Market Reports

• Major stock markets rebounded last week from the major sell down with the Dow Jones Industrial Average closing above 26,000 level to 26,403.4 points. The FBM KLCI also closed firmly above the 1,600 mark at 1,612.14 points.
• Foreign funds continued its risk off mode on emerging markets with our markets seeing reduced outflow of RM324.5m. Performance amongst the FBMKLCI components saw 21 gainers to 8 losers.
• Top 3 performers include SIME (+9.57%), HAPSENG (+3.77%) and PMETAL (+3.58%) while the 3 losers were AIRPORT (-3.86%), PBBANK (-2.31%) and HLB (-2.24%).   

• There is an air of positivity and calm as China has dialled down on the trade war rhetoric and wants to continue trade talks with US. This is a good sign that it is heading in the right direction until Trump’s tweet.
• On our local front, the 2Q 2019 results thus far have been largely within expectations and we expect the market to remain in a range bound trading with KLCI expected to be back above 1,600 level today ahead of long weekend.       

• It is finally confirmed that works on Penang’s tunnel project worth RM6.34bn is set to commence by end-October 2019.
• Consortium Zenith Construction Sdn Bhd, which is the main contractor for the multi-billion-ringgit project, has indicated that the Penang state government has committed to proceed with the construction of the infrastructure works.
• The whole project will comprise of three toll-free roads and a tolled tunnel. The news should be positive to Vertice Bhd which will certainly play a huge part in the project while Vizione Holdings Bhd may also partake in the project as well.

• KNM have had rose to prominence of late with share price rallied from 18.5 sen in May to the current 38.5 sen. We met up with the management recently and reckon its turnaround story is gaining traction.
• Bleeding from its loss-making entities namely in Asia are curtailed as these are gradually hived off. Funds from the sales should improve its cashflow coupled with earnings from its more profitable ventures in Europe.
• Via the ongoing restructuring, KNM should emerged as a leaner and meaner company going forward potentially becoming an interesting value proposition.

Looks like global equity markets will swing according to Mr Trump’s mood. Whilst he is the main culprit in creating the prevailing volatility, Trump may have played his final card with China. The U-turn yesterday showed exactly his folly against China and may be a little too late in trying to amend the damage.

Though we may see some buying today, recent wild market movements would have frightened off the more risk averse investors. Any rebound may be countered with some profit taking activities hence we do not foresee any sharp improvements in the equity markets over the near term and 1,620 to be the immediate resistant level for the FBM KLCI.