Concerns Over Recession Fears Emerged

Market Review

Malaysia: The FBM KLCI (-0.81%) ended significantly lower dragged by selling pressure in the stocks within Industrial Products & Services and Utilities segments; in line with the weak overnight performance on Wall Street following the downbeat earnings from selected tech heavyweights and concerns over economic slowdown.

Global markets: Wall Street ended lower and bond yield tumbled as NFP reports triggered worries of an economic slowdown that was triggered by the Fed’s decision to hold rates at a two-decade high; it pushed the VIX to hit the highest since March 2023. Meanwhile, both the European and Asia stock market ended lower.

The Day Ahead

Last Friday, selling pressure picked up on the local front following the negative performance on Wall Street. A huge sell-down was noticed in the broader market, where only about 10.5% of stocks traded higher. Meanwhile, the US stock markets further declined with a weaker jobs report, triggering the Sahm Rule and raising concerns over a potential economic recession. The Dow fell below 40,000, while the Nasdaq dropped more than 2.4%. This week, traders will be watching the ISM Services PMI and unemployment claims on Thursday. In the commodity markets, Brent oil dropped more than 3% to near the support level of USD76, while the gold price trended near USD2,440 and the CPO price rebounded off the RM3,850 zone.

Sectors Focus: With the weak trading performance in the US stock markets, we believe there might be a spillover of selling pressure into the local market, impacting the Technology sector. However, we think it might be an accumulation phase for the Construction, Building Materials, Property, and Utilities sectors amid the infrastructure and data center catalysts leading into the earnings season. Additionally, traders may look into gold-related stocks in anticipation of an interest rate downcycle environment. Besides, the Financial segment could be attracting foreign funds at this juncture.

FBMKLCI Technical Outlook

The FBM KLCI index ended significantly lower towards 1,611 level. The technical readings on the key index were negative with the MACD histogram forming another negative histogram bar and the RSI dipped below 50. The resistance is envisaged around 1,626-1,631 and the support is set at 1,591-1,596.

Company Brief

Ranhill Utilities Bhd (RANHILL) said four of its directors, including founder and executive chairman Tan Sri Hamdan Mohamad, have resigned from their positions after the successful takeover of Ranhill by YTL Power International Bhd (YTLPOWR) and its 70%-owned unit SIPP Power Sdn Bhd. Their resignations are pursuant to the terms in the unconditional share sale and purchase agreement. (The Edge)

Johor-based developer Paragon Globe Bhd (PGLOBE) is selling more of a big plot of freehold land it had just bought in Plentong, Johor Bahru, to Bridge Data Centres Malaysia IV Sdn Bhd. In May, it inked an agreement to sell part of the 104.5-acre land — roughly the size of 104 football fields — it had bought for RM71.5m in November 2023 to Bridge Data Centres. The agreement was for the sale of 47.86 acres of the plot under Geran 80943 Lot 2699 for RM238.32m, cash, which Paragon Globe said was to improve its liquidity and financial position. (The Edge)

British-domiciled multinational insurance company Prudential plc has emerged as a substantial shareholder in cable support system provider United U-Li Corp Bhd (ULICORP). Prudential acquired 37,700 shares of United U-Li on July 31 through funds managed by Eastspring Investments Bhd, raising its shareholding in the company to 5.19%. (The Edge)

Trading of the shares in Ecobuilt Holdings Bhd (ECOHLDS) will be suspended Aug 9, after the High Court approved a winding-up petition against the company. Earlier, Ecobuilt was served a winding-up petition by S-Form System Formwork (M) Sdn Bhd on April 24, concerning a claim of RM670,596. The court approved the petition on July 24 and concurrently dismissed Ecobuilt's application to stay the winding-up proceedings. (The Edge)

Binastra Corp Bhd’s (BNASTRA) wholly-owned Binastra Builders Sdn Bhd has bagged a RM160m contract to demolish and build an office complex in Damansara Perdana from Dynamicz Sdn Bhd. The contract covers demolition and construction of main building works comprising four floors of offices (560 units), as well as two basement levels. The job is expected to be completed by July 30, 2026. (The Edge)

Infrastructure group Taliworks Corp Bhd (TALIWRK) is expected to get a boost during the current financial year ending Dec 31, 2024 (FY2024) from insurance payments related to replacement costs for the solar modules at its wholly-owned subsidiaries' solar plants. The insurance proceeds are expected to be received this month. Taliworks said the US$2.32m (RM10.67m) in insurance payments the group will receive is expected to contribute positively to the group’s financial performance for FY2024. (The Edge)

Oil trading and fuel bunkering service provider Straits Energy Resources Bhd (STRAITS) plans to exit the port operation and management business by disposing of its entire 51% equity interest in Megah Port Management Sdn Bhd (MPM), the concessionaire of Labuan Liberty Port, to LPM Holdings Sdn Bhd for RM5m, cash. By divesting its stake in MPM, the group can concentrate on fewer operating entities, and improve its overall operational efficiency and effectiveness. (The Edge)

Perak Transit Bhd (PTRANS), developer and operator of integrated public transportation terminals, plans to raise RM1.5b via a perpetual Sukuk Wakalah programme to fund its capital expenditure (capex) and working capital. It said the capex will be used for the construction of the integrated bus transport terminal cum commercial complex known as Terminal Seri Iskandar in Bandar Seri Iskandar, Perak, subject to a margin of advance of 70%. It will also use proceeds from the sukuk programme to refinance existing Shariah-compliant financing and/or conventional borrowings. (The Edge)

Construction and property group WCT Holdings Bhd (WCT) plans to raise up to RM163.06m via a private placement of shares to third-party independent investors. The fundraising exercise involves the issuance of 141.67m new shares, equivalent to up to 10% of its 1.42b issued shares. RM50m of the proceeds will be used to repay bank borrowings while RM112.76m has been allocated for working capital for its ongoing construction projects. (The Edge)

Malaysia Smelting Corp Bhd’s (MSC) net profit for the second quarter ended June 30, 2024 fell 41.2% to RM16.72m from RM28.45m a year earlier, mainly dragged by the weaker performance of its tin smelting segment. Revenue for the quarter under review rose 26% year-on-year to RM410.8m from RM327m, lifted by higher average tin price. No dividend was declared for the quarter. (The Edge)

AwanBiru Technology Bhd (AWANTEC), a cloud-based service provider, is supplying Google Workspace Enterprise Starter licence to Sabah Net Sdn Bhd (SNSB) for RM9.97m. Its wholly-owned subsidiary Awantec Systems Sdn Bhd has inked a service agreement with SNSB for subscription of said licence. The agreement is for a five-year period from Aug 1, 2024 to July 31, 2029. (The Edge)

YBS International Bhd (YBS) plans to raise up to RM25.6m through a private placement with over half of the proceeds allocated to fund the lithium-ion battery manufacturing project it is undertaking in partnership with US advanced silicon battery producer Enovix Corp. It intends to issue up to 10% of its enlarged share base, or 30.47m shares, to third-party investors who will be identified later. (The Edge)

Source: Mplus Research - 5 Aug 2024