Review & Outlook

As the FBM KLCI has reached a two-year high on increasingly overbought short-term technical momentum, the index is more likely to pause for a profit-taking breather. On the other hand, the firmer uptrend momentum backed by strong institutional buying support and positive domestic catalysts should cushion the downside on profit-taking dips. In the meantime, positive external sentiment, largely due to strong technology earnings in the US and an optimistic growth outlook, will be key to sustaining further upside going forward.

Immediate resistance for the index will be at 1,600, with stronger upside hurdles seen at 1,620 and then 1,640. Immediate uptrend supports will be at 1,557, 1,546 and 1,523, which are the respective rising 30-day, 50-day and 100-day moving averages, with stronger support at 1,500.

As for stock picks this week, key banking and telco heavyweights which have largely remained in consolidation recently should attract buyers again for rotational plays, given the strong trading momentum on the market.

News Bites

• Boustead Heavy Industries Corp Bhd's planned disposal of its 20.8% stake in Lumut Naval Shipyard Sdn Bhd to the Ministry of Finance (Inc)-owned Ocean Sunshine Bhd has turned unconditional after shareholders of BHIC endorsed the RM1 deal. 

• Naza Corp Holdings Sdn Bhd has completed the acquisition of a 100% stake in Berjaya Enviro Holdings Sdn Bhd from Berjaya Corp Bhd for RM700mn in cash. 

• Fraser & Neave Holding Bhd said on Friday that the company will focus on fixed asset optimisation over the next three years after having allocated more than RM3.0bn in capital expenditure and development of its integrated farm in Gemas. 

• Pestech International Bhd's unit Pestech Sdn Bhd has lost an appeal to stop the tampering of machinery used in the Gemas-Johor electrified double track project by main contractor Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd. 

• The Energy Commission has raised the tariff to transport gas via Peninsular Malaysia's gas pipeline, owned and operated by Petronas Gas Bhd, to RM1.096 per gigajoule per day (GJ/day) for 2024 versus a base of RM1.063 GJ/day under Regulatory Period 2 (2023-2025). 

• XOX Bhd plans to undertake a share capital reduction to wipe out RM303mn of the virtual mobile network operator's accumulated losses. 

• Penang-based automated test equipment maker TT Vision Holdings Bhd is looking to raise RM25.3mn via a private placement of up to 23.4mn shares or 5% of its enlarged share base, based on an illustrative price of RM1.08. 

• Uzma Bhd has secured a contract from Sarawak Shell Bhd and Sabah Shell Petroleum Company Ltd to provide integrated production and integrity chemical and associated services. 

• WTK Holdings Bhd is raising its stake in Sarawak-based rival Durafarm Sdn Bhd by another 15% for RM28.3mn. 

• Ranhill Utilities Bhd has declared a share dividend distribution on the basis of 0.5 share for every 100 shares held in the utility group. The dividends ex-date is on May 20, with payout on June 13. 

• Farm Price Holdings Bhd, which is scheduled for a listing on the ACE Market of Bursa Malaysia on May 14, has seen its initial public offering oversubscribed by 91.35 times. 

• PN17 outfit Sarawak Cable Bhd announced that Datuk Seri Fong Joo Chung has stepped down as non-independent non-executive deputy chairman, effective immediately. 

• SLP Resources Bhd's net profit surged 63% YoY to RM4.9mn from RM3.0mn for the financial quarter ended March 31, 2024 (1QFY24), bolstered by better product mix and higher output. 

• After growing for fifteen consecutive months, U.S. service sector activity unexpectedly contracted in the month of April, according to a report released by the Institute for Supply Management on Friday. 

• US job growth slowed more than expected in April and the increase in annual wages fell below 4.0% for the first time in nearly three years, indicating that the labour market remains fairly tight. 

• Euro area jobless rate remained unchanged at a record low for the fifth month in a row in March, and unemployment decreased, while a tight labor market could urge the European Central Bank to remain cautious.

Source: TA Research - 6 May 2024