Middle East Tension May Cap The Upside

Market Review

Malaysia: The FBM KLCI (+0.14%) rebounded and closed higher after a volatile intraday session, as bargain hunting emerged in banking heavyweights like MAYBANK (+8.0 sen) and PBBANK (+4.0 sen). The Energy sector (+0.79%) gained momentum in tandem with a spike in crude oil prices.

Global markets: Oil and the dollar rose due to heightened geopolitical tensions in the Middle East. However, Wall Street closed lower as investors traded cautiously ahead of key US jobs data which may affect the interest rate directions. Meanwhile, European stocks closed lower, while Asian markets ended the day on a positive note.

The Day Ahead

The FBM KLCI had a volatile session, rebounding from negative territory to close on a positive note, driven by bargain hunting in banking heavyweights. In the US, Wall Street ended slightly lower after the release of mixed economic data. Jobless claims were rising, but the ISM services PMI showed expansion, and traders seem to be waiting for the non-farm payroll report due later tonight. In the commodities market, Brent crude surged by 4% amid growing concerns over developments in the Middle East, while gold prices remained steady around the USD 2,650 level. The CPO price broke above RM 4,200, signalling the start of an uptrend.

Sector Focus: With the ringgit weakened from RM 4.11/USD to RM 4.21/USD over the past four trading days, we believe traders may shift focus to export-oriented sectors like Technology and Gloves. However, we continue to favour the Consumer sector for its defensive nature. Additionally, the sharp rise in crude oil and CPO prices should benefit the Oil & Gas and Plantation sectors, respectively. Investors may also consider positioning in the Construction, Property, Building Materials, and Utilities sectors ahead of Budget 2025.

FBMKLCI Technical Outlook

The FBM KLCI index rebounded towards the 1,641 level. However, the technical readings on the key index were negative, with the MACD histogram formed another negative bar, but the RSI trended below 50. The resistance is envisaged around 1,656-1,661, and the support is set at 1,621-1,626.

Company Brief

Velesto Energy Bhd (VELESTO) has completed its mandatory five yearly special periodical survey for its Naga 6 back-up rig on schedule. The works, conducted in the Labuan shipyard, include essential class recertification, upgrades, repairs and maintenance on equipment from drilling to well control, pipe racking, as well as some piping and steel renewal, among others. (The Edge)

The total sum for the proposed disposal of Kuchai Development Bhd’s (KUCHAI) assets and liabilities to Sungei Bagan Rubber Company (M) Bhd (SBAGAN) has been revised lower following the exclusion of an agricultural land parcel in Semenyih, Selangor. The disposal sum has been adjusted to RM267.78m from RM275.47m, while the number of consideration shares to be issued has also been reduced to 26.75m from 27.52m. (The Edge)

NH Foods Ltd, a joint venture partner of egg producer Lay Hong Bhd (LAYHONG), has ceased to be the latter’s substantial shareholder after disposing of 62.32m shares, or an 8.24% stake. The shares were sold via an off-market transaction on Wednesday. While the selling price was not disclosed, based on Wednesday’s closing price of 40 sen, the stake could be valued at ~RM24.93m. (The Edge)

Atlan Holdings Bhd (ATLAN) indirectly owned units, Cergasjaya Sdn Bhd and Cergasjaya Properties Sdn Bhd have received notices for the compulsory acquisition of their lands in Bukit Kayu Hitam, Kedah, for a road construction project. The land was acquired by Malaysia's Home Affairs Ministry and is administered by the Department of Director General of Lands and Mines, Kedah. (The Edge)

Technology company Techna-X Bhd (TECHNAX) has called off its plans to develop an 85-acre microalgae farm and produce algae biofuel following the mutual termination of a tripartite agreement. Techna-X Aerobeidou Sdn Bhd, its wholly owned subsidiary, alongside MYKO Global Sdn Bhd and RTA E&C Sdn Bhd, had agreed to mutually terminate the agreement. No further details on the reasons behind the termination were provided. (The Edge)

MyEG Services Bhd (MYEG) blockchain developer, Zetrix, has come out with a digital identification verification service for Chinese nationals on the ZCert service. Through the ZCert service, Zetrix now simplifies and facilitates electronic "know your customer" processes for entities outside of China wishing to verify the authenticity of information contained in the digital IDs presented to them by Chinese nationals. (The Edge)

Harrisons Holdings (Malaysia) Bhd (HARISON) has proposed to split each of its shares into five shares in a move to improve the trading liquidity of the shares. The share split will take place based on an entitlement date to be determined later, and is expected to be completed by the fourth quarter of this year. (The Edge)

Malayan Banking Bhd (MAYBANK) has signed a memorandum of understanding with China's Bank of Hangzhou to work together on enhancing cross-border business and advancing digital innovation. The partnership aims to facilitate services such as cross-border financing, interbank cooperation within China, and the clearing of Southeast Asian currencies, while also connecting Chinese enterprises to a broader business ecosystem in the region. (The Edge)

Varia Bhd (VARIA), formerly known as Stella Holdings Bhd, has appointed Datuk Seri Mohd Nizom Sairi, the former chief executive officer and director general of the Inland Revenue Board (LHDN), as its new independent and non-executive chairman. Nizom, 61, replaces Datuk Mohamad Haslah Mohamad Amin, who stepped down on Jan 14 last year following a series of board resignations, to pursue other interests. (The Edge)

The privatisation of MPHB Capital Bhd (MPHBCAP) has been met with a stumbling block put up by ISM Sdn Bhd, which is the company's minority partner in six joint- venture companies. MPHB said ISM had filed an intervening application on the grounds that the proposed selective capital reduction — which is part of the privatisation exercise — would affect ISM’s rights against MPHB in relation to an ongoing contentious shareholder dispute between the two parties and MPHB's subsidiaries. (The Edge)

Source: Mplus Research - 4 Oct 2024