Geopolitical Tension May Dampen Sentiment

Market Review

Malaysia: The FBMKLCI (-0.16%) ended lower, in line with the negative performance across the regional stock markets, as the index was dragged by Utilities and Telco heavyweights. On the broader market, the Property sector (+1.74%) gained, while the Utilities sector (-0.42%) declined.

Global markets: Wall Street closed lower as geopolitical tensions in the middle east dragged investors sentiment, coupled with the uncertainty on rate cuts due to persistent inflation levels and a selloff in Banking stocks. The European stock markets ended higher, while Asia declined as China’s export levels in March fell.

The Day Ahead

Last Friday, more selling was seen in the FBM KLCI, contributing to the 2-day decline, but the FBM Small Cap made a fresh 52-week high as the buying interest extended on small cap stocks after a 2-day break. However, the US stock markets ended on a negative tone across the board amid persistent inflationary pressure and rising geopolitical tensions. This week, we believe the market could turn weaker amid concerns over Iran, which might retaliate further and may provide uncertainty towards the stock markets. On the commodity front, Brent oil price traded along USD90, while gold price traded along USD2300-2400 on the back of heightened geopolitical risk. The CPO price managed to form a rebound along RM4230 zone.

Sectors focus: Given the flattish earnings from the US Banking corporates, we believe the focus could be on the inflationary pressure and Middle East worries. The traders could shift their attention towards defensive sectors such as Utilities and Consumer. Meanwhile, the commodity-related such as O&G, Plantation and Gold may extend their upward trend for now. Besides, we like the ongoing domestic catalysts that are revolving along the infrastructure-theme and this may provide upside towards the Construction, Building Material and Property sectors.

FBMKLCI Technical Outlook

The FBM KLCI index ended lower for the 2nd consecutive day. However, the technical readings on the key index were positive, with the MACD Histogram extending another positive bar, while the RSI maintains above 50. The resistance is envisaged around 1,565-1,570 and the support is set at 1,535-1,540.

Company Brief

Bahvest Resources Bhd's subsidiary, Wullersdorf Resources Sdn Bhd, has obtained approval from the federal government's mining regulator, the Department of Mineral and Geoscience Malaysia (JMG), for its gold mining operations in Tawau, Sabah. This approval, granted under Section 10 of the Mineral Development Act 1994 (MDA), complements the previous approval from the Sabah state government under Section 18(d) of the Sabah Mining Ordinance 1960. (The Edge)

Nextgreen IOI Pulp Sdn Bhd (NIP), a joint venture between Nextgreen Global Bhd and IOI Corp Bhd, is partnering with Chinese firm Xiamen C&D Paper & Pulp Group Co Ltd (Xiamen C&D), a wholly-owned subsidiary of Xiamen C&D Inc under Xiamen C&D Corp Ltd, a Fortune 500 company, to develop a RM600m paper pulp plant in Pekan, Pahang. Under the MOU, NIP and Xiamen C&D will establish a joint venture company (JVco), with NIP holding a 75% stake. The facility, utilizing Nextgreen Global’s patented technology, will produce 100,000 tonnes of paper pulp annually from oil palm empty fruit bunches. NIP will lead feasibility studies and project preparation, while Xiamen C&D will support business development and manage off-take. (The Edge)

Amanahraya Trustees Bhd, the trustee of Amanah Saham Bumiputera (ASB), reduced its stake in property developer S P Setia Bhd by selling 100m shares on April 8, cutting its stake from 24.54% to 22.37%. The off-market trade was executed at RM1.41 per share, representing a 2.76% discount compared with the closing price on April 8. ASB remains the second-largest shareholder in S P Setia, behind Permodalan Nasional Bhd. ASB has been trimming its stake since the beginning of the year, with net disposals totaling 100.92m shares. Additionally, ASB converted some of its Class C Islamic Redeemable Convertible Preference shares into ordinary shares on April 5. (The Edge)

Yinson Holdings Bhd, an oil-and-gas services firm, is considering a potential bond issue of up to US$500m (RM2.37bn). The company has enlisted Nordic investment banks DNB Markets and Pareto Securities, along with ABG Sundal Collier ASA, to arrange meetings with fixed-income investors. The proceeds from the proposed bond issue will be utilized for refinancing existing debt and general corporate purposes. Yinson's total borrowings stood at RM16.32bn as of end-January, with a net gearing ratio of 1.66 times, up from 1.23 times a year ago. (The Edge)

Source: Mplus Research - 15 Apr 2024