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Bursa Malaysia poised to gain further to test 1,620 level

KUALA LUMPUR: Bursa Malaysia is set to rise further next week to test the immediate resistance at 1,620 and the next resistance threshold of 1,650.

Phillip Capital Management, Asia-Pacific, senior vice president (investment) Datuk Dr Nazri Khan Adam Khan said the near-term view suggests that the KLCI will continue hovering above the key support level of 1,600.

He said positive overnight Wall Street performance, Bank Negara Malaysia’s overnight policy rate (OPR) cut, rising prices of commodities and ease of the US-China trade tension would drive positive sentiment next week.

“Although the ongoing trade tension gave a sour impact to the ringgit versus the greenback, the local market remains attractive with the capital market recording a net inflow of RM2.1 billion,” he said.

Fundamentally, the local market continues to be resilient against the external headwinds with diversified sources of growth.

“Our participation in the ‘Belt and Road Initiative’ will give long-term advantage to the economic growth, as an important catalyst for foreign direct investment and connectivity to the global market.

“Looking forward, the lower OPR could be an important factor to boost the local economy in the second half of the year,” he said.

Nazri Khan said OPR cuts and the revival of the East Coast Rail Link and Bandar Malaysia projects would give a breath of fresh air for economic growth.

He said despite the weakness in investment activities, the local market posted a 4.5% growth in the first quarter of 2019.

“This is partly derived by the positive improvement in the agriculture sector and firm private consumption. This gives positive impact to the manufacturing sector, as well as the household spending,”he said.

In line with the encouraging private sector spending, BNM maintained its projection that the GDP will continue to grow between 4.3% – 4.8% this year.

He said despite the US-China spat have gave sour impact to the ringgit against the greenback, the local market remained to be attractive, given the RM2.1 billion net inflow recorded in the capital market.

Nazri said the S&P 500’s three-day winning streak during the week showed calmness towards the current state of trading relations between Washington and Beijing.

“We believe the US’ decision to effectively ban Chinese phone maker Huawei from the US market has overshadowed the earlier move to apply import taxes on European-made cars,” he said.

Overall, Bursa Malaysia was mostly higher despite the mounting concerns over the US-China trade spat.

On a Friday-to-Friday basis, the benchmark FBM KLCI settled 4.91 points weaker at 1,605.36.

The FBM Emas Index declined 74.91 points to 11,300.05, the FBMT 100 Index depreciated 68.25 points to 11,136.80 and the FBM Emas Shariah Index erased 99.09 points to 11,451.34.

The FBM Ace Index fell 137.43 points to 4,395.14 and the FBM 70 shrank 223.73 points to 13,855.32.

Sector-wise, the Financial Services Index dropped 3.31 points to 16,562.87, the Plantation Index eased 154.78 points to 6,895.50, and the Industrial Products and Services Index gave up 2.86 points to 163.82.

Weekly turnover inched down to 11.80 billion units valued at RM9.41 billion from 12.71 billion units valued at RM9.87 billion last Friday.

Main Market volume was weaker at 6.97 billion shares worth RM8.65 billion compared with 8.02 billion shares worth RM8.85 billion.

Warrants turnover slid to 1.67 billion units valued at RM427.70 million from 2.54 billion units valued at RM704.83 million.

The ACE Market volume, however, was higher at 3.22 billion shares worth RM326.88 million from 2.14 billion shares valued at RM301.87 million previously. – Bernama


OCBC: 2019 may be a weak growth year for Malaysia

KUALA LUMPUR, May 16 — OCBC Bank expects this year to be a weak growth year for Malaysia, concluding the full year growth of 4.4 per cent year-on-year (y-o-y). It said the current data print continues to indicate slow momentum in the Malaysian…


Malaysia’s economic fundamentals far stronger than in 1998, says Maybank IB CEO

SINGAPORE, May 13 — Malaysia’s economic fundamentals are very different today and far stronger than what they were in 1998, says Maybank Investment Bank Bhd (Maybank IB) chief executive officer Ami Moris. Citing some of the key economic…


Report: Bank Negara to maintain 3pc OPR following ECRL, Bandar Malaysia project revival

KUALA LUMPUR, May 8 — Bank Negara Malaysia (BNM) is expected to maintain its 3 per cent overnight policy rate (OPR) through 2019 as the East Coast Rail Link (ECRL) and Bandar Malaysia project revivals will provide an economic boost to the country,…


YTL buys Lafarge: Game changer or time to exit?

PETALING JAYA: AllianceDBS Research has advised investors not to accept the offer by YTL Corp Bhd to acquire a 51% stake in Lafarge Malaysia Bhd at RM3.75 a share as it believes that Lafarge could fetch higher valuations if it remains listed, on the back of improved outlook for the cement industry.

“We expect cement demand to recover with the revival of several major infrastructure projects and this should help support prices,“ the research house said in a report last Friday.

Several key projects such as the East Coast Rail Link, Bandar Malaysia, Klang Valley Double Tracking Project and Penang Transport Master Plan have recently been revived. As a result, AlianceDBS expects cement demand to improve, projecting a growth of 10% (FY19), 5% (FY20) and 5% (FY21).

In contrast, Kenanga Research believes that this is a golden opportunity for investors to exit their investments in Lafarge regardless of a mandatory general offer exercise, due to the limited upside (+3 sen) to the offer price of RM3.75/share and 103% / 95% premium to its and consensus target price of RM1.85/RM1.92.

“We view the offer price of RM3.75/share from YTL for the 51% stake in Lafarge as generous, especially when Lafarge has been loss-making since 2017, and expected to continue until FY20 due to intense competition,“ the research house said.

“We remain cautious over the overall group’s outlook in 2019 due to weak domestic demand woes and continuous overcapacity in the market leading to stiff competition and cement rebates wars. The group’s export strategy may partially help to drive revenue but given generally low margins from export sales, we do not expect any immediate significant bottom-line improvements,“ it added.

AllianceDBS is positive on YTL Cement Sdn Bhd’s acquisition as this would improve industry dynamics that have been pressured by intense price competition and sluggish demand over the past few years. YTL Cement and Lafarge will have a combined market share of about 60%, which would lead to better pricing power.

“We do not discount the possibility of YTL Corp injecting YTL Cement into Lafarge in the future, given that YTL Cement intends to keep Lafarge’s listing status (unless it receives acceptance level of more than 90%). This could create greater shareholder value,“ said AllianceDBS.

It expects the stock to trade close to the RM3.75 offer price in the near term. Assuming the stock is valued at its three-year forward price-to-book value mean (of 1.7 times book value), it would imply a RM4.55 value/share for Lafarge.

Lafarge’s share price closed unchanged at RM3.72 last Friday.


China infrastructure initiative to spur return of foreign funds to Malaysia

PETALING JAYA: Foreign fund inflows are expected to return in the third quarter of the year, driven by China’s Belt and Road Initiative, according to Rakuten Trade.

Its head of research Kenny Yee said that the boost will come from China’s infrastructure initiative in Malaysia and the Asean region, which includes the East Coast Rail Link (ECRL).

“We envisage China to be the saviour for drawing in foreign funds into the region,” he told reporters at a media briefing today.

According to him, the inflow will hinge on the spillover effect from the proposal to cut reserve ratio requirement (RRR) for China’s banking sector, which currently stands at 14.5% for large banks and 12.5% for smaller institutions. For every 1% cut in China’s RRR, US$120 billion (RM496 billion) is expected to flow into the system.

In addition, the gradual increase of foreign investors to China’s Morgan Stanley Capital International (MSCI) index from a current weighting of 5% to 20% starting in May 2019 will have a positive impact to Malaysia and the region.

Yee anticipates that this would draw US$80 billion foreign funds into China’s market and this would have a spillover effect on Malaysia and the region on the back of China’s Belt and Road Initiative.

“China is in for a positive ride ahead of its MSCI realignment and prospect of a RRR reduction, and the Asean region will benefit from the spillover effect,” he said.

In the near term, he does not expect much foreign inflows within the current quarter as there have not been any major market catalysts for Malaysia, although he views the government’s willingness to do business with China as a good indicator of what to expect over the next few months.

Meanwhile, Yee said there is no need for Bank Negara Malaysia to cut the Overnight Policy Rate (OPR) just yet, despite market talk that the central bank will reduce it by 25bps to 3% at the upcoming Monetary Policy Committee meeting next week.

“There are those who think that there will be a cut next month, others think that a reduction is due in July. We expect a later date,” he said.

Yee said if there is a reduction in the benchmark interest rate, the impact on banks will be minimal and could be offset by higher loan growth, especially with the revival of mega projects, particularly the ECRL and Bandar Malaysia, with a combined value of RM200 billion.


Bursa Malaysia Q1 net profit down 26.5% on lower operating revenue

PETALING JAYA: Bursa Malaysia Bhd’s net profit for the first quarter ended March 31, 2019 fell 26.5% to RM46.86 million from RM63.78 million a year ago due to a 16.2% drop in operating revenue to RM121.4 million from RM144.8 million a year ago.

Revenue for the quarter fell 16% to RM126.53 million from RM150.71 million a year ago while total operating expenses was 1.4% lower at RM62 million compared with RM62.9 million a year ago.

Annualised return on equity fell 7ppt to 23% while basic earnings per share was 2.1 sen lower at 5.8 sen. Market capitalisation as at March 31, 2019 stood at RM1.7 trillion, marking an 8.8% year-on-year decline.

During the quarter, the securities market saw a 22.6% decline in trading revenue to RM59 million from RM76.3 million a year ago, due to lower average daily trading value (ADV) for securities market’s on-market trades during the quarter.

The total non-trading revenue fell 7.6% to RM42.1 million from RM45.6 million a year ago mainly due to the decline in listing and issuer services revenue. This was partly offset by better market data revenue, driven by higher number of subscribers.

The derivatives market trading revenue fell 13.8% to RM16.4 million from RM19 million a year ago due to lower number of contracts traded for crude palm oil futures and FTSE Bursa Malaysia KLCI Futures, as well as higher market incentives.

Average daily contracts for the derivatives market fell 12.3% with 47,359 contracts in the quarter compared with 54,020 contracts a year ago.

For the Islamic Capital Market, Bursa Suq Al-Sila’ remained fairly stable with a trading revenue of RM3.9 million despite a 39.6% growth in ADV to RM31.6 billion during the quarter.

“The first quarter of the year remained challenging on the back of weaker sentiment largely influenced by external concerns. These concerns are wide ranging, and are driving uncertainty in the global economy. The spillover of this impact is also affecting businesses of all sizes in our local economy,” said Bursa Malaysia CEO Datuk Muhamad Umar Swift.

“While the FTSE Bursa Malaysia KLCI Index weakened in the first quarter, it is important to note that the small and mid-cap indices continue to show a positive trend, with the FTSE Bursa Malaysia Small Cap Index and FTSE Bursa Malaysia Mid-70 Index recording a year-to-date growth of 13% and 9% as at end-March,” he said in a statement today.

Umar said the temporary challenges are the impetus that could drive positive transformation among more agile participants across the broad economy while the fundamentals of the economy are strong and robust.

“The recent positive announcements such as the revival of the East Coast Rail Link and Bandar Malaysia projects will have a positive impact and act as a catalyst that will stimulate the broader market,” he added.

Umar said the exchange will continue with its long-term growth strategy by improving operational efficiency, digitalising services to provide better customer experience and enhancing the breadth and depth of the capital market with new products.


Lowest foreign net outflow in 16 weeks

PETALING JAYA: Offshore investors sold RM72 million net of local equities last week, marking the lowest weekly foreign net outflow in 16 weeks, said MIDF Research.

In its fund flow report, the research house said that selling was at a measurable pace last week, although foreign investors remained net sellers for the fifth consecutive week.

“Bursa started the week with a foreign net outflow of RM95.2 million on Monday while the local bourse was little changed at 1,622 points. The foreign net outflow occurred despite gains seen in the KL Construction Index following the reinstatement of the Bandar Malaysia project announced on Friday in the preceding week,” it said.

On Tuesday, international investors turned net buyers on for the first time in nine trading days after purchasing RM38.6 million net before advancing to RM105.9 million net on Wednesday.

According to MIDF Research, the surge of foreign funds into Bursa on Wednesday was partly attributable to the overnight record highs posted on Wall Street. The FBM KLCI followed suit to close 0.7% higher at 1,638 points.

On Thursday, the two-day buying streak came to an end as foreign investors sold RM113.7 million net as US equities slip from their record high.

On Friday, foreign funds continued selling off equities on Bursa but at a minimal level of RM7.6 million net. Sentiment on Friday was partially buoyed by the agreement of China to purchase more palm oil from Malaysia.

“With two more trading days left, April is set to be a month of foreign net outflow. International investors have so far disposed RM1.21 billion this month bringing the year-to-date foreign net outflow to RM2.56 billion,” it said.


Bursa Malaysia records lower earnings in first quarter

PETALING JAYA: Bursa Malaysia Bhd’s net profit for the first quarter ended March 31, 2019 fell 26.5% to RM46.86 million from RM63.78 million a year ago due to a 16.2% drop in operating revenue to RM121.4 million from RM144.8 million a year ago.

Revenue for the quarter fell 16% to RM126.53 million from RM150.71 million a year ago while total operating expenses was 1.4% lower at RM62 million compared with RM62.9 million a year ago.

Annualised return on equity decreased by 7ppt to 23% while basic earnings per share was 2.1 sen lower at 5.8 sen. Market capitalisation as at March 31, 2019 stood at RM1.7 trillion, marking an 8.8% year-on-year decline.

“The first quarter of the year remained challenging on the back of weaker sentiment largely influenced by external concerns. These concerns are wide ranging, and are driving uncertainty in the global economy. The spill over of this impact is also affecting businesses of all sizes in our local economy,” said Bursa Malaysia CEO Datuk Muhamad Umar Swift.

“While the FTSE Bursa Malaysia KLCI Index weakened in the first quarter, it is important to note that the small and mid-cap indices continue to show a positive trend, with the FTSE Bursa Malaysia Small Cap Index and FTSE Bursa Malaysia Mid-70 Index recording a year-to-date growth of 13% and 9% as at end-March,” he said in a statement.

He said the temporary challenges are the impetus that could drive positive transformation among more agile participants across the broad economy while the fundamentals of the economy are strong and robust, driving the nation’s growth trajectory.

“The recent positive announcements such as the revival of the East Coast Rail Link and Bandar Malaysia projects will have a positive impact and act as a catalyst that will stimulate the broader market,” he added.

He said the exchange will continue with its long-term growth strategy by improving operational efficiency, digitalising services to provide better customer experience and enhancing the breadth and depth of the capital market with new products.


Fund flow reversal into equities market as early as Q3, analyst says

KUALA LUMPUR, April 29 — Malaysia’s equities market is expected to see a reversal of fund flows and as early as the third quarter (Q3) of this year, an analyst said. Rakuten Trade head of research Kenny Yee said this would be underpinned by the…