Concerns Over Recession Fears Emerged

Market Review

Malaysia: The FBM KLCI (-0.08%) ended marginally lower despite the strong overnight US market performance as the Fed signalled possible rate cuts in September provided inflation cools further. The Energy sector (+0.60%) was the best performing sector, while the Construction sector (-0.56%) declined the most.

Global markets: Wall Street ended lower despite the positive tone from the Fed, as selected weak earnings from megacap tech giants may indicate a weakening economy. Meanwhile, traders will be eyeing the upcoming nonfarm payroll data on Friday. The European stock market ended lower, while Asia ended mixed.

The Day Ahead

Still, trading activities were unstable throughout the past few days on the local front, with huge volatility, fluctuating between red and green on a daily basis after decisions from the Fed and BOJ; the Fed is looking more dovish, while the BOJ is potentially looking for more rate hikes. Meanwhile, the US stock markets traded lower as the ISM manufacturing index came in weaker than expected and may signal an economic slowdown, while the 10-year bond yields fell below 4%. Earnings-wise, Amazon reported slightly weaker revenue and dropped 5% post-market, while Apple’s results beat estimates and share prices rose after-market. In the commodity markets, Brent oil retraced slightly below USD80, while gold price maintained above USD2440 zone and the CPO price declined below RM3900.

Sectors Focus: With the negative trading sentiment and volatile moves in the US, we believe there might be further selling pressure for the session. However, we believe it could be a buy-on-dip opportunity ahead of the results season on the local front within the Construction, Building Materials, Property, and Utilities sectors. Additionally, we opine that the Renewable Energy segment should benefit from the recent incentives for solar panel installations, while the Telco segment could see an upside move due to the recent 5G news.

FBMKLCI Technical Outlook

The FBM KLCI index ended slightly below the 1,625 level. However, the technical readings on the key index were positive with the MACD histogram forming a rounding bottom formation, while the RSI maintains above 50. The resistance is envisaged around 1,640-1,645 and the support is set at 1,605-1,610.

Company Brief

Fraser & Neave Holdings Bhd's (F&N) net profit rose 22.4% to RM121.63m for the third quarter ended June 30, 2024, from RM99.37m a year ago, when there were one- off non-operating items. Revenue dropped 2.08% to RM1.3bn from RM1.33bn, which the group attributed to geopolitical uncertainties affecting exports from Malaysia and unfavourable currency translation resulting from a weakening baht. The group did not pay any dividend for the quarter. (The Edge)

CTOS Digital Bhd’s (CTOS) net profit gained 20.7% to RM25.5m for the second quarter ended June 30, 2024, from RM21.13m a year ago, thanks to higher contribution from all customer groups, namely key accounts, commercial and direct- to-consumer. Quarterly revenue increased 23.1% year-on-year to RM76.64m from RM62.24m. The group declared a higher second interim dividend per share of 0.78 sen, payable on Sept 27. (The Edge)

YTL Hospitality Real Estate Investment Trust (YTLREIT) reported a 9.7% increase in net property income (NPI) for its fourth quarter ended June 30, 2024, rising to RM65.8m from RM59.9m a year earlier, driven by higher contributions from both the hotel and property rental segments. Quarterly revenue grew 10.7% year-on-year to RM130.2m from RM117.6m. The group declared a final income distribution of 4.09 sen per unit, to be paid on Aug 30. (The Edge)

Singapore-based firms Jostar Investment VCC and Mark Investment Group VCC have signed share subscription agreements with Nova MSC Bhd (NOVAMSC) for investments in two of the company’s subsidiaries totalling RM81.1m. Jostar and Mark Investment will invest a total of RM34.6m in Nova MSC’s 60%-owned subsidiary, Dex-Lab Pte Ltd, and another RM46.5m in EyRIS Pte Ltd, which is 42% indirectly-owned by Nova MSC. (The Edge)

Solar power specialist Pekat Group Bhd (PEKAT) is buying a 60% stake in Apex Power Industry Sdn Bhd for RM96m. Apex Power and its wholly-owned unit EPE Switchgear Sdn Bhd are among Malaysia’s largest manufacturers of medium voltage electrical switchgears and are also involved in manufacturing, engineering and project activities within the power sector. (The Edge)

MN Holdings Bhd (MNHLDG) has secured a RM86m contract from Tenaga Nasional Bhd (TENAGA) to develop a gas-insulated substation in Pahang. The development of the 132/11 kilovolt Kg Awah substation would include remote end substation works. With this job win, the group’s outstanding order book has increased to a total value of RM654.5m. (The Edge)

Mitrajaya Holdings Bhd’s (MITRA) wholly-owned subsidiary Pembinaan Mitrajaya Sdn Bhd has clinched a contract worth RM37.91m for the construction of a four- storey building with one level of sub-basement car park in Kuala Lumpur. The company accepted the letter of award for the project with a duration of 21 months from "a local company". (The Edge)

Software developer Asdion Bhd (ASDION) has been classified as a Guidance Note 3 (GN3) company. This comes after its external auditors, CAS Malaysia PLT, flagged material uncertainty that would affect the company’s ability to continue as a going concern. It is required to submit a regularisation plan to Bursa Malaysia and obtain approval to implement the plan within 12 months from Thursday. (The Edge)

After 21 years on Bursa Malaysia, payment service provider GHL Systems Bhd (GHLSYS) is set to be delisted next week, following a successful takeover by NTT Data Japan Corp (NTTD Japan). The company received a letter from Bursa Securities stating that its shares will be removed from the official list effective 9am, Aug 6. (The Edge)

Pentamaster Corp Bhd’s (PENTA) net profit fell 15.87% to RM19.9m for the second quarter ended June 30, 2024, from RM23.65m a year ago, as its biggest revenue contributor — the automated test equipment (ATE) segment — recorded lower sales volume, higher employee expenses, provisions for slow-moving inventories, and research and development expenditure for certain projects. Revenue dipped 3.11% to RM171.37m from RM176.88m. The group did not declare any dividend for the quarter. (The Edge)

Source: Mplus Research - 2 Aug 2024