Fed's Hawkish Tone Triggers Sell-Off

Market Review

Malaysia: After two consecutive days of losses, the FBMKLCI rebounded (+0.14%), closing just below the key 1,600 psychological level as buying support was seen in the Utilities and Consumer Products & Services sectors, with notable gains in TENAGA (+28.0 sen) and NESTLE (+120.0 sen).

Global markets: The Fed jarred Wall Street, sending Treasury yields higher after a widely expected 25 bps rate cut and signalling a slower easing cycle in 2025. Meanwhile, European markets closed higher, while Asian markets ended the day on a mixed note ahead of the BoJ monetary conference.

The Day Ahead

The local bourse rebounded, supported by gains in the Consumer Products & Services sector. US markets traded lower despite the widely anticipated 25 bps rate cut, as the Fed expressed concerns that higher tariffs imposed by the Trump administration may cause elevated inflationary pressure in the US, signalling a slower easing cycle going forward. Meanwhile, traders will closely monitor several key data releases, including (i) U.S. GDP, (ii) Unemployment Claims, (iii) Core PCE Price Index, and (iv) the BoJ monetary policy conference. In the commodities market, Brent crude oil traded within the USD72-73 range despite a fourth consecutive week of declining oil inventories. Gold prices retreated below the USD2,600 mark, while CPO prices continued their decline for another session, trading below the RM4,500 level.

Sector Focus: Although negative sentiment is expected to spill over into the local stock market, we believe export-oriented stocks within the Gloves and Technology sectors may benefit from a stronger dollar index following the Fed's interest rate outlook, which suggests a slower easing cycle. Also, we remain positive on stocks related to the data center supply chain and anticipate that the Sub-Utility and Building Material segments will trade on a positive trend, at least in the near term.

FBMKLCI Technical Outlook

The FBMKLCI rebounded, closing just below key 1,600 psychological level. However, as the MACD histogram has formed a new negative bar and the RSI has trended below 50, this suggests that the momentum is negative at the current juncture. Resistance is anticipated around 1,614-1,619, and support is set at 1,579-1,584.

Company Briefs

Malaysian Resources Corporation Bhd (MRCB) has withdrawn from the Berjaya-led consortium involved in the Kuala Lumpur-Singapore High-Speed Rail (HSR) project to focus on other strategic opportunities. Despite this, the consortium, which includes Berjaya Corp Bhd's (BJCORP) indirect unit Berjaya Rail Sdn Bhd, Keretapi Tanah Melayu, IJM Corp Bhd (IJM), said it remains committed to delivering the HSR system. (The Edge)

YTL Power International Bhd (YTLPOWR) announced that the Malaysian Anti- Corruption Commission (MACC) has cleared its subsidiary, YTL Communications Sdn Bhd, of any wrongdoing related to the 1BestariNet project. YTL Power said it was informed of this by MACC after it concluded its investigation and confirmed that no charges would be pursued against YTL Communications. (The Edge)

SD Guthrie Bhd (SDG), Eco World Development Group Bhd (ECOWLD), and NS Corporation will jointly develop a 1,166-acre industrial park in Bukit Pelanduk, Negeri Sembilan, with an estimated gross development value of RM2.95bn. The project, to be developed over eight years, will include industrial lots, ready-built factories, and commercial properties targeting sectors like aerospace, electronics, logistics and biotechnology. The park, part of the Malaysia Vision Valley 2.0 economic corridor, aims to promote sustainable development in Negeri Sembilan. (The Edge)

Supermax Corp Bhd (SUPERMX) plans a bonus share issue of one share for every five existing shares and the issuance of one bonus warrant for every 20 shares held. The proposals involve up to 544.12m new shares and up to 163.24m free warrants. After the issuances, Supermax's share base will increase from 2.72bn to 3.26bn shares. The warrants, with an exercise price of RM1 each, are expected to raise up to RM163.24m for working capital. (The Edge)

Scientex Bhd's (SCIENTX) net profit in the quarter ended Oct 31 (1QFY2025) fell 6.7% to RM128.6m from RM137.8m, dragged by weaker packaging segment despite improved property segment performance. Revenue remained flat at RM1.11bn, as growth in the property division was offset by a decline in packaging revenue, caused by unfavorable foreign exchange movements and weaker export demand. (The Edge)

YNH Property Bhd (YNHPROP) executive chairman Datuk Dr Yu Kuan Chon has been redesignated as executive director in the company, while his brother, Datuk Yu Kuan Huat, has taken over as executive chairman. Kuan Chon, 62, is the largest shareholder with a 32.58% stake while Kuan Huat, 66, holds 29.34%. The company did not provide a reason for the boardroom change in its bourse filing. (The Edge)

T7 Global Bhd (T7GLOBAL) has been appointed by Petronas as a panel contractor to provide integrated well continuity services for a five-year term, starting from October 10. The contract, awarded to T7 Global's wholly-owned unit, Tanjung Offshore Services Sdn Bhd, includes well intervention, workover and abandonment services for several sub-packages. It is its sixth five-year Pan Malaysia contract won in the last two months. (The Edge)

PTT Synergy Group Bhd (PTT) is selling its 70% stake in sanitary wares manufacturer Heap Wah Barakah Sdn Bhd (HWBSB) to HW Barakah Sdn Bhd for RM15m, leading to a one-off loss of RM13.8m. The proceeds from the sale will fund PTT's working capital for its property development and construction business. The remaining 30% of HWBSB is owned by Lum Pek Yoke (13.65%) and Lam Weng Wai (16.35%), with Lum also holding a 50% stake in HW Barakah. (The Edge)

RHB Bank Bhd (RHBBANK) has filed an appeal against the High Court's ruling that Tokio Marine Life Insurance Malaysia's right of first refusal under their bancassurance agreement remains in effect until December 31, 2024. The bank has complied with the ruling while appealing to preserve its rights. RHB Bank added that the appeal is not expected to impact its financial performance or operations. (The Edge)

Ge-Shen Corp Bhd (GESHEN) executive director Lee Hai Peng has become a substantial shareholder by acquiring 1.05m shares (0.82% stake) for RM3.99m, at RM3.80 per share. This raises his total stake to 5.41%, or 6.95m shares. The acquisition price reflects a 5.71% discount to the closing price of RM4.03 on Tuesday. (The Edge)

Aeon Co (M) Bhd (AEON) plans to appeal a High Court ruling that found it in breach of a tenancy agreement with Betanaz Properties Sdn Bhd, a subsidiary of Ahmad Zaki Resources Bhd (AZRB). The court had ordered Aeon to pay RM18.7m in outstanding rent, plus interest, and RM200,000 to Betanaz and RM100,000 to AZRB. The dispute began in 2021 when Betanaz sued Aeon for breaching a lease agreement made in 2017 for a commercial shopping complex in Kuantan. (The Edge)

Pestech International Bhd (PESTECH), now a 57.52%-owned subsidiary of Dhaya Maju Infrastructure Sdn Bhd, has proposed a scheme to settle its RM267m debt with a one-time cash payment of RM65m. The payment will be funded by proceeds from the RM160m restricted share issuance to Dhaya Maju. The scheme has already received "approval-in-principle" from creditors holding over 75% of the debt, but will still be officially voted on by creditors by Jan 15. (The Edge)

Quality Concrete Holdings Bhd (QUALITY) has secured a RM75m construction contract in Kuching, Sarawak. The contract, awarded to its wholly-owned unit QC Construction & Engineering Sdn Bhd by LCDA Real Estate Sdn Bhd, will span two years from the date the site is possessed, which will be arranged later. (The Edge)

Advancecon Holdings Bhd (ADVCON) has secured a RM417.7m contract to develop the Silver Valley Technology Park in Perak. Its wholly-owned unit, Advancecon Infra Sdn Bhd, will serve as the main contractor for the 36-month project, which includes infrastructure works, site clearing, road and drainage construction, bridges, and the installation of external mechanical and electrical systems. (The Edge)

Source: PublicInvest Research - 19 Dec 2024