US Stock Markets Started Sept In A Weaker Tone

Market Review

Malaysia: The FBM KLCI (-0.38%) closed lower, dragged down by selling pressure in the Industrial Products & Services and Banking heavyweights, namely PCHEM (-12.0 sen) and PBBANK (-4.0 sen), as uncertainties arise in the global markets amid concerns about the economic growth and monetary policy direction.

Global markets: Bond yields fell and Wall Street extended its losses after a soft job openings report heightened concerns about the health of the US economy. Meanwhile, both European and Asian stock markets ended lower following the US tech sell-off and weak US economic data, which sparked recession fears.

The Day Ahead

Overall, sentiment on the local front ended on a negative note with broad-based sell- offs, following a weak start in the US stock markets. However, foreign funds remained net buyers on the Bursa exchange. Meanwhile, Wall Street began September on a weaker footing, with the S&P and Nasdaq experiencing consecutive declines, driven by amplified selling in the technology sector after softer JOLTS openings and ISM Manufacturing PMI data. Traders will be closely watching the unemployment claims data later tonight and the non-farm payroll report due on Friday. In the commodity markets, Brent oil extended its decline due to weaker economic growth in China, while on the supply side, OPEC may increase production in Q4. Gold prices continued trading around the USD 2,500 level, and CPO prices fell below RM 3,900.

Sector Focus: Given the ongoing negative sentiment in the US technology sector, we anticipate further selling pressure on local tech stocks. Additionally, the strong ringgit could exacerbate the situation. On the positive side, the strong ringgit may benefit sectors like Consumer, Construction, Building Materials, and Utilities. Investors may also re-assess fundamentally solid small-cap stocks after last month’s market rout and the current oversold conditions.

FBMKLCI Technical Outlook

The FBM KLCI index ended lower towards the 1,670 level. However, the technical readings on the key index were positive with the MACD histogram forming another positive bar and the RSI trended above 50. The resistance is envisaged around 1,685- 1,690 and the support is set at 1,655-1,650.

Company Brief

IHH Healthcare Bhd (IHH) said it is acquiring the 600-bed Island Hospital in Penang for RM3.92bn in cash from Comprehensive Care Sdn Bhd. The acquisition includes the vacant land, which is valued at RM223m with approvals secured for future development. The transaction — to be financed with internal funds and external borrowings — is expected to be accretive to its earnings and return on equity from 2026. IHH group chief financial officer Dilip Kadambi said the group is expecting Island Hospital to contribute "upwards of 15%" of its total annual revenue. Based on the group's FY2023 revenue of RM20.93bn, Island Hospital's revenue contribution may come up to over RM3.13bn annually. (The Edge)

YTL Power International Bhd (YTLPOWR) has confirmed that its subsidiary YTL Communications Sdn Bhd (YTL Comms) has been questioned by the Malaysian Anti- Corruption Commission (MACC) about the Ministry of Education's 1BestariNet project, valued at RM4bn. "We wish to confirm that MACC has recently requested information from YTL Comms in respect of the 1Bestarinet project," YTL Power said. Bernama, citing a source, reported that MACC had launched an investigation into payment claims related to the 1BestariNet service tender, as the graftbuster raided several government offices as well as the office of YTL Comms. According to the news agency, the investigation is centred on claims involving false details related to RM2.7bn in payments, as well as other criminal elements under the MACC Act 2009. (The Edge)

Central Global Bhd (CGB) has bagged a RM616.4m contract for the Pan Borneo Highway Sabah Phase 1B project. The contract was granted to its unit, RYRT International Sdn Bhd, from Pembinaan Urusmesra Sdn Bhd for the upgrading of the road from the Lahad Datu Bypass to Kampung Sandau under Work Package 22. The project is expected to start on Sept 30, 2024 and conclude on March 29, 2028. Central Global said the project award has significantly increased its order book by 456.3% and amounting to RM751.5m. It expects the contract to provide consistent revenue generation for the group over the next three and a half years. (The Edge)

Jentayu Sustainables Bhd (JSB) said it has received a letter of notification from the Energy Commission of Sabah (ECOS) for Project Oriole — a 162MW run-of-river hydropower plant in the state. The letter outlines the key commercial and technical terms for the project, including specific deadlines for signing a 40-year power purchase agreement, achieving financial close and submitting a commitment letter and bond to ECOS. "The project is scheduled to reach its commercial operation date no later than Dec 31, 2028," Jentayu said. (The Edge)

Loss-making Ocean Vantage Holdings Bhd (OVH) announced the emergence of three new Sarawak-based substantial shareholders, following the disposal of a collective 23.32% stake by executive directors Martin Philip King Ik Piau and Yau Kah Tak, and one other. The three new shareholders, all based in Kuching, are Majuco Motor Sdn Bhd (10% or 41.99m shares), Pertanian Teguh Jaya Sdn Bhd (7.75% or 32.54m shares) and Resources Hub Logistics Sdn Bhd (5.57% or 23.39m shares). With the announcement, Majuco and Pertanian Teguh Jaya are now the largest and second largest shareholders in Ocean Vantage. (The Edge)

Vetece Holdings Bhd (VTC) was the most active stock on Wednesday, though the share price of the newly listed enterprise software company was volatile amid strong interest. The stock rose as much as 6% or 4 sen to 63.5 sen before slipping to as low as 53 sen. The counter closed at 58.5 sen, giving the company a market capitalisation of RM229.3m. Trading volume totalled 111.42m shares, over 28% of its total shares outstanding. Shares of Vetece have exceeded the fair value of 30 sen to 46 sen assessed by Public Investment Bank, Mercury Securities and Apex Securities in non-rated notes ahead of its listing on Aug 28. The stock has also more than doubled from its initial public offering price of 25 sen apiece. (The Edge)

Shares of UWC Bhd (UWC) fell by more than 15% on Wednesday, prompting Bursa Malaysia to suspend the counter’s intraday short-selling (IDSS). The regulator said that IDSS in UWC will only be reactivated at 8.30am on Thursday. Shares of the Penang-based integrated engineering solutions provider fell 9.88% to RM2.19 as at noon market break on Wednesday. The counter then extended its losses to RM2.04 at market close, down 16.05% or 39 sen from the previous day’s close of RM2.43, giving it a market capitalisation of RM2.25bn. Year to date, UWC has fallen more than 40%. While it is not immediately clear why the counter experienced such a downfall, the company is currently lagging its performance in the previous financial year. (The Edge)

Shares of Tan Chong Motor Holdings Bhd (TCHONG) slipped on Wednesday to their lowest in two decades, as analysts took a dim view following a larger-than-expected quarterly loss. Tan Chong fell to 70.5 sen, its lowest since April 2004, at market close. At that price, the company — which mainly assembles Nissan-branded vehicles — had a market capitalisation of RM473.76m. Trading volume, however, was light, with only 166,400 shares changing hands throughout the day. Hong Leong Investment Bank Research maintained its “sell” call on the stock, as it voiced concern over the group’s continued weak sales volume amid deteriorated market conditions. (The Edge)

Source: Mplus Research - 5 Sep 2024