KUALA LUMPUR: Bursa Malaysia closed higher on Tuesday, buoyed by buying in selected heavyweights and blue chips, mainly telco, plantation and transportation and logistics counters.
However, overall the market is still cautious and investors are quietly monitoring the two-day US Federal Reserve policy meeting which begins today.
“Investors are now betting the US Fed will move to cut rates as early as July, due to the slowdown in the US economy resulting from trade-related uncertainties,“ a dealer said.
He said this is the best time for investors to go for defensive stocks and value stocks.
The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) advanced 14.36 points to 1,652.76 compared with Monday’s close of 1,638.18.
The barometer index, which opened 1.74 points weaker at 1,636.66 this morning, moved between 1,636.18 and 1,652.76 throughout the day.
Losers trumped gainers by 428 to 357, while 386 counters were unchanged, 697 untraded and 21 others suspended.
Turnover increased to 2.03 billion units worth RM1.72 billion from 1.62 billion units valued at RM1.43 billion recorded on Monday.
Axiata, which has a merger plan with Norway’s Telenor Group, saw its shares jump 24 sen to RM4.95, Sime Darby Plantation gained 18 sen to RM4.82, MISC increased 23 sen to RM7.20 and Digi was 14 sen higher at RM4.95.
To recap, Axiata announced last month that it was in talks with Telenor Group to merge their operations in Asia, including a plan to combine their respective subsidiaries, Celcom Axiata Bhd and Digi Com Bhd, into Malaysia’s largest mobile operator.
The local bourse opened Tuesday’s trading flat and it then turned mixed with investors adopting a wait-and-see attitude ahead of the meeting.
Besides the Fed, global exchanges would also be jittery ahead of two other policy meetings — by the Bank of England, and Bank of Japan.
Among heavyweights, Maybank fell three sen to RM8.96, Public Bank went up by two sen to RM23.04 and Tenaga was 26 sen higher at RM13.
Steel pole manufacturer Mestron Holdings Bhd, which today made its debut on Bursa Malaysia’s Ace Market with a premium of four sen today, added half-a-sen at closing to 16.5 sen.
Meanwhile, T7 improved one sen to 42.5 sen. The 51%-owned subsidiary of T7 Global Bhd is targeting to bid for contracts valued at up to RM200 million this year.
The FBM Emas Index rose 77.78 points to 11,616.46, the FBMT 100 Index increased 81.17 points to 11,471.45 and the FBM Emas Syariah Index soared 126.37 points to 11,898.91.
The FBM Ace went up 3.78 points to 4,353.52 and the FBM 70 added 26.09 points to 14,295.40.
Sector-wise, the Financial Services Index was 29.11 points lower at 16,683.62 and the Plantation Index improved 81.90 points to 6,942.01, while the Industrial Products and Services Index edged up 0.56 point to 159.97.
Main Market volume appreciated 946.01 million shares valued at RM1.41 billion from 820.87 million shares worth RM1.21 billion.
Warrants turnover fell to 472.21 million units valued at RM119.00 million from 513.93 million units worth RM120.60 million.
Volume on the ACE Market advanced to 609.66 million shares valued at RM181.86 million versus 283.78 million shares worth RM100.03 million.
Consumer products and services accounted for 161.74 million shares traded on the Main Market, industrial products and services (205.78 million), construction (112.72 million), technology (83.82 million), SPAC (nil), financial services (31.97 million), property (84.52 million), plantation (16.36 million), REITs (7.67 million), closed/fund (16,900), energy (131.25 million), healthcare (37.44 million), telecommunications and media (38.51 million), transportation and logistics (22.77 million), and utilities (11.46 million).
The physical price of gold as at 5pm stood at RM174.85 per gramme, up RM1.67 from RM173.18 at 5pm yesterday. — Bernama
CYBERJAYA, June 17 — The merger plan between Axiata Group Bhd of Malaysia and Norway’s Telenor Group is still at the proposal stage, says Communications and Multimedia Minister Gobind Singh Deo. He said the ministry views the merger proposal…
PETALING JAYA: Analysts are divided on the market outlook for the year, following a muted quarter of corporate earnings.
Despite a downward revision to its end-2019 FBM KLCI target, PublicInvest Research remains positive over the near to medium-term market outlook and expects the earnings cycle to improve.
“Our optimism is premised on, among others, the government’s focus on growth, an undervalued ringgit which should encourage capital inflows, and an expected resolution to the US-China trade spat, albeit piecemeal, but sufficient to make both parties coming out looking like ‘winners’,” it said in its report on Tuesday.
In terms of stocks, it favours EA Technique, Sapura Energy, D&O Green Technologies, Mega First, Ta Ann and Alliance Bank while Uzma and Perak Transit were dropped in favour of CIMB Group and Serba Dinamik.
“The current result reporting cycle saw some cuts to significant market moving sectors in the benchmark index, most noticeably in plantations. Banking saw some minor tweaks lower owing to the recent Overnight Policy Rate (OPR) cut while telecommunications were adjusted for accounting standard changes.
“Reaction has again been relatively muted thus far, with the benchmark FBM KLCI actually inching 4.55 points higher on Monday (June 3) to show some resilience, despite weaker global markets on account of President Donald Trump now ‘picking a fight’ with Mexico and India,” said PublicInvest Research.
Its earnings growth assumption for 2019 and 2020 are 2.5% and 6.2% respectively due to prevailing weak conditions. The adjustments to earnings resulted in a reduction of its end-2019 FBM KLCI target to 1,690 points.
MIDF Research has also cut its 2019 baseline target for the local benchmark from 1,800 points to 1,720 points, following the reduction in its aggregate forward earnings estimates for 2019 and 2020.
“Having reasoned the above, however, we take cognisance that equity price is a function of both underlying value and valuation. Granted, the performance of corporate earnings (which is a key measure of underlying value) may have been less than buoyant lately hence the decision to cut our FBM KLCI 2019 baseline target. Nevertheless, valuation expansion is a bona fide risk to our baseline outlook on the local benchmark,” it said.
Meanwhile, Affin Hwang Capital said there is no significant catalyst for the market, especially given the poor corporate earnings delivery while PE valuations for the KLCI remain at a premium over its peers.
“We maintain our ‘neutral’ rating on the KLCI although our 2019 year-end estimate for the KLCI is reduced to 1,679 (based on an unchanged 18 times 2019 KLCI EPS), from 1,810 previously.
“We make no change to our sector positioning for now, and remain overweight on the autos, gaming, healthcare, insurance, oil and gas, and rubber gloves sectors, where we believe the risk-reward is still favourable and earnings growth is still a key consideration,” it said.
However, it believes that equity outflows may recede over the near term as foreign shareholdings appear to have plateaued at 23%.
“Note that the KLCI was one of the only markets within the Asia-6 that saw significant equity outflows. Year-to-date, RM4.8 billion has been withdrawn and contributing to the 2.5% drop of the KLCI.”
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PETALING JAYA: Kenanga Research has cut its crude palm oil (CPO) price forecast for 2019-2020 to RM2,000-RM2,200 from RM2,400-RM2,200 per tonne.
This is premised on the palm-oil biodiesel ban from the European Union (EU), a potential CPO inventory pickup in the second half of the year and mounting trade war tensions depressing CPO prices.
Following the revision, the research house slashed planters’ earnings by 6-97% for FY19 and 7-79% for FY20E with pure upstream players such as IJM Plantations Bhd and Hap Seng Plantations Holdings Bhd taking bigger hits.
“We believe planters’ earnings will hit a rough patch in coming quarters with CPO prices hovering around current levels, which will likely overshadow any production pickup in the second half of 2019.”
Kenanga said while biodiesel mandates seem to be panning out well (expected to absorb 13% of CPO production in Indonesia and 4% in Malaysia), the intensifying US-China trade war tensions are likely to discourage soybean oil prices like what happened last year.
“In our opinion, this will dwarf any positive trade/demand impact on CPO and keep its prices under pressure in the near term, as the two commodities are close substitutes with their prices highly correlated (>0.90).
“Coupled with a potential inventory pickup in the second half of 2019 (to 3.0-3.5 million tonnes levels), we believe the possibility of a strong CPO price recovery in the near term can be practically ruled out, leaving 2019 an unexciting year for most planters.”
Nevertheless, it said should the Chinese and/or biodiesel demand be stronger-than-expected, resulting in falling stockpiles in the second half and a sharp recovery in CPO prices, it would review the sector call and target prices of planters under its coverage.
Kenanga downgraded the plantation sector from “neutral” to “underweight”, with only Ta Ann Holdings Bhd set to outperform due to its core net profit compound annual growth rate of 12.8% driven by improved log production, profitable status and attractive 4% dividend yield.
The research house was previously hopeful of a handsome CPO price recovery by June 2019 as stockpiles fall and demand from China picks up.
“However, despite the positives nicely falling into place, negative news flows vis-à-vis palm-oil biodiesel ban from the Europe has proven to be a major killjoy.”
“As we move closer to the second half, chances of CPO price reaching our 2019 target of RM2,400 per tonne are becoming next to zero.”
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