Uncertainties Intensified Ahead Of US Elections

Market Review

Malaysia: In tandem with sluggish regional market performance, the FBMKLCI (- 0.06%) closed lower, as selected Plantation heavyweights, like SDG (-6.0 sen), dragged down the sentiment on the local front. Meanwhile, Telco & Media gained momentum for the session (+0.42%).

Global markets: Wall Street experienced a significant pullback, dragged down by ongoing concerns of a slower pace of Fed rate cuts and the uncertainties surrounding the upcoming US election, which pushed the Treasury yield higher. The European market closed lower, but Asian market ended the day on positive note.

The Day Ahead

The FBM KLCI declined for the third consecutive day, while the FBM Small Cap index rebounded. In the US, market sentiment turned negative, with all major indices closing in the red as uncertainties surrounding the upcoming US elections intensified. Also, US home sales fell short of expectations, while Treasury yields rose to a three-month high, with the market now pricing in an 89% probability of a 25 bps rate cut at the upcoming FOMC meeting. In the commodities market, Brent crude oil dipped slightly after US crude inventories increased more than anticipated, despite a rebound in refining activity. Meanwhile, gold prices pulled back but remained above the USD2,700 mark. CPO prices edged closer to RM4,500, signalling a potential upward rally.

Sector Focus: We believe investors will continue to focus on the Construction, Property, and Renewable Energy sectors after the Budget 2025. Meanwhile, we are optimistic about the commodity sectors, as CPO has been trending positively in recent trading sessions, which may drive higher trading activity in the Plantation sector. Besides, as the ringgit weakened further to RM4.347/USD, we expect traders to seize the opportunity to accumulate stocks in the Glove and Technology sectors.

FBMKLCI Technical Outlook

The FBM KLCI index ended lower towards the 1,641 level. The technical readings on the key index were mixed, with the MACD histogram extended another positive histogram, but the RSI has trended below 50. The resistance is envisaged around 1,656-1,661, and the support is set at 1,621-1,626.

Company Brief

Capital A Bhd (CAPITALA) has terminated an agreement with Aetherium Acquisition Corp meant to pave the way for it to inject its AirAsia brand management business into the Nasdaq-listed special purpose acquisition company (SPAC) for US$1.15bn (RM5bn). Capital A said it called off the deal because Aetherium had received a delisting notification from Nasdaq's hearing panel in June. The delisting notification follows Aetherium's failure to comply with certain Nasdaq listing rules, including meeting minimum market value of US$50m and having at least 400 shareholders. Aetherium is appealing against the notice, but Capital A still had the right to terminate the agreement under the terms and conditions of the agreement. (The Edge)

ABM Fujiya Bhd (AFUJIYA) said Chinese battery maker Jujiang Power Technology Co Ltd will subscribe for a 40% stake worth RM48m in one of its wholly-owned unit. The consideration for the stake in Fuya Energy Sdn Bhd will be offset with most of the cash advanced earlier from Jujiang. That means there would not be any cash proceeds for Fuya Energy from the issuance of new shares to Jujiang. Once the deal is completed, the group expects its revenue to be increased, translating into improved profits. (The Edge)

Protasco Bhd (PRTASCO) said its affordable housing project awarded by Perbadanan Putrajaya in 2022 to its wholly-owned subsidiary Protasco Development Sdn Bhd has been revised with a new name and with a lower number of units. The first project, previously named Projek Residensi Prihatin Keluarga Malaysia Putrajaya Melur, has been renamed to Projek Residensi Madani Melur, with the number of units dropping from 688 to 654. The second project, previously named Projek Residensi Prihatin Keluarga Malaysia Putrajaya Kenanga, has been renamed Projek Residensi Harga Bebas Kenanga, with the same number of units (984). However, Protasco did not disclose the reason for the revision and whether there were any changes to the initial gross development cost of RM442.68m. (The Edge)

Construction and engineering company LFE Corp Bhd (LFECORP) has secured a related-party construction contract worth RM81.71m. The contract was awarded to its wholly-owned unit, LFE Engineering Sdn Bhd, by Puncakcity Development Sdn Bhd. LFE Engineering has been appointed the main contractor for main building works, the group said, without disclosing the project. The appointment is for a period of 32 months. LFE Corp said its executive chairman and substantial shareholder Chuah Chong Ewe is an interested party in the transaction. (The Edge)

TAS Offshore Bhd (TAS) has secured shipbuilding contracts for eight units of tugboats worth about RM49.1m. The vessels, which are set to be delivered in the second quarter of 2025, were awarded by “new customers from Indonesia”, the company said, without disclosing the names of the customers. Nonetheless, the contracts are expected to contribute positively to the group’s earnings and net assets for the financial year ending May 31, 2025 (FY2025). (The Edge)

Kerjaya Prospek Group Bhd (KERJAYA), via its wholly-owned subsidiary Kerjaya Prospek (M) Sdn Bhd, has secured two new contracts from Pixel Valley Sdn Bhd and Greencove Sdn Bhd totalling RM34.4m. The first contract, valued at RM16m, involves piling and pile cap works for a development in Batu Kawan, Penang. The second contract, worth RM18.4m, involves earthworks and structural works for a proposed development in Damansara Damai, Selangor. Both projects will begin on Nov 5, 2024, with completion expected within 18 months. The group has so far secured 10 contracts, amounting to RM1.6bn, and its outstanding order book now stands at RM4.5bn. (The Edge)

Leong Hup International Bhd (LHI) has appointed Chong Choon Yeng as its new chief financial officer (CFO), effective Jan 1, 2025. Chong, 53, last Friday (Oct 18) left the same position at Tan Chong Motor Holdings Bhd (TCHONG) after four years at the Nissan vehicle franchise holder company. He takes over from Chew Eng Loke, 55, who will assume his new role as group adviser at Leong Hup. (The Edge)

MNRB Holdings Bhd's (MNRB) second quarter net profit more than doubled to RM92.74m, from RM41.57m a year earlier, on the back of an RM85m jump in the group's insurance service earnings amid improved claims. Revenue for the quarter ended Sept 30, 2024 fell slightly to RM974.34m from RM977.52m previously, following a drop in insurance revenue from the reinsurance business that was offset by growth in general takaful revenue earned from motor and fire businesses as well as family takaful. MNRB declared a dividend of 10 sen per share for the quarter, compared to 4.45 sen a year earlier. (The Edge)

Steel pipes, valves and fittings solutions provider Pantech Group Holdings Bhd (PANTECH) said its second quarter net profit fell 27% to RM20.74m from RM28.42m a year earlier, hurt by lower sales delivery to local oil and gas (O&G) projects at its trading division and foreign exchange losses. Revenue for the quarter was flat at RM252.14m as the group saw higher sales in its manufacturing division, mainly export sales, which offset lower sales in its trading segment, which saw a decrease in domestic sales. Pantech declared a second interim dividend of 1.5 sen per share, unchanged from a year ago, payable on Dec 20. (The Edge)

Source: Mplus Research - 24 Oct 2024