Export-Oriented Stocks:Ripe for Breakouts

Market Review

Malaysia:

The FBMKLCI (-0.85%) closed at the lowest for the week around 1,618 level, as profit- taking activities happened across the Banking and Utilities sectors, with heavyweights like PBBANK (-11.0 sen) and YTLPOWR (-22.0 sen) dragging down the local index.

Global markets: The US market ended mixed, with Nasdaq closed positive but both the S&P500 and Dow trended lower with gains in tech stocks failed to offset the drop in banking shares. The European market closed slightly lower, while the Asian market ended mixed amid the Japan snap election.

The Day Ahead

Market sentiment weakened last week on the local exchange, with increased selling in YTL-related stocks, while the FBM Small Cap index continued to decline. In the US, sentiment was mixed as traders evaluated a range of corporate earnings and economic data. US durable goods orders fell in September, yet consumer sentiment climbed to its highest level since April; the Dow and S&P 500 retreated from their record highs, while the Nasdaq saw a rebound. In the commodities market, Brent crude oil rebounded close to USD76, but it is likely to retrace as Middle East tensions eased. Gold prices rallied towards an all-time high zone, and CPO prices, continued to hold above the RM4,500 mark.

Sector Focus: With the ringgit weakened towards the RM4.337/USD range, we expect export-oriented sectors like Gloves and Technology to benefit, while traders may shift away from domestic-focused stocks. Also, commodity-related sectors such as Plantation, O&G, and gold-related stocks stand to gain from recent underlying commodity price movements; we believe BAHVEST may continue its rally in the near term, given the surge in gold prices. This week, selected Construction and Shipping stocks may also trend positively as momentum builds.

FBMKLCI Technical Outlook

The FBM KLCI index ended lower towards the 1,618 level. The technical readings on the key index could be turning negative, with the MACD histogram showing a rounding top formation, and the RSI has trended below 50. The resistance is envisaged around 1,633-1,638, and the support is set at 1,598-1,603.

Company Briefs

Gamuda Bhd (GAMUDA) said its 75%-owned joint venture company has been appointed as the total development contractor to build a hydroelectric plant in Sabah for RM3.05bn. The contract, awarded by Upper Padas Power Sdn Bhd (UPPSB), involves the design and construction of a 187.5-megawatt Ulu Padas dam in Tenom. It is a related-party transaction as Gamuda holds an indirect interest of 45% in UPPSB through UPP Holdings Sdn Bhd. Conlay Construction Sdn Bhd, a construction and property development company, will hold the remaining 25% stake in the joint venture. (The Edge)

ACE Market-bound OB Holdings Bhd’s (OBHB) wholly-owned subsidiary has received a dispute notice from a customer, Nature One Dairy (Hong Kong) Ltd (NOD), for allegedly breaching the purchase and supply agreement between the two. NOD also claims that the subsidiary, Orient Biotech Sdn Bhd, had infringed its intellectual property rights. The allegations stem from Orient Biotech’s production of a milk powder product for a new customer, which NOD claims uses "formulations, recipes and ingredients" identical to its own. Orient Biotech has denied the allegations, asserting that the ingredients in question are generic and commonly available in the market. (The Edge)

MyEG Services Bhd's (MYEG) joint venture company MYEG Philippines Inc (MYEG PH) has partnered with the Philippines' National Home Mortgage Finance Corporation (NHMFC) to integrate its payment system with the state-owned agency's platform. NHMFC is a Philippine government agency tasked with expanding access to affordable housing finance in the country. The two parties signed a Memorandum of Agreement on Oct 22, paving the way for the expansion of payment channels available to NHMFC borrowers. (The Edge)

MN Holdings Bhd (MNHLDG) has partnered with Protech Builders Sdn Bhd (PBSB) to jointly tender for sub-contract works for the construction of a data centre project. However, it is unable to disclose the identity of the customer, as the customer is not agreeable to provide consent for disclosure. The underground utilities and substation engineering specialist also did not disclose the contract value of the subcontract works. MN Holdings said its wholly-owned subsidiary, Mutu Nusantara Sdn Bhd (MNSB), has inked a joint venture agreement with PBSB for the said subcontract work. (The Edge)

Padini Holdings Bhd (PADINI) announced plans to refurbish nine stores, open four new outlets, and close one location in Malaysia in the current financial year ending June 30, 2025 (FY2025) as part of efforts to streamline its retail operations. The fashion retailer will also close one of its seven stores in Thailand as part of its overseas market strategy, it said in its latest annual report. (The Edge)

Malakoff Corp Bhd (MALAKOF) said the deadline for the fulfilment of the conditions precedent in the group's proposed acquisition of a 49% stake in solid management company E-Idaman Sdn Bhd has been extended for a third time till Jan 28, 2025. Malakoff's wholly-owned unit Tuah Utama Sdn Bhd had agreed to buy the stake from Metacorp Bhd for RM133.2m on Oct 27, 2023. (The Edge)

Source: Mplus Research - 28 Oct 2024