Selling pressure regained control

Market Review

Malaysia:. The FBM KLCI (-1.8%) formed a bearish engulfing candle as selling pressure demonstrated no signs of upward move yet. The lower liners also turned downbeat again, while all the 13 major sectors on the broader market were splashed in red with the plantation sector (-4.6%) taking the worst hit.

Global markets:. Wall Street edged mildly lower after erasing all its intraday gains as the Dow (-0.2%) fell after US Federal Reserve Chairman Jerome Powell acknowledged that the steep interest rate hikes may tip the economy into recession. Both the European and Asia stock markets ended on a negative note.

The Day Ahead

The FBM KLCI tumbled more than 1.8% along with regional peers as pervasive fears over recession rippled through the markets. We believe the sentiment will remain negative-bias as investors mulled the US Fed Chairman’s testimony on the commitment in interest rate hikes to tame inflation, while eyeing Malaysia’s and Japan’s inflation rate tomorrow. Nevertheless, the oversold stocks may still look attractive for bargain hunting activities. Commodities prices have shown a downtrend move amid growing recession worries; the Brent oil price hovered around USD111, while the CPO price dropped to RM4,600.

Sector focus:. With the setup above, investors should remain cautious and may avoid trading in the commodities related sectors such as plantation and energy. On the defensive side, banking, REITs, and selected consumer stocks may stay focus over the near term.

FBMKLCI Technical Outlook

The FBM KLCI has again violated its 52-week low as the key index plummeted below the immediate support at 1,450. Technical indicators continued to show negative momentum as the MACD Histogram narrowed towards zero, while the RSI fell below the oversold 30 level. Support is pegged along 1,400-1,420, while the resistance is located at 1,450-1,480.

Company Brief

Lotte Chemical Titan Holding Bhd’s unit, Pt Lotte Chemical Indonesia (LCI), has entered into related party transactions involving the company's integrated petrochemical facility in Indonesia. Known as the Lotte Chemical Indonesia New Ethylene Project, LCI has awarded contracts to Lotte Data Communication Co Ltd (LDCC) for USD33.6m (RM147.8m), Lotte Engineering & Construction Co Ltd (LEC) for USD6.2m (RM27.3m) and Kine Project Jo IDR432.1bn (RM128.3m) for the engineering, procurement and construction of an automatic warehouse and bagging area in the petrochemical facility. (The Star)

Mtouche Technology Bhd has received a notice in writing dated 3rd June 2022 from Messrs Afrizan Tarmili Khairul Azhar PLT (AFTAAS) on their resignation as auditors of the company. Pursuant to Section 281(2) of the Companies Act 2016, AFTAAS's term of office will end after 21 days from 3rd June 2022. (The Star)

Axiata Group Bhd and PT XL Axiata Tbk (XL Axiata) have completed the acquisition of 66.0% of PT Link Net Tbk (Link Net) for IDR8.72trn, or approximately RM2.63bn. With the completion, Axiata’s wholly-owned subsidiaries, Axiata Investments (Indonesia) Sdn Bhd (AII) and XL Axiata now hold 46.0% and 20.0% respectively in Link Net previously held by Asia Link Dewa Pte Ltd and PT First Media Tbk. (The Edge)

Bioalpha Holdings Bhd has formed a joint venture (JV) with Shanghai-listed Suzhou Medicalsystems Technology Co Ltd to supply health supplement products in the China market. Suzhou Medicalsystems has agreed to invest 6.0m Yuan (about RM3.9m) into the JV for working capital. (The Edge)

Reservoir Link Energy Bhd will transfer its listing status to the Main Market from the ACE Market effective 27th June 2022. The company would be categorised under the Energy sector, and that the stock short names and stock numbers for the company’s securities would remain unchanged. (The Edge)

Allianz Malaysia Bhd announced the redesignation of its non-independent and non executive director, Zakri Mohd Khir, as its new chairman effective 23rd June 2022. The group said Zakri, who also served as CEO of Allianz Malaysia previously, will be replacing Tan Sri Dr Rafiah Salim who retired from the post after helming the group since May 2018. (The Edge)

CIMB Group Holdings Bhd has confirmed the appointment of Chu Kok Wei and Novan Amirudin as co-chief executive officers (co-CEOs) of its group wholesale banking business effective 18th July 2022. This would result in co-CEO positions to separately oversee the treasury and markets segment as well as the corporate and investment banking segment. (The Edge)

Omesti Bhd has secured a 3-year contract for the leasing of personal computers for Tenaga Nasional Bhd (TNB), amounting to RM25.3m. Its indirect 51.0%-owned subsidiary Formis Network Services Sdn Bhd accepted the award from TNB on 21st June 2022. (The Edge)

Tenaga Nasional Bhd (TNB) has signed an energy-wheeling agreement (EWA) for electricity transmission from Laos to Singapore via Thailand and Malaysia using the existing interconnection facilities owned by all countries involved. The EWA will be effective for 2 years beginning 22nd June 2022. (The Edge)

Deleum Bhd’s wholly-owned subsidiary Deleum Services Sdn Bhd (DSSB) has incorporated a Thailand-based subsidiary to provide software, oilfield and chemical services in Thailand. (The Edge)

Mestron Holdings Bhd has secured a total of RM17.5m worth of orders from telecommunication infrastructure companies since the start of 2022, in line with the accelerated implementation of the National Digital Network (JENDELA). These works were awarded by various companies, including Smartgen Technology Sdn Bhd, Hydro Vista Sdn Bhd and OCK Setia Engineering Sdn Bhd. (The Edge)

Kronologi Asia Bhd's 1QFY23 net profit slumped 45.0% YoY to RM2.2m, on increased operational costs and higher tax. Revenue for the quarter dipped 2.5% YoY to RM57.3m. (The Edge)

Source: Mplus Research - 23 Jun 2022