FOMC Rate Cut To Support Emerging Markets

Market Review

Malaysia: The FBM KLCI (+0.19%) closed higher, boosted by buying pressure in Banking and Utility heavyweights, namely CIMB (+15.0 sen) and YTL (+12.0 sen), backed by a stronger ringgit environment and robust inflows from foreign funds following the Fed rate cut.

Global markets: The Wall Street ended mixed last Friday as the investors traded cautiously after the 50 bps US interest rate cut. Meanwhile, the European stock markets ended lower, but the Asian stock markets closed on a positive note after BoJ concluded to kept its benchmark rate steady at 25bps.

The Day Ahead

Last week, local stock markets ended on a positive note following the Fed’s rate cut. Similarly, U.S. stock markets also saw strong momentum, as the Dow approached all-time highs. This week, market participants will focus on key economic indicators, including: (i) Manufacturing and Services PMI, (ii) U.S. Final GDP Data, (iii) Unemployment Claims, and (iv) Core PCE Index. In the commodities market, Brent oil is trading closer to USD 75 amid ongoing tensions in the Middle East, while gold prices have surged to a new all-time high above USD 2,600. Meanwhile, crude palm oil ended the week on a stronger note after India raised the basic import tax on crude and refined edible oils by 20 percentage points to 27.5%.

Sector Focus: We anticipate increased interest in emerging markets, with foreign funds possibly investing in Malaysian equities. Also, we believe investors will position in the small-cap and lower-liner stocks, which were significantly oversold in recent weeks. Additionally, we believe a strong ringgit will benefit domestic sectors such as Construction, Consumer, Utilities, Financials, and Automotive. We also foresee more trading opportunities in the Property sector, particularly revolving around data center development and the Johor-Singapore Special Economic Zone, following the King’s return to Malaysia after a four-day visit to China.

FBMKLCI Technical Outlook

The FBM KLCI index closed higher towards the 1,668 level. Also, the technical readings on the key index were positive, with the MACD histogram turned into the positive territory, and the RSI stayed above 50. The resistance is envisaged around 1,683-1,688, and the support is set at 1,648-1,653.

Company Brief

Tenaga Nasional Bhd (TENAGA) has inked an agreement with Singapore’s Keppel Electric Pte Ltd to supply up to 100MW of electricity to the island-state. The Malaysian utility company also signed a cross-border power trade interconnection agreement with SP Power Assets Ltd (SPPA) to ensure stable electricity transmission between Malaysia and Singapore. These agreements “support Asean’s broader energy transition, prioritising interconnectivity and grid efficiency as the region faces growing energy demand”, it said. (The Edge)

The upcoming increase in US tariffs on China-made gloves provides an opportunity for Malaysian players to increase production, said Top Glove Corp Bhd (TOPGLOV) managing director Lim Cheong Guan. Malaysian players are “able to increase our production” to meet US demand should the tariffs result in a supply vacuum from China, Lim told reporters at a media event on the progress of the glovemaker’s water management system improvements. Some 20% of the group's total sales are to the US. US regulators this month announced that tariffs against China-made medical gloves will be raised to 50% next year, from 7.5% currently. In 2026, it will be increased to 100%. (The Edge)

Health products manufacturer Sunzen Biotech Bhd (SUNZEN) is eyeing double-digit revenue growth for its financial year ending June 30, 2025 (FY2025), driven by strong demand for its bird's nest products and loan financing services. Its executive chairman Ching Chee Pun said there is a surge in demand for bird's nest products in China, a market that contributes 53% of the group's revenue. There is also a growing number of clients seeking money lending services from the group, he said. “Actually, we are optimistic on this [our businesses moving forward]. I would say [our revenue] would be at least at double-digit growth,” he said. The group plans to sell its factory in Kota Kemuning to inject additional capital into the loan financing business and reduce reliance on bank loans. (The Edge)

Construction outfit and property development and hospitality management group NCT Alliance Bhd (NCT) is planning to acquire a 51% equity interest in Setara Juara Sdn Bhd, which holds development rights to about 249.67 acres of land in Putatan, Sabah. The land has been earmarked for a mixed-development project, with an estimated gross development value of approximately RM3bn. The proposed acquisition, the price of which has yet to be decided on, will be a key component of NCT’s growth strategy in Sabah as the group seeks to expand its property development business there. It has inked a memorandum of understanding with Setara Juara's existing shareholders to negotiate and finalise the terms of the planned acquisition. (The Edge)

Source: Mplus Research - 23 Sep 2024