REITs and transportation and logistics sector will benefit as Malaysia has transitioned into the endemic phase.

FBMKLCI Technical Outlook

The FBM KLCI breached below the 1,530 support level after a 4-day decline. Technical indicators remained mixed as the MACD Histogram has extended a positive bar, while the RSI hovered below the 50 level. The next support is located around 1,500-1,510, while the resistance is pegged at 1,570-1,580

Company Brief

IHH Healthcare Bhd has proposed the disposal of IMU Health Sdn Bhd and a hospital for an initial total cash consideration of RM1.35bn. Under a conditional share sale agreement, it will dispose of 1.1m shares, the entire equity interest, in IMU Health to Inbound Education Holdings Sdn Bhd, a company controlled by Hong Leong Healthcare Group Sdn Bhd (45.0%), The Rise Fund Inbound SF Pte Ltd (45.0%) and the Employees Provident Fund (EPF) (10.0%) for an initial consideration of RM1.24bn. In conjunction with the disposal, IHH will transfer the ownership of a hospital that is still under construction to a newly incorporated holding company for sale to Columbia Asia Sdn Bhd for an initial consideration of RM139.0m, less an RM38.0m outstanding bank loan. The cash proceeds received will be utilised towards general corporate purposes (including debt repayment, capital expenditure as well as mergers and acquisitions, investments and working capital) over the next 12 months after completion of the proposed disposals. (The Star)

Capitaland Malaysia Trust (CLMT) has entered into a sale and purchase agreement to acquire 2 plots of contiguous freehold land and industrial properties erected therein in Sungai Jawi, Penang for RM80.0m. This marks CLMT’s entry into Malaysia’s logistics sector after the expansion of its investment mandate beyond the retail sector to include properties in commercial, office and industrial asset classes. Post-transaction, CLMT’s gearing will increase from 35.9% to 37.2%, which remains well below the regulatory limit of 50.0%. (The Star)

Sarawak Consolidated Industries Bhd (SCIB) has bagged an engineering, procurement, construction and commissioning contract worth RM30.8m. SCIB Properties Sdn Bhd had received a contract from Ennova Sdn Bhd to provide project engineering services for Kuala Lumpur City Hall's (DBKL) integrated smart lamp pole replacement within the Klang Valley, involving 200 units of poles (monopoles). (The Edge)

Boustead Plantations Bhd (BPB) has sealed a RM45.0m green financing agreement with China Construction Bank (M) Bhd (CCBM) to facilitate its sustainable replanting exercise as part of its commitment towards environmental, social and governance efforts. BPB seeks to leverage financing to maximise its ongoing accelerated sustainable replanting programme, particularly for its plantation assets in Sabah, from 2022 until 2024. (The Edge)

CIMB Group Holdings Bhd's subsidiaries CIMB Bank Bhd and CIMB Islamic Bank Bhd have committed RM100.0m in financing through Bank Negara Malaysia's (BNM) low carbon transition facility (LCTF) to encourage and empower businesses, including small and medium enterprises (SME), to adopt low carbon and sustainable practices for business resilience. The RM100.0m facility is being offered as part of the LCTF financing scheme established by BNM in January 2022. (The Edge)

Hibiscus Petroleum Bhd subsidiary REPSOL Oil & Gas M Ltd (RML) has discontinued the payment of state sales tax (SST) imposed by Sabah, after its appeal against the tax enforcement was met with silence from the Sabah finance minister. RML, which has a production sharing contract (PSC) in the Kinabalu Oil Field, had been making SST payment since 2020. Another subsidiary, SEA Hibiscus Sdn Bhd, which is the holder and operator of the 2011 North Sabah Enhanced Oil Recovery PSC, has not been paying SST to the state at all. (The Edge)

Source: Mplus Research - 8 Jun 2022