KLCI Index Rebalancing Takes Effect Today

Market Review

Malaysia: The FBMKLCI (-0.54%) ended the week below the 1,600 psychological mark as investors reduced their exposure on Banking-related stocks. Nevertheless, buying support was noticed in sectors related to data centre supply chain, including Construction (+1.02%) and Utilities (+0.59%) sectors.

Global markets: Wall Street ended on a positive note last Friday following cooler- than-expected PCE data. Meanwhile, both the European and Asian markets ended lower, as Japan's inflation data came in slightly higher-than-expected while China held its loan prime rate unchanged.

The Day Ahead

The local bourse closed below the 1,600 mark as the key index is set to be effectively rebalanced following last month's index review. Foreign investors remained net sellers, and traders reduced their exposure ahead of the year-end season. In the US, all three indices rebounded last Friday as PCE data rose at its slowest pace since May, likely reassuring policymakers and investors that inflation is cooling alongside a growing economy. This week, some markets, including the US, UK, and Hong Kong, will experience early closures on Tuesday ahead of Christmas and Boxing Day. In the commodities market, Brent crude oil continued to trade sideways, hovering around USD72-73 per barrel. Gold prices ended marginally higher at approximately USD2,620, while CPO prices declined further, trading below the RM4,500 level.

Sector Focus: Given the Fed's more hawkish tone toward 2025, we expect buying interest to remain focused on export-oriented sectors such as Technology and Gloves, supported by an anticipated sustained strength in the USD. Additionally, we remain positive on stocks linked to the data center supply chain, including those in the Construction, Utility, and Building Material sectors. Investors should also note that the KLCI index additions and deletions take effect today.

FBMKLCI Technical Outlook

The FBMKLCI closed below the 1,600 psychological level and continued to trend below all the MA lines. The MACD histogram has formed a new negative bar and the RSI is trending below 50, suggesting negative momentum at this current juncture. Resistance is anticipated around 1,606-1,611, and support is set at 1,571-1,576.

Company Briefs

Hong Leong Investment Bank (HLIB) has concluded that the RM11 per share takeover offer for Malaysia Airports Holdings Bhd (MAHB) (AIRPORT), from the consortium led by Khazanah Nasional Bhd and the Employees Provident Fund (EPF), is not fair - as it is below its valuation - but reasonable in the absence of a competing bid. The independent adviser advised shareholders of MAHB to accept the offer, as it represents a chance for them to realise their investments in MAHB. MAHB's non-interested directors, however, concluded that the offer is both unfair and unreasonable, and have recommended that shareholders reject it instead. (The Edge)

Top Glove Corp Bhd (TOPGLOV) returned to black with a net profit of RM5.47m for its first quarter ended Nov 30, 2024 (1QFY2025), from a net loss of RM57.71m in the corresponding quarter a year ago, thanks to higher sales volumes and increased foreign exchange gains. The world's largest glove manufacturer's revenue for 1QFY2025 surged 79.5% to RM885.89m, from RM493.46m in 1QFY2024. It projects its glove sales volume in FY2025 to grow 60% to 43bn pieces, helped by the impending US tariffs on Chinese gloves. (The Edge)

Catcha Digital Bhd (CATCHA), formerly known as Rev Asia Bhd, is acquiring a 60% stake in Drive 2 Digital Sdn Bhd (D2D) for RM16.2m, cash, marking its entry into the automotive digital media sector, with a focus on Chinese and Malay language automotive content. The acquisition is contingent upon D2D achieving profit targets of RM3.5m in the first 12 months following the deal's completion, and RM4.2m in the subsequent 12 months. (The Edge)

Johor Plantations Group Bhd (JPG) has appointed Tg Langsat Development Sdn Bhd (TLD) as earthwork and main infrastructure contractor for its Integrated Sustainable Palm Oil Complex (iSPOC) project in Johor for RM39.04m. The contract is deemed a related-party transaction as TLD is a wholly-owned unit of TPM Technopark, which in turn is a wholly-owned subsidiary of Johor Corporation (JCorp). Kulim (Malaysia) Sdn Bhd - a wholly-owned unit of JCorp - is the largest shareholder in JPG with a 65% stake. (The Edge)

ACE Market-listed Kawan Renergy Bhd's (KENERGY) earnings for the financial year ended Oct 31, 2024 (FY2024) hit an all-time high as net profit for the full year surged 44.5% to RM19.22m, compared with RM13.3m in FY2023. For FY2024, the company's cumulative revenue grew 15% to RM113.1m from RM98.4m in the previous year, attributed to a stronger order book. For its fourth quarter ended Oct 31, 2024 (4QFY2024), Kawan Renergy's net profit of RM5.32m was largely unchanged from its immediate previous quarter of RM5.31m in 3QFY2024. Revenue increased 23.1% quarter-on-quarter to RM39.16m, from RM31.82m in 3QFY2024, driven by higher sales from its industrial process plants business. (The Edge)

Mega First Corp Bhd's (MFCB) executive director, Goh Nan Yang, will step down from his position effective Dec 31, upon the expiry of his employment contract. In line with his resignation, Nan Yang will also vacate his role as an alternate director to MFCB's executive chairman, Goh Nan Kioh, who is his brother. Nan Yang, who owns a 1.34% direct stake in MFCB, has served as the company's executive director for two decades. (The Edge)

PLB Engineering Bhd's (PLB) external auditors, Grant Thornton Malaysia PLT, have expressed an unmodified audit opinion with material uncertainty regarding the group's ability to continue as a going concern. Grant Thornton highlighted the group's and the company's net losses of RM12.79m and RM17.12m, respectively, in the audited financial statements for the financial year ended Aug 31, 2024 (FY2024). It also noted that the group's and the company's current liabilities exceeded their current assets by RM54.79m and RM52.18m, respectively. (The Edge)

Bahvest Resources Bhd (BAHVEST) has proposed to buy mining equipment from China-based Chengdu Mining Maintenance Technology Co Ltd for RM22.82m, to be used to build a new gold mining processing plant. The plant is located less than 1km from the company's existing facility in Bukit Mantri in Tawau, Sabah. The commissioning of the plant is expected to commence within 12 months. (The Edge)

Auditing firm HLB Ler Lum Chew said a special notice for a resolution to remove the firm as the external auditor of Smile-Link Healthcare Global Bhd (SMILE) had been immediately retracted, and that is the reason why the firm did not make any written representation on the matter. HLB Ler Lum Chew was responding to an announcement by Smile-Link on Thursday that its major shareholder Smile Link Resources (M) Sdn Bhd, holding 46.36% in the company, had proposed to remove the auditing firm, following significant delays in the company's financial reporting, which have led to trading suspensions and regulatory scrutiny. (The Edge)

Source: PublicInvest Research - 23 Dec 2024