Aviation (OVERWEIGHT)

MAS-AirAsia Collaboration Agreement

'''' MAS as national FSC; AirAsia as national LCC; Firefly transformed into FSC (similar to Silk Airways).

'''' Khazanah swap 20.5% stake in MAS with Tune Air's 10% stake in AirAsia.

'''' Existing MAS-AirAsia shareholders entitled warrants of each other airlines.

'''' Positives on the move as it will eliminate irrational competitive pricing, allow economy of scales, higher bargaining power and synergies for both MAS and AirAsia.

'''' AirAsia will have better control on the supply and yields without competition from Firefly on LCC segment. AirAsia to increase its route and enhance its network connections.

'''' Enhanced business turnaround plan for MAS from the management expertise of Tan Sri Tony Fernandes and Dato's Kamarudin Meranun, in lowering operational cost, streamlining its routes and improve overall yields for MAS.

'''' Recommendation:

'''' Maintain BUY on AirAsia with TP of RM4.50.

'''' Upgrade Hold on MAS with TP of RM1.55.

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FBM KLCI - A relief rally may spur KLCI to revisit 1500-1530 levels

'''' Although the KLCI is able to close above the 1470 pts, which is key YTD support before yesterday's plunge, we will only turn bullish again if the KLCI is able to maintain its posture above 200-d SMA (1530 pts).''

'''' Relief rally targets are 1500, 1511 (50% FR) and 1530. Immediate supports are 1450-1470 pts.''

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Dow Jones - Relief rally targets at 11555-11740 pts

'''' We are relieved that the envisaged 76.4% FR support (10383) was not broken yesterday and with the gradual uptick in RSI and MACD as well as moderating 'DMI, more technical rebounds are likely but the tough hurdles are situated near 11555, 11740 and 11993 (200-d SMA).

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