Monday, August 16, 2021 FBMKLCI: 1, 505 .11 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* WWeeeekkllyy SSttrraatteeggyy Market View, News in Brief: Corporate, Economy, and Share Buybacks Kaladher Govindan Tel: +603-2167 9609 [email protected] www.taonline.com.my Market View Market Recovery Pending on the Outcome of PM’s Audience with the King The local blue -chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) staged mild rebound during last week’s Awal Muharram holiday shortened trading, as the relaxation of some restrictions for the fully vaccinated population helped improve economic recovery hopes. Keen bargain hunting interest in key rubber glove stocks lifted the healthcare sector up by 1.5 percent post Awal Muharram, but persistent uncertainties on the domestic politics front and the challenging local Covid situation continued to bog down sentiment. Week-on-week, the FBM KLCI gained 15.31 points, or 1.03 percent to 1,505.11, with gains in Hartalega (+50sen), Press Metal Holdings (+12sen), KLK (+90sen) and Maybank (+7sen) offsetting falls in Sime Darby (-3sen) and Petronas Chemicals (-3sen). Average daily traded volume and value last week slowed to 3.82 billion shares and RM2.41 billion, respectively, compared to the 4.04 billion shares and RM2.51 billion average the previous week, as trading participation dwindled with increased uncertainties over the domestic political landscape and challenging Covid situation bogging down trading sentiment. As far as domestic politics is concerned, the plot thickened further on news the Prime Minister (PM) will be meeting the Yang di-Pertuan Agong again today. Investors’ anxiety has increased ever since some members of parliament (MPs) withdrew support for the PM, which raised doubts about him having majority in the parliament. This meeting with the King came hot on the heels of his recent parliamentary reform proposals to all MPs and widespread speculations that there is an increased pressure on him to call for a vote of confidence in the parliament as soon as possible. With a lot of speculations on what could transpire during this meeting and its implications on Malaysia’s political landscape, most investors, especially institutional, may prefer to continue sitting on the fence until more clarity emerges. This may also heighten concerns about greater foreign selling but I believe most foreigners who wanted to exit because of uncertain domestic politics have already done so. Take note that the net outflow of foreign funds started in 2018, after 14 GE, and gained momentum because of the increasingly unstable domestic politics. The net outflow situation continued in 2021, amplified by rising Covid-19 cases and unwinding of US Dollar carry trades due to intense speculations about the timing of US monetary policy tightening. So, don't expect major outflow because of the most recent political development. In fact, any positive outcome that ends the current political turmoil and leads to a stable government should be positive for the economy and the equity market. Any knee jerk selling should be a good buying opportunity with 1,450 acting as a good support level for the FBMKLCI. Long-term growth prospects for the domestic economy and equity market remain intact and investors’ appetite for equities is expected to pick up once the dust settles in the not-so-distant future. Expect better clarity in domestic politics in 2H22 as the PM has committed that the 15 th GE will be held by next July. Of course, what transpires after that Page 1 of 10 16-Aug-21 depends on the election outcome, which is not easy to predict, but b elieve w hat happened since 2018 should provide a better understanding and basis for the rakyat to elect a stronger government in the upcoming polls. By that time there should be a reversal in net foreign outflow as foreigners look for cheaper investments in recovering South East Asian equity markets post-Covid as they start to exit the pricy US equities. Thus, investors should view any price weakness in domestic equity market as an opportunity to go long. Banks look cheap in a monetary tightening environment, which could happen in 2H22. Same goes to property stocks that are mostly trading at an attractive CY22 P/Bk valuation of 0.2x to 0.6x for small caps and 0.3x to 0.9x for medium caps. Buy technology stocks that will continue to benefit from the new norm and chip shortages apart from recovery plays in the building materials, oil & gas and plantation sectors. Meanwhile, the government’s decision to allow more economic activities and businesses to resume operations today in states under Phase One and Two of the National Recovery Plan should contribute positively to the economy, which contracted by a seasonally adjusted 2% quarter-on-quarter but surged 16.1% year-on-year (YoY) in the second quarter of 2021. In the absence of low base effect and strict Covid-19 containment measures biting into the current quarter’s performance, anticipate a 4.9% YoY contraction in 3Q GDP before it expands by 6.2% YoY in the final quarter due to resumption in almost all economic activities after Malaysia achieves herd immunity by end of October. This will add up to a full year growth of 3.7%. (THE REMAINING OF THIS PAGE IS INTENTIONALLY LEFT BLANK) Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan – Head of Research TA S ECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 502 50 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 203 2 504 8 www.t a.com.my Page 2 of 10 16-Aug-21 News In Brief Corporate Maj uperak Holdings Bhd (Not Rated) has enter ed into a land swap deal to dispose of four plots of its land valued at RM100mn in Sungai Raya to the Perak State Economic Development Corporation (PKNP) in exchange for three pieces of land valued at RM140mn in Hulu Kinta. Majuperak said the difference of RM40mn will be deemed as an amount owed by the group to PKNP. Majuperak will issue a promissory note in favour of PKNP with a 12-month maturity from the completion of the agreement, it said. (Bursa Malaysia / The Edge) Malaysia Airports Holdings Bhd (MAHB) saw further improvement in passenger volume at its airport in Turkey during July, with 3.02mn passengers versus 2.2mn in June. The improvement represents a return to pre-Covid-19 levels for the Istanbul Sabiha Gokcen International Airport, which averaged just under 3.0mn passengers each month in 2019. Meanwhile, the July passenger count in all of MAHB’s Malaysian airports rose to 261,000 from 187,000 in June. This is however 80.1% lower compared with the 1.3mn passengers registered in July last year. (Bursa Malaysia / The Edge) NWP Holdings Bhd (Not Rated) is looking to diversify into proptech under the leadership of executive director Datuk Seri Nelson Kee, who comes with vast experience in real estate. It also plans to launch a yet-to-be-named app by the end of the year. NWP's proptech model will comprise a hybrid agency, fintech, smart homes and a one-stop solution. The hybrid agency will include lead generation from traditional and digital sources, as well as marketing and selling properties through various conventional and non- traditional methods. (Bursa Malaysia / The Edge) Samaiden Group Bhd (Not Rated) has inked four contracts worth RM22.8mn with Malakoff Corp Bhd for the construction of rooftop solar photovoltaic systems. The construction will take place in Malakoff’s facilities in Melaka, Kedah, Shah Alam and Pahang. (Bursa Malaysia / The Edge) Paramount Corp Bhd (Not Rated) has completed its first fintech investment by acquiring a 30% stake in Omegaxis Sdn Bhd, the holding company of Peoplender Sdn Bhd, the operator of peer-to-peer (P2P) financing platform Fundaztic. Paramount said its wholly- owned subsidiary Magna Intelligent Sdn Bhd signed an agreement with P2P Venture Sdn Bhd and Omegaxis, for the 30% stake in Omegaxis for RM13.7mn. (Bursa Malaysia / The Edge) G Capital Bhd (GCAP) (Not Rated) has entered a memorandum of understanding with Smart Sabah Corporation Sdn Bhd to establish a framework for collaboration for business opportunities and potential business ventures. GCAP said the partnership entails the mutual intentions to explore collaboration on a green technology project reference "Projek Merancang, Merekabentuk, Membangun, Melaksana dan Menyelenggara Loji Pengeluar Tenaga Hijau Sabah (Tenaga Elektrik) 3500 MW di Pantai Timur Sabah" to be awarded by the state government of Sabah. (Bursa Malaysia / Bernama) KIP Real Estate Investment Trust (Not Rated) plans to undertake a private placement to raise up to RM80.9mn for the group’s future acquisitions. The private placement involves an issuance of up to 101.1mn new units, representing up to 20% of the total number of 505.3mn units issued to the independent investors to be identified at a later date. (Bursa Malaysia / The Edge) Page 3 of 10 16-Aug-21 Bursa Securities has reje cted Catcha Digital Bhd ’s (formerly known as Rev Asia Bhd) (Not Rated) proposed regularisation plan, as the regulator said the GN2 status company’s sponsor has not demonstrated the ability of the plan to comply with the ACE Market Listing Requirements.