Eyes on the Fed's Next Move

Market Review

Malaysia: Despite the mixed performance on the overnight US markets, the FBM KLCI (+0.73%) extended its gains strongly, as bargain hunting emerged in banking and healthcare heavyweights, namely IHH (+27.0 sen) and CIMB (+20.0 sen), boosting sentiment on the local front.

Global markets: Despite retail sales for August came in above expectations at 0.1% vs -0.2% consensus, Wall Street ended mixed ahead of the FOMC meeting, currently the market is divided on the rate cut quantum. Meanwhile, European stock markets closed mostly higher, while Asian stock markets were mixed.

The Day Ahead

The FBMKLCI gained momentum, driven by strength in banking and healthcare heavyweights. Investors also shifted focus to glove companies after the U.S. Trade Representative (USTR) imposed higher tariffs on Chinese products like gloves and electric vehicles (EVs). Meanwhile, Wall Street traded mixed ahead of the FOMC meeting, with investors awaiting the Fed’s decision following August retail sales, which came in at 0.1%, beating the -0.2% consensus. In the commodities market, Brent oil extended its rebound due to supply disruptions from Hurricane Francine and potential declines in oil exports from Libya. Gold prices remained near record highs, holding above USD2,570. Crude palm oil, however, slipped below RM 3,800, pressured by the strong ringgit and India’s decision to raise taxes on edible oils.

Sector Focus: We expect continued focus on the healthcare sector, with higher U.S. tariffs benefiting glove manufacturers, and Malaysia confirming its first Mpox case, which could boost trading in glove and hospital stocks. Given the strong ringgit, we favour sectors like Consumer, Utilities, Financials, and Automotive. Additionally, we believe ongoing data center projects will benefit the Construction sector, while the Johor-Singapore Special Economic Zone should provide a boost to the Property sector.

FBMKLCI Technical Outlook

The FBM KLCI index closed higher towards the 1,664 level. However, the technical readings on the key index were mixed, with the MACD histogram forming another negative bar, but the RSI gained above 50. The resistance is envisaged around 1,679- 1,684, and the support is set at 1,644-1,649.

Company Brief

Two of Genting Malaysia Bhd’s (GENM) subsidiaries, video lottery facility operator Genting New York LLC and its unit Genny Capital Inc, have priced an additional US$100m (RM427m) of 7.25% senior unsecured notes, due 2029. This came after the two indirect wholly-owned units priced an offering of US$525m of 7.25% senior unsecured notes, also due 2029, last Tuesday. "These additional notes form part of the same series as the initial US$525m aggregate principal amount of notes that were priced on Sept 10, 2024 (initial notes) and the additional notes will carry the same terms as the initial notes.” Net proceeds from the additional corporate notes will be used to repay existing debts. Post-issuance, its gross borrowings is expected to increase to RM17.69bn from RM14.98bn. Net gearing is expected to increase to 1.04 times from 0.81 times. (The Edge)

Supermax Corp Bhd’s (SUPERMX) first US manufacturing facility in Texas will begin commercial production by January 2025. Its US-based unit Maxter Healthcare Inc will commence testing and commissioning of its first batch of production lines in December 2024. Phase one operation has a total production capacity of 4.8bn pieces of gloves pa, and it expects to achieve half capacity by next year. The remaining capacity expansion is expected to be completed in the fourth quarter of 2025. Based on analysts’ compilation, Supermax's current production capacity is about 21bn pieces of gloves pa. Some 29% of its total sales are to the US. (The Edge)

Samaiden Group Bhd (SAMAIDEN) plans to expand its renewable energy (RE) business into Indonesia via the setting up of a joint venture (JV) company. Its subsidiary, Samaiden SG Pte Ltd, will establish the JV with PT MCS Bina Energi on a 70:30 basis, with an authorised capital of 10bn rupiah (RM2.8m). MCS Bina is involved in sectors such as basic infrastructure, RE and mineral resources. The company is closely aligned with Bintang Timur Investama, a diversified investment firm that actively engages in infrastructure, RE and technology sectors. Samaiden will provide technical advisory services in solar photovoltaic systems and RE, while MCS Bina will focus on identifying local business opportunities and navigating the regulatory landscape in Indonesia. (The Edge)

Pipes and fittings maker Resintech Bhd (RESINTC) is forming a joint venture (JV) with a unit of a Sarawak state agency to jointly trade industrial plastic products in the state. The JV will boost Resintech’s trading capabilities and open doors to new opportunities in Sarawak’s rapidly growing industrial sector, providing a steady revenue stream from the Sarawak market. The JV will initially focus on trading industrial plastics products, with the possibility of expanding into manufacturing based on future market demands. SEDC Energy Sdn Bhd, a unit of Sarawak Economic Development Corp, has agreed to subscribe to 40,000 new shares or 40% in the JV, while Resintech will have the remaining 60%. (The Edge)

Debt-ridden Perak Corp Bhd (PRKCORP) has been given another six-month extension by Bursa Malaysia to submit its regularisation plan, with the deadline now being postponed to Feb 9, 2025. This was in response to the company’s application for an extension of time in Aug 9, which it submitted as its previous Aug 10 submission deadline approached. (The Edge)

MyEG Services Bhd (MYEG) has teamed up with the Federation of Malaysian Freight Forwarders (FMFF) to promote ZTrade — a blockchain-based trade document system — as Malaysia's National Single Window (NSW) for cross-border trade facilitation. FMFF currently has 1,500 members nationwide. This partnership follows MyEG’s recent exclusive collaboration with East Logistics Link Co Ltd, a unit of the General Administration of Customs of China, to jointly develop and implement an NSW to facilitate cross-border trade in Asean. ZTrade, a Web3 technology based on MyEG's Zetrix blockchain platform, provides near real-time access to certificate data, enhancing tariff calculations and customs clearance efficiency. (The Edge)

Source: Mplus Research - 18 Sep 2024