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Tuesday, March 31, 2009

Bursa Chat - News Highlights (30.03.2009)

Kumpulan Europlus (KEuro) announced yesterday that construction and the related work at Canal City project that commenced towards the end of 2007 has stopped. KEuro further mentioned that the new state government of Selangor has requested changes to the original privatisation plan, including omission of the main canal and its related work. KEuro is jointly controlled by Tan Sri Chan Ah Chye and IJM Corp (IJM MK, Buy, TP: RM5.10), which has a 25% stake. Under the Canal City project, KEuro is to undertake a flood mitigation programme in Selangor and construct a highway linking certain portion of Shah Alam. In return, KEuro will get land. But with the revised terms, KEuro has to pay for the land alienated. (Financial Daily)
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Malaysia Airlines (MAS MK, Sell, TP: RM2.44) is still keen to pursue the proposal with Australia’s Qantas Airways to set up a joint-venture (JV) company for the provision of airframe maintenance services, although the memorandum of understanding (MoU) signed for it has lapsed. The group told Bursa last Friday that the MoU for the JV signed in 2007 had expired but both parties were still working on the details for the intended venture. (StarBiz)
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EON Capital Bhd is evaluating its capital structure in light of the current economic environment. The financial group stated that this was only a preliminary exercise, and that no decision on new capital raising has been made. (Financial Daily)

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Perusahaan Otomobil Kedua Sdn Bhd (Perodua) expects its vehicle sales to drop by 6% to 10% due to the gloomy economic outlook. Last year, Perodua sold about 167,000 vehicles, an increase of 3% y-o-y. Currently, Perodua has 30.5% of local market share. Sales for the first two months amounted to about 24,000 units, a 10% drop compared to the previous corresponding period. Perodua will be launching its new multi-purpose vehicle in 4QCY09, in hopes to boost sales. According to managing director, Datuk Syed Abdul Hafiz Syed Abu Bakar, a clearer picture on how the industry will perform will likely emerge this month onwards. (Financial Daily)
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Proton expects RM2bn in revenue over the next five years from its strategic licensing and assembly agreement with Detroit Electric Holdings Ltd (DE). Under the agreements signed yesterday, Proton unit Perusahaan Otomobil Nasional Bhd will license the use of Persona and Gen.2 platforms to DE for the latter to build its full line of pure electric vehicles (PEV) for the global market over the next five years. The PEVs will be built in Proton’s Tanjong Malim plant. According to Proton managing director Datuk Syed Zainal Abidin Syed Mohamad Tahir, the RM2bn is on the basis of Proton assembling 40,000 cars per annum, to be rebadged and sold under the DE brand. The initial target markets for the PEVs are the UK, Europe, and China. DE plans to sell more than 270,000 PEVs by 2013. The cars will be priced between RM83,200 and RM94,120 for the city range. DE’s chairman and CEO, Albert Lam, said DE would invest up to RM150m in Malaysia to set up two plants to support the venture. (Financial Daily)
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The Cabinet will decide tomorrow whether Syarikat Bekalan Air Selangor (SYABAS) can raise water tariff by as much as 31% as provided for in the concession agreements. Energy, Water and Communications Minister, Datuk Shaziman Abu Mansor said he would be presenting a proposal to the Cabinet on SYABAS request for the tariff increase. Though the minister himself has the power to either delay or give the nod for the tariff hike under the Water Services Industry Act 2006 (WSIA), the ministry still has to present its opinion to the Cabinet on the proposed tariff hike and the quantum of increase, after which the Cabinet will decide. (StarBiz)
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Suria KLCC hopes to grow total retail sales by up to 5% to about RM2.1bn this year which will represent the 11th consecutive year of growth. The growth, though small compared to the 15% in 2007, is still better than its marginal growth in 2008. Retail sales were stable at Suria KLCC last year amidst lower traffic count as a result of an additional 2.9m sq ft of retail space in the market (at the Pavilion Kuala Lumpur, The Gardens Mid Valley and Sunway Pyramid) and high fuel price. (BT)
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INVESTMENT RESEARCH
Malaysia
TSR Capital Bhd looks set to build and equip a teaching hospital costing RM1.7bn for International Islamic University Malaysia (IIUM) in Nilai, Negeri Sembilan. Prime Minister Datuk Seri Abdullah Ahmad Badawi will today officiate the ground- breaking ceremony for the hospital which will be funded by private finance initiative (PFI). Under the PFI scheme, a private sector company will finance the development of infrastructure and lease it to the Government over a period of time. (StarBiz)
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Bursa Malaysia plans to launch a platform to facilitate regulated Islamic short selling and hedge fund activities towards the end of the year. Short selling is controversial among Islamic scholars, as some believe that syariah does not permit selling what one does not own. Bursa is still working out the platform’s structure, but one way to enable Islamic short- selling is for investors to buy, in stead of borrowing, a stock by paying a fraction of the stock price and executing a simultaneous agreement to sell it back to the seller at a later date. Meanwhile, Bursa said that it plans to cut expenses by 15% and capex by more than 15% this year as the economic crisis hits trading income. (Financial Daily)
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Industry experts from Malaysia’s palm and biodiesel sector plan to meet officials from the European Commission on its recent amendment to the renewable energy directives which hinder the export of biodiesel to the region. Malaysian Biodiesel Association vice-president UN Unnithan said palm players were discussing the EU’s sustainability criteria on the minimum greenhouse gas savings of 35%. Based on EU’s estimates, the default value of palm oils greenhouse gas savings was around 19%. However, based on Malaysia’s estimates, the palm industry is saving as much as 50% hence some differences between measurement methodologies need to be sorted out. He added that if palm users used the methane gas capture technology, saving would go as much as 60%. (Financial Daily)
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INVESTMENT RESEARCH
Global

Stocks slumped Monday, falling for a second straight session, as worries about the auto and bank industries sent investors running after the recent rally. The Dow Jones industrial average lost 3.3% (-254.2 pts, close 7,522.0). The Standard & Poor' s 500 index lost 3.5% (-28.4 pts, close 787.5) and the Nasdaq composite lost 2.8% (-43.4 pts, close 1,501.8). In currency trading, the dollar gained against the euro and fell against the yen. U.S. light crude oil for May delivery fell US$3.97 to settle at US$48.41 a barrel on the New York Mercantile Exchange. (CNNmoney)
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European confidence fell to the lowest on record in March as the Group of 20 nations prepared to discuss this week how best to fight the deepening global recession, which has prompted job cuts across the continent. An index of executive and consumer sentiment in the euro area declined to 64.6, the lowest since the indicator began in 1985, from 65.3 in February, the uropean Commission in Brussels said yesterday. Gauges for industry, services and consumer sentiment all reached record lows. Leaders from the G-20 emerging and developed nations will meet in London on April 2 to try to forge a common response to the crisis. U.S. calls for European nations to spend more on fiscal stimulus have met with some resistance by governments trying to keep their budget deficits under control. (Bloomberg)
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Ireland had its AAA credit rating removed by Standard & Poor’s in the fourth downgrade of a euro-region government this year as the global financial turmoil fuelled borrowing costs and swelled the budget deficit. The rating was lowered one step to AA+ with a “negative” outlook, S&P said yesterday, indicating the rating company is more likely to lower the classification again than raise it or leave it unchanged. S&P lowered the ratings of Spain, Portugal and Greece in January. The European Commission forecast in January that Ireland’s budget deficit may widen to 11% of gross domestic product this year, almost four times the European Union’s approved limit. (Bloomberg)
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Russia’s economy will probably shrink 4.5% this year after oil prices slumped and global contagion spread, driving up unemployment and pushing more people into poverty, the World Bank forecast. The slump may last longer and be deeper than in the aftermath of the 1998 government’s US$40bn debt default and 70% ruble devaluation, which triggered bank runs and
wiped out citizens’ savings. A contraction may be prolonged by a drop in household consumption and a “second wave” of non- performing corporate loans, Zeljko Bogetic, the World Bank’s Moscow-based lead economist, said yesterday. (Bloomberg)
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Japanese companies cut inventories at an unprecedented pace in February and said they would increase production in coming months, indicating the worst of the country’s manufacturing slump may be over. Inventories fell 4.2% last month, the biggest decrease since record-keeping began in 1953, the Trade Ministry said yesterday. Factory output slid 9.4% from January, when it plunged a record 10.2%. The second monthly reduction in stockpiles brought them to the lowest level since August 2007, the report showed. Manufacturers said they’ll raise output 2.9% in March and 3.1% in April, ending a five-month losing streak. (Bloomberg)
*****


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Monday, March 30, 2009

Bursa Chat - News Highlights (30.03.2009)

AirAsia Bhd (AIRA MK, Buy, TP: RM1.90) has sealed a MobileOnAir Agreement with OnAir, which has its headquarters in Geneva Switzerland, for the provision of in-flight telephony services for use by its passengers. The move was part of the airline’s continuing efforts to increase the variety and improve the quality of its services to passengers in the course of business. OnAir is owned by SITA, the airline-owned provider of IT solutions and communications services to the air transport industry, and Airbus, one of the world’s leading aircraft manufacturers. (StarBiz)

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EON Capital Bhd is considering a rights issue, according to sources. It is learnt that Rin Kei Mei, a major shareholder of EON Capital with an 11.12% stake, is not agreeable to the proposed rights issue that is now being looked at by a European investment bank. Sources say the foreign investment bank has been mandated to study the need for it and to come up with recommendations if the bank needs the capital. According to EON Capital’s latest annual report, its risk-weighted capital ratio is 13.2%, which is above the industry average of 12.2%. (The Edge)

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Proton Holdings Bhd is believed to be close to finalising a technology collaboration pact with another foreign automaker. An announcement could be made as early as next month, sources say. It is believed that the foreign automaker is the Renaut-Nissan group, and the supposed collaboration should be for a Perdana replacement. The source says the new tie-up will not affect any of Proton’s existing partnerships, such as the product collaboration agreement with Mitsubishi to come up with a replacement for the Waja. (The Edge)
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DRB-Hicom Bhd is poised to take over as the importer of Volkswagen cars into the country from AutoStadt Asia Sdn Bhd, sources say. It is learnt that DRB’s wholly-owned unit DRB-Hicom Auto Solutions Sdn Bhd could commence importing the cars for Volkswagen Group Malaysia Sdn Bhd (VGM) as early as the middle of the year. It is not clear if DRB and VGM have included car assembly operations in their negotiations. (The Edge)
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Malaysia’s sales of 37,801 vehicles in January are the highest among the Asean countries, said the Malaysia Automotive Association (MAA) president Datuk Aishah Ahmad yesterday. She said Thailand had recorded the second highest sales with 32,085 units, followed by Indonesia (31,567), Philippines (8,791), Singapore (7,388), Vietnam (3,852) and Brunei (1,123).”This is the first time Malaysia has achieved the highest figure in Asean since the US financial crisis and global economic downturn plagued the region,” she told reporters after the MAA annual general meeting yesterday. (Bernama)

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Eastern & Oriental Bhd (E&O) is halting expansion work on its E&O Hotel in Penang due to the UNESCO ruling that buildings in heritage zones must not exceed 18m in height. E&O will wait for clarification from the relevant authorities, which is expected in June. The other 3 projects approved by the previous administration are the RM400m Pier Hub, the RM130m Royal Bintang, and the Low Yat Group’s proposed 23-storey hotel on Jalan Sultan Ahmad Shah. (StarBiz)
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Malaysia Airports Holdings Berhad (MAHB) has denied claims by Kazakhstan that it is ineffective in managing the International Airport Astana (IAA). MAHB said it started to manage the airport from May 2007. On 31 March 2007, Malaysia Airports Management & Technical Services (Labuan) Pte Ltd (MAMTS Labuan) signed a trust agreement with the Department of Finance of the Astana akimat (city mayor’s office), Kazakhstan. MAMTS Labuan is a subsidiary of MAHB. The IAA was managed by the Joint Stock Company International Airport Astana (JSC IAA), a wholly owned company of the Kazakhstan government. The government agreed to transfer its entire shareholding in the JSC IAA under trust management to MAMTS Labuan. The former has since reduced its active participation in the management of IAA. MAHB is presently in discussion with the government of Kazakhstan to resolve these issues. (Malaysian Reserve)
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INVESTMENT RESEARCH
Malaysia
The Government is likely to allocate RM200bn for the 2010 budget, says Deputy Prime Minister Datuk Seri Mohd Najib Razak, who is also Finance Minister, when winding up the motion on economy at the last day of the UMNO general assembly at the Putra World Trade Centre in Kuala Lumpur last Saturday. The government is expected to give out some RM28bn in subsidies this year. In addition, a special website will be launched in 2 weeks to monitor expenditure under the stimulus package to promote transparency in recovery efforts. (Malaysian Reserve)
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A total of 26,224 workers have been retrenched as of March 19, Malaysian Employers Federation (MEF) executive director Shamsuddin Bardan said. He told that out of this, 12,674 Malaysians and 6,651 foreigners lost their jobs outright while the rest were given voluntary separation schemes (VSS). Shamsuddin expected more workers to be retrenched in the weeks ahead if there was no immediate improvement in the economy. He said the recent mini budget did not have much an impact on the companies nor was there immediate incentive for companies to retain their workers. (Bernama)
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Property prices in Malaysia are expected to come down this year reflecting the softer market and oversupply as global economic and financial crises dampen demand, said president of International Real Estate Federation (FIABCI), Datuk Richard Fong. “The transactions have come down. The extent to which the prices will fall will also depend on the availability of financing now when the buyers are faced with financial difficulties due to job losses and uncertainties in the job market," he said at the 8th FIABCI Asia Pacific Regional Secretariat Summit 2009 here today. Fong said to support the property market, banks should be flexible in restructuring the duration of housing loans to meet the financial requirements of house buyers who were struggling with their commitments. “While the Malaysian economy is heading towards a pronounced slowdown, the banking sector remains relatively strong as compared to the 1997/98 Asian financial crisis,” he said. (Bernama)
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INVESTMENT RESEARCH
Global

Stocks tumbled on Friday at the end of an otherwise upbeat week, stretching the market rally to three straight weeks, for the best run in a year. The Dow Jones industrial average lost 1.91% (-148.38 pts, close 7,776.18). The Standard & Poor' 500 index lost 2.03% (-16.92 pts, close 815.94) and the Nasdaq composite lost 2.63% (-41.80 pts, close 1,545.20). In currency trading, the dollar weakened against the euro and the yen. U.S. light crude oil for May delivery fell by US$1.96 to settle at US$52.38 per barrel on the New York Mercantile Exchange. (CNNmoney)
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U.S. consumer spending rose for a second consecutive month in February and sentiment edged up in March, according to reports on Friday that backed views that the worst of the recession may be over. Spending increased 0.2% after rising by an upwardly revised 1.0% in January, the Commerce Department said. The hefty adjustment to January' figure, which was previously reported as a 0.6% gain, suggested that consumer spending rebounded in the first quarter after a big drop at the end of last year. (Reuters)
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The U.S. Treasury Department said it expects to have about $134.5bn left in its financial-rescue fund, giving the Obama administration a cushion as it implements a range of expensive programs aimed at unlocking the credit market and boosting ailing industries. The figure would mean that about 81% of the $700bn in the Troubled Asset Relief Program, or TARP, has been committed. But it also means that the Obama administration may not have to go to Congress to request additional funds, at least until well into the year. (WSJ)
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The European Central Bank could start buying corporate bonds in an unusual move to support the euro zone economy, ECB Vice President Lucas Papademos said on Thursday. His comments are the strongest signal yet about the ECB' plans to ramp up efforts to keep funds flowing through clogged euro-zone credit markets. The remarks indicate that s policy makers are prepared to take more-aggressive steps to stem the problem than they have thus far. (WSJ)
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The U.K. economy’s contraction in the fourth quarter was deeper than previously estimated, as consumer spending and construction slumped the most since 1980. Gross domestic product fell 1.6% from the third quarter, exceeding the prior measurement of 1.5%, which was also the median forecast of 27 economists in a Bloomberg News survey. Construction dropped 4.9% and consumer spending declined 1%. (Bloomberg)
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The Bank of England has rejected billions of pounds in aid to car firms, dealing a blow to the government’s promise to support the stricken industry. The refusal leaves struggling car manufacturers, which have slashed production, laid off thousands of workers and imposed wage cuts because of a collapse in demand, still waiting to receive any significant government response. (StarBiz)
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Spain mounted its first major bank rescue in 16 years as the state took over Caja Castilla-La Mancha after efforts to choreograph its purchase by a rival lender failed. The Bank of Spain said yesterday it appointed administrators to run the savings bank after removing its management. As part of the rescue, the government pledged to guarantee as much as 9bn euros (US$12bn) of the lender’s liabilities. Loan defaults in Spain have tripled since the global financial crisis began in 2007, ending the country’s real estate boom and boosting unemployment to a European-Union high of 14%. The economy is in the grip of its worst recession in half a century, with the government forecasting a contraction of 1.6% this year. (Bloomberg)
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INVESTMENT RESEARCH
Global
Japan' Parliament enacted a record 88.55trn yen ($897.16bn) budget for the next fiscal year, paving the way for the government to carry out its third stimulus package and accelerate work on its next steps to revive growth. The approval capped months of efforts by Prime Minister Taro Aso' Cabinet to put in action three stimulus plans crafted since last summer to fight the nation' recession. The national budget for the fiscal year starting April was needed to fund much of the last package, valued at 37trn yen. Introduced in December, this package includes steps to spur job growth, tax breaks to rejuvenate housing demand and help small companies as well as attempts to boost bank lending. (WSJ)
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Japan' core consumer price index was flat in February from the year-earlier month, but analysts say weakening private demand means it is a matter of time before deflation revisits the world' second largest economy. That was the second straight month of a flat reading in the core CPI, which excludes volatile fresh food prices, according to government data released Friday. Core CPI was flat in January after rising 0.2% in December. Still, many analysts say prices will very likely start falling from March because both overseas and domestic demand for Japanese goods is quickly decreasing due to the global economic downturn. (WSJ)
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Despite some recent signs of improvement in China' economy, profits at many Chinese companies continued to deteriorate in the first two months of the year, new data show. Profits of China' industrial companies in the January-February period fell 37% y-o-y to 219.1bn yuan (US$32.1bn), the National Bureau of Statistics said Friday. The drop contrasts with a y- o-y increase of 16.5% in the first two months of 2008 and was steeper than a 27% profit decline in the three months to November. While the performance in the coal and oil sector improved, profit in other industries including steel, power, chemicals, construction materials, equipment manufacturing, chemical fibre and non-ferrous metal all fell. The trend of declining profits follows a years-long string of 20% to 40% profit growth. At a time when Beijing is pouring four trillion yuan into a massive stimulus plan, falling profits mean companies have less money to buy new equipment or expand their businesses, increasing the burden on government stimulus to drive China' growth. (WSJ)
s
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The global economic crisis will hit jobs hard, with unemployment set to reach double digits in many developing and advanced countries, the Organisation for Economic Cooperation and Development (OECD) said yesterday. “By the end of 2010 the unemployment rate could be approaching double digit figures in all G8 countries with the sole exception of Japan, as well as in the OECD area as a whole,” the OECD forecast in a background paper to G8 labour and employment ministers gathering in Rome. In new projections to be issued on Tuesday the OECD will forecast growth in the 30-nation bloc will contract by 4.2% this year, the Paris-based body’s general secretary, Angel Gurria, told reporters on Friday. (BT)
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Saturday, March 28, 2009

Acting on Impulse

Have you ever ditched your trading plan? If not, you should read this anyway because you're most likely lying. If you have, why do you think you're so "unfaithful"?

Do you blame it on your personality? Temporary insanity? Or an excuse that its' just part of trading?

You might actually be right. Thare are many factors that could contribute to your lack of discipline.

Depending on your personality, background, training, and experience with the markets, you may have trouble controlling your tendency to act on impulse


For some, impulsivity is in their blood. They have trouble concentrating. They are easily bored. They look for quick thrills for relief. For others, impulsivity is related emotional weakness. Some people have so much trouble controlling their emotions that they react impulsively out of frustration.

Temporary setbacks are inescapable when trading. When the extremely emotional trader encounters one of these setbacks, he or she becomes overly distressed, and may close a position early, or in a fit of frantic, make a major trading mistake that can only be fixed by closing the position.

No trader is perfect though. Any trader can act impulsive at times. Research has shown, for example, that when people are tired, they have difficulty concentrating. As much as your conscious mind cares about sticking to your trading plan, your unconscious mind thinks, "Who cares? I just want to get this over so I can chill out." Your psychological resources have been exhausted. When you push yourself to the limits, you'll have trouble concentrating on your trading plan and obeying it.

Other traders may be impulsive because they lack experience. You can't expect to stick with a trading plan when you don't what the hell you're doing. If you're new to forex, you'll lack confidence and feel uneasy You'll start hesitating to pull the trigger. You won't want to risk your money because you don't have that strong belief that your plan will produce a profit like seasoned traders display.

Trading plans must be clearly defined and easy to follow. When you have a n incomplete trading plan where important parts are left unclear, you'll have trouble following it. A trading plan should consist of clearly defined entrance and exit strategies. Signals that indicate how the trade is going are also important. Don't underestimate the importance of clearly mapping out a trading plan. You can't stick with a trading plan that you can't follow.

The winning trader is the disciplined trader. Disciplined traders stick with trading plans. They don't act on impulse. It's essential that you identify the reasons you find yourself trading on impulse. It could be your personality or it may just be situational, but whatever it is, you must gain awareness of these factors and resolve them. Once you control the urge to act on impulse, you'll trade more profitably.



Source : Babypips.com

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Thursday, March 26, 2009

Funny Cartoon


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Bursa Chat News Highlights (26.03.2009)

Telekom Malaysia Bhd (T MK, Hold, TP: RM2.74) has signed a deal with PT Telekomunikasi Indonesia Tbk (PT Telkom) to enhance the value of their products and services in Malaysia and Indonesia. The two companies yesterday signed a memorandum of understanding (MOU) to collaborate towards international infrastructure development, which covers expansion of international voice and data services coverage, diversification of the Dumai-Malacca Cable System and provisioning of multiprotocol label switching services. The MOU also covers the co-location of data centre in Singapore and other cities in the region, which will enable TM and PT Telkom to have wider service reach within the region and beyond, as well as joint marketing and promotion activities. (BT)

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Boustead Holdings’s (BOUS MK, Buy, TP: RM4.00) 95% owned unit, Boustead Building Materials Sdn Bhd yesterday was awarded a RM18.87m contract from Boustead Hotels and Resorts Sdn Bhd which is 65% owned by Boustead Holdings. The contract is for the construction of a 12-storey four-star 301 room hotel and two levels of basement parking in utiara Damansara. The hotel is expected to be completed by 2Q2010. (Malaysian Reserve)

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The Malaysian economy is expected to contract significantly in the first half of 2009 before the stimulus packages kick in to provide support, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said. The economy' prospect for recovery in the second half will nevertheless be dependent on the global economic outlook and success of restoration moves in crisis- affected countries. "For the first quarter of 2008, we had an exceptional growth of 7.4%, and it is very likely the first quarter of this year will see a much slower growth because we already had more than 25% drop in exports in January," she said. Taking into account the full implementation of the measures to support domestic demand, gross domestic product (GDP) performance in 2009 in real terms is projected to be between -1% and 1% from 4.6% in 2008. (BT)

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Malaysia’s headline inflation is expected to slow significantly to average between 1.5% and 2% in 2009, reflecting the sharp reversal of global commodity prices from their peaks in 2008 and slowing global economy, said Bank Negara Malaysia in its 2008 Annual Report. As a small and highly open economy, the decline in global commodity prices and recessionary influences would have a material impact on price developments in Malaysia, it said. (Financial Daily)

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The local labour market is expected to further weaken in tandem with the slowdown in economic activities, with the unemployment rate projected to increase from 3.7% in 2008 to 4.5% in 2009, said Bank Negara Malaysia. The unemployment rate in the country stood at 3.3% and 3.2% in 2006 and 2007, respectively, it said in its Annual Report 208. The report said average private sector salary increase was expected to moderate to 2.7% in 2009 from 5.9% last year. Per capita income was projected to decline to RM24,541 compared with RM25,796 last year, it said. (Financial Daily)
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Bank Negara Malaysia (BNM) has proposed the setting up of a corporate debt restructuring committee (CDRC), similar to the one established during the 1997-98 Asian financial crisis, but with an extended scope to tackle private debt securities (PDS) instead of just corporate borrowings. The enhanced CDRC proposal would be forwarded to the finance ministry soon, and expected the enhanced CDRC to be operational by mid April. (Financial Daily)

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Bank Negara Malaysia (BNM) is receptive to the idea of a new international reserve currency, to replace the US dollar as the world’s main reserve currency, as it has the potential to provide greater stability to the global financial market, according to governor Tan Sri Dr Zeti Akhtar Aziz. Zeti acknowledged that the Special Drawing Rights, an international reserve asset created by the International Monetary Fund in 1979, had the potential to provide greater stability due to its representation of a composite of currencies. (Financial Daily)

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INVESTMENT RESEARCH
Malaysia
Khairy Jamaluddin yesterday won the contest for the Umno Youth chief post in a closely fought battle while Datuk Seri Sharizat and Datuk Rosnah Rashid Shirlin secured the coveted Wanita Head and Puteri Umno chief respectively. Today, delegates will decide on the outcome for the other much anticipated close fights for the posts of deputy Umno president and supreme council members. (Malaysian Reserve)

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Perodua will introduce the car scrapping programme from March 27 instead of April 1 as earlier scheduled. Perodua MD said the company had completed all its processes ahead of plan. There are an estimated 4.8m cars of 10 years and above on the road now. Of this number, about 300,000 are Perodua Vehicles comprising the Kancil, Rusa and Kembara registered between 1994 to 1999. He also said Perodua wished to clear the misconception that it would be giving customers the RM5000 voucher plus the market value of their old car stressing that it was a scrapping exercise and not a trade-in programme. (Malaysian Reserve)
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INVESTMENT RESEARCH
Global
Stocks gained Wednesday, mustering up a late-session rally after a choppy session that helped push the S&P 500' two- week gains to 20%. Stocks spiked in the morning on better-than-expected readings on new home sales and durable goods orders, but the advance sputtered out through most of the afternoon. A late-session jump in financial stocks and tech shares helped markets finish higher. The Dow Jones industrial average gained 1.2% (+89.8 pts, close 7,749.8). The Standard & Poor' 500 index gained 0.9% (+7.6 pts, close 813.9) and the Nasdaq composite gained 0.8% (+12.4 pts, close 1,528.9). In currency trading, the dollar fell against the euro and the yen. U.S. light crude oil for May delivery fell US$1.21 to settle at US$52.77 a barrel on the New York Mercantile Exchange. (CNNmoney)

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Orders for durable goods and sales of new homes unexpectedly rose in February, reports yesterday showed, a sign of improvement in two of the biggest drags on the U.S. economy. Last month’s 3.4% increase in bookings for long- lasting goods such as machinery and computers was the biggest gain in more than a year and the first in seven months, Commerce Department figures showed. Another Commerce report indicated new-home sales jumped 4.7% from a record low pace in January. Home sales picked up as plummeting prices and cheaper mortgage rates lured some buyers. The median sales price fell 18% y-o-y, the biggest drop since records began in 1964, and the glut of properties on the market dwindled. (Bloomberg)

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Treasury Secretary Timothy Geithner sent the dollar tumbling with comments about China’s ideas for overhauling the global monetary system, only to drive it back up by affirming that it should remain the world’s reserve currency. Geithner was asked at a Council on Foreign Relations event in New York about People’s Bank of China Governor Zhou Xiaochuan’s call for new international reserve currency. He said while he had not read Zhou’s proposal, he understood it as a plan “designed to increase the use of the IMF’s special drawing rights. And we’re actually quite open to that.” The dollar slid as much as 1.3% against the euro within 10 minutes of news accounts of Geithner’s remarks. It recouped much of the loss about 15 minutes
later, when Geithner then predicted no change in the U.S. currency’s role. (Bloomberg)

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The collapse in U.S. inventories indicates the economy is laying the foundation for a return to growth this year. Stockpiles of long-lasting factory goods declined 0.9% in February after falling 1.1% in January, the biggest two-month slide since 2003, the Commerce Department reported yesterday. The decrease brought the ratio of inventories to sales down for the first time in seven months. The report bolstered forecasts that the world’s largest economy will begin to expand in 2H09 after a likely contraction in 1H09. Retail sales, residential construction and home sales last month have all been stronger than most economists projected. (Bloomberg)

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The U.K. failed to find enough buyers for 1.75bn pounds (US$2.55bn) of bonds for the first time in almost seven years as debt investors repudiated Prime Minister Gordon Brown’s plan to stem the worst economic crisis in three decades. Gilts slumped after the London-based Debt Management Office, which manages bond auctions on behalf of the Treasury, said investors bid for 1.63bn pounds of the 40-year securities. The last time the U.K. government was unable to attract enough investors was in 2002 when it tried to sell 30-year inflation-protected bonds. Brown’s government aims to sell a record 146.4bn pounds of debt this fiscal year and as much as 147.9bn pounds in 2010 as he tries to pull Europe’s second-largest economy out of its worst recession since 1980. The prime minister’s plan drew criticism on Tuesday when Bank of England Governor Mervyn King said the government should be “cautious” about spending and deficits. (Bloomberg)

*****
German business confidence fell to the lowest level in more than 26 years in March, adding to signs that the recession is deepening. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 82.1 from 82.6 in February. That’s the worst reading since November 1982. A global slump in demand has forced German companies to scale back production and cut jobs, pushing the economy into its worst recession since World War II. Commerzbank AG expects gross domestic product to decline as much as 7% this year. (Bloomberg)
*****
INVESTMENT RESEARCH
Global
Japan’s exports plunged a record 49.4% in February as deepening recessions in the U.S. and Europe sapped demand for the country’s cars and electronics. Shipments to the U.S., the country’s biggest market, tumbled an unprecedented 58.4% y- o-y, the Finance Ministry said yesterday. Automobile exports slid 70.9%. The collapse signals gross domestic product may shrink this quarter at a similar pace to the annualized 12.1% contraction posted in the previous three months, the sharpest since 1974. Prime Minister Taro Aso is compiling his third stimulus package as companies from Toyota Motor Corp. to Panasonic Corp. fire thousands of workers. (Bloomberg)
*****
The Bank of Japan won’t rule out additional reductions to the benchmark 0.1% interest rate, Deputy Governor Hirohide Yamaguchi said. His remarks contrast with Bank of Japan Governor Masaaki Shirakawa, who yesterday told lawmakers that the key rate is now at the most appropriate level. The central bank last lowered the rate in December and has since focused on easing credit for companies by purchasing corporate debt and stocks from banks. Yamaguchi said the policy board would need to assess the impact of further rate reductions on money-market trading. Shirakawa has repeatedly said lowering the overnight lending rate to zero percent should be avoided because it would make trading in short-term markets unprofitable.
(Bloomberg)
*****


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Wednesday, March 25, 2009

Bursa Chat News Highlights (25.03.2009)

Vietnam’s An Binh Bank said yesterday it would sell another 5% stake to Maybank (MAY MK, Hold, TP: RM5.45) in May, raising the latter’s ownership to the ceiling rate of 20%. The unlisted bank said it would issue new shares to Maybank and the stake sale was to boost their capital base by 28.7% to US$205m. (Reuters)

*****
Malaysia' two low-cost carriers (LCCs) have been granted rights to fly to Singapore from several domestic destinations, including Subang and Penang. Transport Minister Datuk Seri Ong Tee Keat said that the Cabinet had granted permission to turboprop operator Firefly to fly to Singapore from Subang, Penang, Kuantan and Terengganu. It also allowed AirAsia (AIRA MK, BUY, TP: RM1.90) to fly to Singapore from Penang in addition to Langkawi, Sandakan and Tawau. Ong said that apart from the Penang-Singapore route, AirAsia has also obtained the go-ahead to fly from Kuala Lumpur to four Indian cities: Chennai, Hyderabad, Kolkatta and Bangalore. (BT)

*****
Glomac Bhd (GLMC MK, Hold, TP: RM0.62) appointed Datuk Fateh Iskandar Mohamed Mansor as its chief executive officer effective yesterday, taking over the post from his father, Tan Sri Mohamed Mansor Fateh Din. Fateh, 41, is also the group managing director, while Mohamed Mansor remains as the executive chairman. (Financial Daily)

*****
Steel players are concerned that banks will further cut their lending exposure to the sector, which is being plagued by a steep drop in prices and waning demand. Industry sources warned that the sector could fall into a dangerous financial whirlpool if banks were to severely cut lending due to the higher business risks in the steel industry, which has already been battered by shrinking profit margins and low capacity Among the listed steel companies in Malaysia are Ann Joo Resources Bhd, Kinsteel Bhd, Lion Corp Bhd and Mycron Steel Bhd. (Malaysian Reserve)

*****
The government is considering mandating owners of palm oil mills to upgrade their plants to be more friendly towards the environment as there are incentives already available. Datuk Peter Chin said the present technology used by millers in Malaysia are from the 1960-70’s, and are not good enough to minimise the amount of harmful gas emitted into the atmosphere. A dialog has been proposed with the Palm Oil Millers Association which represents some 400 mill owners in the country. Currently, only 20 out of 406 palm oil mills in Malaysia are involved in the clean development mechanism projects under the Kyoto Protocol. (Malaysian Reserve)

*****
The government may not defer the mandatory implementation of the B5 blend biofuel programme by 2010, but to address several critical issues first to ensure its success. Major issues to be addressed are logistics, infrastucture cost, blending facilities and the transportation of palm biodiesel. Datuk Peter Chin said also that the ministry was in talks with the Treasure to provide more incentives to biodiesel producers in Malaysia to ensure the business in viable. (Starbiz)

*****
RAM Ratings Services expects the local banking sector’s gross NPL’s ratio to reach about 9% this year. RAM ratings has an overall stable outlook on the banking sector given its parameters like asset quality, profitability, capitalisation and liquidity are healthy. (Starbiz)

*****
Felda and its Brazilian partner will embark on an oil palm cultivation project in Tefe this year, said Brazilian ambassador Sergio Arruda. The initial cultivation will involve 30,000 ha, and will be increased up to 100,000ha, he said. Felda was offered to open a 100,000 oil palm plantation in Manaus and Tefe near the Amazon River in Brazil. The joint venture, Felda Global Ventures Brazil Sdn Bhd, was set up with a paid-up capital of RM25m, in which Felda holds 70% equity while Braspalma of Brazil holds the rest. Arruda said a new port will also be available for transporting palm oil to refineries and the Manaus industrial area down river. (BT)
*****
INVESTMENT RESEARCH
Global
Technology and bank shares led a selloff Tuesday, as investors stepped back after the previous session' big rally, Wall Street' best in four months. The Dow Jones industrial average lost 1.5% (-115 pts, close 7,660.21). The S&P 500 index lost 2% (-17 pts, close 806.25) while the Nasdaq composite lost 2.5% (-40pts, close 1,516.52). In currency trading, the dollar gained against the euro and fell against the yen. U.S. light crude oil for May delivery rose 18 cents to settle at $53.98 a barrel. (CNNMoney)

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U.S. home prices rose 1.7% in January compared with December, the Federal Housing Finance Agency reported Tuesday. It was the first monthly increase in a year. Home prices are down 6.3% in the past year and are down 9.6% from the peak in April 2006, the agency said. In December, the year-over-year decline was 8.8%. The "unexpected rise" in January was partially due to stronger sales in some markets, FHFA said. The FHFA index attempts to control for such changes in sales patterns, but the adjustment is not perfect, the agency said. The agency warned that its estimate was uncertain and subject to large revisions. December' index, originally reported as a 0.2% increase, was revised down to a 0.1% decline.

*****
U.K. consumer price inflation accelerated on an annual basis in February, the Office for National Statistics said Tuesday, surprising economists who had expected a sharp decline. The unexpected rise required Bank of England Governor Mervyn King to write a letter to the treasury explaining why inflation was more than one percentage point above the 2.0% target. The consumer price index rose 0.9% on a month-to-month basis and 3.2% on a year-to-year basis. In January, the index fell 0.7% from a month earlier and increased 3% from a year earlier. (WSJ)
*****
Europe’s manufacturing and service industries contracted for a 10th month in March and job cuts accelerated, as companies slashed production and costs in response to the deepening global recession. A composite index of both industries was at 37.6 compared with a record low of 36.2 in February. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates contraction. The measures of employment and output prices both fell to record lows. (Bloomberg)
*****
South Korea unveiled a 28.9trn won ($20.83bn) supplementary budget, its largest ever, in an effort to cushion the economy' fall into its first recession in more than 10 years. Economists said the spending will provide much-needed support for the economy but won' likely head off a deep slump this year, driven by falling demand for Korean exports. Debt valued at 16.9 trillion won to pay for the package could also hurt the government' fiscal health in the longer term, they said. (WSJ)
*****
Global rubber demand could fall more sharply than expected this year, dropping as much as 8% if the recession that has slashed demand for cars worsens, industry officials said yesterday. Physical rubber prices have more than halved from July' peak above US$3 (RM11) a kg. "Our best scenario is still 6.4% down (in 2009) but it may even fall to 8 per cent if really the recession is worse than the IMF predicted in January," said Hidde Smit, secretary-general of the International Rubber Study Group (IRSG). (BT)

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World airlines are set to lose US$4.7bn (RM17.01bn) this year as a result of the global recession that shrunk passenger and cargo demand, said the International Air Transport Association (IATA). IATA also raised its estimate of international airline losses in 2008 to US$8.5bn, from its previous US$8bn estimate. It expects better prospects toward the end of 2009 or the beginning of 2010. (Financial Daily)
*****

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Monday, March 23, 2009

If you want to be rich, first stop being so frightened

Felix Dennis, publishing tycoon, has written a guide to becoming a multi-millionaire. All you need is thick skin, cunning - and a work ethic

It also helps that I am writing while sipping a very fine wine (a Chateau d’Yquem 1986, if you really want to know), nibbling on fresh conch tidbits, ensconced by a window with one of the most beautiful views on earth.

Across the valley, far, far below me, palm trees fringe the fishing boats and yachts nodding in the harbour. Beyond the bay to the west, a turquoise sea ripples out to a purple and pink horizon, heralding another glorious sunset.

I am in Mustique, a tiny island in the Windward Islands of the Caribbean. More specifically in my “writer’s cottage”, a study-cum-library some distance from the main house, built solely for one purpose — to permit me to write whatever I please in peace and quiet.

All of this, as if you needed me to remind you, costs money. It’s what you get, if you want, when you’re rich.

You’ll be suggesting next that it will improve my sex life.

People who grow rich almost always improve their sex life. More people want to have sex with them. That’s just the way human beings work. Money is power. Power is an aphrodisiac. Money did not make me happy. But it definitely improved my sex life.

Just how quickly can I become rich?

I have known it done inside five years, but there are very few “short cuts”. Knowledge learnt the hard way combined with the avoidance of error, whenever and wherever possible, is the soundest basis for success in any endeavour.

The bottom line is that if I did it, you can do it. I got rich without the benefit of a college education or a penny of capital but making many errors along the way. I went from being a pauper — a hippie dropout on the dole, living in a crummy room without the proverbial pot to piss in, without even the money to pay the rent, without a clue as to what to do next — to being rich. And I am certainly no business genius, as my rivals will happily and swiftly confirm.

Yet the odd thing is, I’ve ended up far richer than most of my rivals.

How rich are you, anyway?

I don’t know. Nor does any rich person know. I haven’t cashed in all my assets and I’m not certain what they will fetch. Let’s say $400m-$900m (£215m- £483m) of net worth before tax.

Five homes. Three estates. Fancy cars. Private jets. (The jets are always rented. If it flies, floats or fornicates, always rent it — it’s cheaper in the long run.) Thousands of acres of land. Art on the walls and libraries stuffed with first editions. Bronze statues littering up the garden. Chauffeurs, housekeepers, financial advisers and other personal staff coming out of my rear end. Oh, and thousands of bottles of fine wine in the cellars. Never forget the wine.

Less the debt, of course. Around $30m (£16m) of debt. Rich people always have a certain degree of debt. Apparently it helps to reduce taxes. I’m not so hot on the bean-counting side. But I can’t fly the jets or drive the Rolls-Royces or Bentleys either. I never had the time or the inclination to learn.

Honestly speaking, what kind of people get to become rich?

An interesting topic. There is a confidence that radiates from first-born sons and daughters. Not in all the cases but in too many for it to be a coincidence. A similar confidence is to be observed, more often than not, in people who are rich, no matter whether they were born with it, inherited it or acquired it through their own efforts.

You can see it in the way they walk into a hotel or restaurant they have never visited before. In the irritating disposition of rich women to haggle in an Oxfam shop over a designer dress — unlike any working-class woman, who would be horrified at the thought of doing any such thing, even though she perhaps needs the discount while the rich woman does not

You can see it, too, in the way the children of the rich appear to assume that the world was created entirely for their sole benefit. Money brings a kind of insouciance with it. It is among wealth’s least attractive characteristics.

Whatever qualities the rich may have, they can be acquired by anyone with the tenacity to become rich. The key, I think, is confidence. Confidence and an unshakeable belief it can be done and that you are the one to do it.

Tunnel vision helps. Being a bit of a shit helps. A thick skin helps. Stamina is crucial, as is a capacity to work so hard that your best friends mock you, your lovers despair and the rest of your acquaintances watch furtively from the sidelines, half in awe and half in contempt.

Becoming rich does not guarantee happiness. In fact, it is almost certain to impose the opposite condition — if not from the stresses and strains of protecting it, then from the guilt that inevitably accompanies its arrival.

If I had my time again, I would dedicate myself to making just enough to live comfortably (say £30m or £40m) as quickly as I could, hopefully by the time I was 35. I would then cash out immediately and retire to write poetry and plant trees.

Making money was, and still is, fun, but at one time it wreaked chaos upon my private life. It consumed my waking hours. It led me into a lifestyle of narcotics, high-class whores, drink and consolatory debauchery. As a philosopher might have put it, all the usual dreary afflictions of the seeker after wealth. ()

These afflictions, in turn, helped to undermine my health. But like an old, punch-drunk boxer, I couldn’t quit. It’s no excuse, but making money is a drug. Not the money itself. The making of the money. This sounds like so much hooplah, but it’s true.

Nobody believed that exercise could prove addictive until science stepped in and discovered endorphins. And making money, I assure you, is a hell of a lot more of a rush than jogging.

Up to just seven years ago I was still working 12 to 16 hours a day making money. With hundreds of millions of dollars in assets I just could not let go. It was pathetic. Because whoever dies with the most toys doesn’t win. Real winners are people who know their limits and respect them.

Eventually I found a way out. I handed over day-to-day control of my businesses to younger and mostly smarter boys and girls. I cleaned up my personal life.

I began doing what I wanted to do — not what I felt I had to do. After all, what did I have to prove? Except, perhaps, to myself.

IT IS possible that you will avoid such mistakes when you get rich. I hope so. One thing is for sure: “the usual afflictions” are no reason not to make the attempt. There is no reason on earth why financial success should lead to personal catastrophe

If you wish to be rich, however, you must grow a carapace. A mental armour. Not so thick as to blind you to well-constructed criticism and advice, especially from those you trust. Nor so thick as to cut you off from friends and family. But thick enough to shrug off the inevitable sniggering and malicious mockery that will follow your inevitable failures. Not to mention the poorly hidden envy that will accompany your eventual success.

Consider carefully this shortlist:

If you cannot face up to your fear of failure, you will never be rich.

The truth is that getting rich means sacrifice. And it isn’t always you that’s doing the sacrificing. This is not a calling for the faint-hearted. There is no shame in turning away. After all, if everyone was prepared to make the necessary sacrifices, who would be left to work for my own companies? Quite apart from sacrifice, there is a last brutal truth to be confronted. After a lifetime of making money and observing better men and women than me fall by the wayside, I am convinced that fear of failing in the eyes of the world is the single biggest impediment to amassing wealth. Trust me on this. ()

If you shy away for any reason whatever, then the way is blocked. You will never get started. You will never get rich.

Fear of failure is almost certainly the reason that you have not already begun to make yourself rich. It haunts all of us.

In essence, it comprises two components. The first is our natural desire to avoid letting ourselves or others down. The second is the exposure of that failure to the outside world.

This nastier, stickier second component, the “broadcasting” of our misjudgments or errors, especially to our peers, is often the nub of the matter.

The same factors apply to me, sitting around with colleagues at Dennis Publishing trying to figure out if we should invest millions of pounds to launch a new car magazine, or to a young woman considering whether to take over her father’s used-car business or to invest another two years of her life into obtaining a PhD in bio-engineering.

Neither decision will involve utter financial ruin. But fear of a result that cannot be easily hidden weighs heavily in the balance.

The board of directors that runs Dennis Publishing will talk earnestly and sensibly about the effect on morale for the rest of the company (usually forgetting to mention its own morale) in the event our proposed new magazine bombs.

In reality, Dennis Publishing staff working, say, on The Week or Maxim or Computer Shopper, won’t give two hoots if the company’s new car magazine is a sensational flop. But by discussing the matter in such terms, in code if you like, the board gives itself the opportunity to weigh its own fears while appearing to weigh the fears of others. It is a form of well-disguised cowardice.

On a less corporate level, the young woman believes she might be able to expand her father’s used-car business more aggressively than he has done in the past. On the other hand, a PhD would add status to her life and offers the prospect of a fulfilling career in science.
She must decide. Her father is unwell and cannot wait for her decision. What if she takes over the company and it goes belly up? What if she shoots for a master’s degree and does not achieve it? A failure to obtain her master’s degree could be disguised fairly easily. She could always claim she has become bored with bio-engineering. The decision to take over her dad’s company, however, will be far more closely monitored — by relatives and neighbours, by the people who work there, by rival car dealerships, by the bank manager, and not least by her father. Should she fail, she will run the risk of becoming a laughing stock or an object of pity.

So what is her best option? She is unlikely to get rich as a bio-engineer. But she might well get rich expanding the dealership, especially because she is aware that her father has never invested to the extent that he might have done in marketing and promotion, especially on the internet.

The car dealership is already capitalised, and, although she will have to pay off her father eventually, he is hardly likely to foreclose on her. There is an opportunity, but is she prepared to exploit it? So what should our young college girl do? Normally, I would hesitate to offer any advice. But I happen to know her. I was half in love with her once. She happens to be real and her name is Julie. All this happened a long time ago.

In the event, she took her degree and her father sold the business to an outsider. Julie is a highly competent bio-engineer and has enjoyed her career enormously. But on more than one occasion she has told me she regrets not taking her father up on his offer.

What swung the balance was her fear of failure in such a “public” endeavour. She was frightened that others (especially the male-dominated community of car sales firms) would laugh at her.

It irks her to know that she will never be rich. It always irks intelligent people like Julie. And I can give you other examples. One of them is my mother.

She will be furious (if she ever reads this) that I have mentioned her in such a context. But I know my mother well. I know beyond a shadow of a doubt that everything I have achieved I owe not just to care and love but to her genes.

She could have built herself a fortune had she wished. Her personality combines the resilience, the drive and the restless energy of so many people who become rich. But 60 years ago it was almost unheard of for a woman to act out such ambitions. Her parents would have been scandalised. Neighbours would have viewed such behaviour in the most negative light imaginable. And had she succeeded, horror of horrors, she would have earned their undying enmity. It just was not “done” for a woman to earn a fortune for herself — except, somewhat dubiously, as a movie star perhaps. Or a writer of crime novels.

Single or newly married women from respectable families in the 1940s and 1950s were actively discouraged from involvement in business except for a little light typing or serving in shops and department stores. Especially if they had children. Especially if they lived in the south of England.

Never mind that my mother had more brains in her little finger than half the twerps she worked for as an accountant. Women were not even allowed to sign a hire-purchase form back then. They had to get their husband or their brother or their father to do it.

So she didn’t become rich. She had a decent career. She earned enough to support my brother and me and to provide us with more than just the necessities of life. And she married again and became a pillar of the community. But I know that she could have done it, had she been prepared for the unpleasantness, the sheer nastiness that would have been unleashed upon her if she had chosen to say: “To hell with them. Let’s go!” It was not so much a fear of failure on my mother’s part, I believe, as a fear of upsetting the whole apple cart of the community in which she lived. And now she is an elderly, if formidable lady who quietly walks her dog along English country lanes.

DENNIS'S WEALTH GUIDE

Total assets

£1m-£2m The comfortable poor

£2m-£5m The comfortably off

£5m-£15m The comfortably wealthy

£15m-£40m The lesser rich

£40m-£75m The comfortably rich

£75m-£100m The rich

£100m-£200m The seriously rich

£200m-£400m The truly rich

£400m-£999m The filthy rich

More than £999m The super rich

© Felix Dennis 2006



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Bursa Chat News Highlights (23.03.2009)

Business News
Ministry of Finance (MoF) and Shimizu to talk on water project. The consortium led by Shimizu Corp may emerge as the frontrunner to head the tunnelling portion of the Pahang-Selangor Inter State Water Transfer project, sources say. Shimizu’s partners in the project are IJM Corp Bhd (IJM MK, Buy, TP: RM5.10), UEM Group and Nishimatsu Construction Co. The MoF is understood to have approached the Shimuzu consortium after evaluating three bids. The total value of the contract is estimated at RM7bn. However, Shimizu’s cost is estimated to be over its bid of RM1.3bn, according to industry sources. (The Edge)

*****
Sime Darby Bhd (SIME MK, Buy, TP: RM6.40) may redevelop and expand Liberia’s Guthrie rubber plantation, Liberia’s Agriculture Minister Chris Toe said. “We have concluded the talks and we expect the signing of a formal agreement with the company in the next days,” Toe told reporters in the capital, Monrovia last Friday. (Malaysian Reserve)

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Sime Darby Bhd (SIME MK, Buy, TP: RM6.40) is disposing its interest in Sime Darby Travel Sdn Bhd to Super Deals Travel & Tours Sdn Bhd for RM12.79m. Sime Darby Travel is principally involved in the business of travel and tour agency. (Malaysian Reserve)

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Muhibbah Engineering Bhd (MUHI MK, Buy, TP: RM1.77) would be disposing off its equity interest in International Deepwater Services Ltd to the former’s unit, Aspect Saga Sdn Bhd and IES Energy Holdings Sdn Bhd for RM13,275. Upon completion of the disposal, Muhibbah will own 50% of 500 shares in International Deepwater through Aspect Saga, thus making International Deepwater an associate of Muhibbah. (Malaysian Reserve)

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The government will award RM3.2bn worth of contracts from the second stimulus package this week. Deputy Prime Minister Datuk Seri Najib Tun Razak, who is also finance minister, said RM1.3bn of the sum would be awarded to contracts for the improvement, upgrading, and development of facilities and infrastructure of 322 schools nationwide. Some RM95.5mn worth of projects would be awarded for the rehabilitation and improvement of police stations. To date, 16, 386 projects worth RM1.67bn under the first stimulus package have been implemented. By the end of the month, all the 38,000 projects under the first stimulus package were targeted to be rolled out and expected to be completed by August. (Financial Daily)

*****
Malaysia’s inflation rate continued to slow in February to 3.7% compared to a year earlier due to a decrease in transport costs. The statistics department announced last Friday the consumer price index (CPI) for February increased to 111.9 from 107.9 a year earlier. February’s inflation rate of 3.7% is marginally lower than the rate of 3.9% registered in January. (Malaysian Reserve)

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BNM’s international reserves fell to RM314bn as at March 13, from RM315.9bn as at Feb 27. BNM stated the reserves position was sufficient to finance 7.7 months of retained imports and was 3.9 times the short term external debt. BNM’s assets stood at RM343.855bn as at March 13. (StarBiz)

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MMC Corporation Bhd (MMC) gets minority shareholders’ nod to buy Senai Airport Terminal Services Sdn Bhd (SATS). 97% of the minority shareholders of MMC have agreed on the management’s proposal to acquire the entire stake in for RM1.7bn. The first valuation of SATS done by IPC Island Property Consultants Sdn Bhd was RM2.23bn; the second valuation done on Feb 5 2009 by Knight Frank Ooi & Zaharin Sdn Bhd came to RM2bn. (StarBiz)

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According to MAA, total vehicle sales in February dipped 3%, or 1,126 units to 36,675 from January due to lower consumer confidence as a result of the current economic slowdown. Sales dipped 4.8% y-o-y. MAA says sales for March are expected to be slightly better, underpinned by slightly improved consumer confidence and a longer working month. (StarBiz)

*****
INVESTMENT RESEARCH
Global

Stocks managed gains for the second week in a row despite tumbling Friday, as investors pulled back after the recent run. The Dow Jones industrial average lost 1.6% (-122.4 pts, close 7,278.4). The Standard & Poor' 500 index lost 2.0% (-15.5 s pts, close 768.5) and the Nasdaq composite lost 1.8% (-25.2 pts, close 1,457.3). In currency trading, the dollar gained against the euro and the yen. U.S. light crude oil for April delivery lost 55 cents to settle at US$51.06 a barrel on the New York Mercantile Exchange. (CNNmoney)

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The world economy is predicted to shrink for the first time in 60 years. The International Monetary Fund says the total of goods and services produced around the world is projected to slump by 1% in 2009. The total of goods and services produced around the world is projected to slump by 1% in 2009, compared with a 3.2% growth rate the year before. Leading the slump will be the world' most developed economies, including the United States, Europe and Japan. Japan' economy is forecast to shrink by 5.8% in 2009, while Europe' is expected to decline 3.2% and the United States'2.6%. "The turnaround depends critically on more concerted policy actions to stabilize financial conditions as well as sustained strong policy support to bolster demand," the IMF said. The IMF thinks the world' emerging and developing economies will continue to grow this year, but by s no more than 2.5%, after a 6.1% growth rate in 2008. Global economic recovery won' come until 2010, according to the IMF the report. The world' economic powers will struggle to break even in the new year, while developing nations'economies will surge by up to 4.5%. (CNN Money)

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The Obama administration will this week outline regulatory changes aimed at avoiding a repeat of the financial crisis that’s crippled the banking system and pushed the U.S. into the deepest recession since 1982. The proposals will address the risks that remain in financial regulation, an administration official said, including the need for an agency to have the power to resolve a breakdown at a major financial institution. Federal Reserve Chairman Ben S. Bernanke two weeks ago called for regulators to be given the authority to seize such firms, in the way the Federal Deposit Insurance Corp. already has for deposit- taking institutions. Officials, who will unveil today details of a plan to remove distressed assets from banks’ balance sheets, favour giving the Fed greater responsibility for managing risk across the financial system. (Bloomberg)

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European Central Bank council member Axel Weber said the bank is poised to lower interest rates further to counter the worst recession since World War II in Europe. Weber said “We have room to manoeuvre. We are using the room that we have to manoeuvre.” The ECB is under increasing pressure to outline a strategy for how it will counter the recession once it runs out of room to lower interest rates. The Fed and the Bank of Japan have lowered their key rates to close to zero and the Bank of England’s is at 0.5%. (Bloomberg)

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EU leaders agreed to double a credit line for countries in financial distress, trying to shore up ex-communist economies hit by the worst slump in 60 years. The EU will increase to 50 billion euros ($68 billion) a limit on emergency lending to 11 EU countries not using the euro, eight of which are in eastern Europe. Hungary has already drawn 6.5 billion euros and Latvia 3.1 billion euros. Leaders also pledged to provide an extra 75 billion euros to the International Monetary Fund. (Bloomberg).

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China’s stimulus spending may add as much as 1.9 percentage points to economic expansion and help the government achieve its growth target this year, according to the State Council’s research group. “China has the ability to become the first in the world to step out of the crisis and keep stable growth for the mid and long term,” Zhang Yutai, director of the Development Research Center of the State Council, said yesterday. Vice Premier Li Keqiang reaffirmed China’s goal of 8% growth yesterday, saying some industries “have seen signs of recovery.” The nation’s economy is showing “early signs” of stabilizing as government-backed investment counters a slump in exports, the World Bank said March 18. (Bloomberg)

*****

The Chinese government' massive investment in the economy could end up increasing excess capacity in industries from steel to petrochemicals, some executives and economists say. Given China' global manufacturing heft, more idle factories could heighten competitive pressure world-wide, sparking trade squabbles as Chinese factories ship surplus products abroad. U.S. and European steelmakers already are looking at import curbs. China is the world' largest steelmaker and third- largest vehicle maker. The supply of these and other industrial products exceeds demand both at home and abroad. According to China' industry ministry, as of this month about 30% of the nation' aluminum production capacity is idle, as is 20% of cement and plate-glass capacity and 70% of semiconductor production. The Chinese government' four trillion yuan (about $585 billion) investment program attempts to tackle part of the problem. (WSJ)
*****

Japanese Finance Minister Kaoru Yosano said a new stimulus package would require trillions of yen to boost an economy that may repeat in this quarter the 12.1% annualized rate of contraction of three months earlier. “It’s not a situation where new fiscal spending of 2-3trn yen would be enough of a remedy,” Yosano said yesterday. “A figure of 20trn yen (US$210bn) is “not out of line,” he said. As the economy continues to contract, the government may revise its estimate of zero growth for 2009, made in December. An International Monetary Fund estimate of a 5.8% contraction may be close, Yosano said. (Bloomberg)

*****
India’s central bank has “more room” to cut interest rates further to combat economic slowdown and a global recession, according to Montek Singh Ahluwalia, deputy chairman of the nation’s Planning Commission. India’s central bank earlier this month cut interest rates for the fifth time since October after growth slowed to a five-year low. Governor Duvvuri Subbarao is driving policy rates to unprecedented lows to revive investment and spur consumption in Asia’s third-largest economy. Parliamentary elections scheduled for April and May complicate efforts to boost the economy because the government is banned from announcing new fiscal policies or stimulus steps until the voting is finished. Prime Minister Manmohan Singh’s government has backed the monetary stimulus by lowering taxes and increasing spending on infrastructure. (Bloomberg)

*****
Australia’s Prime Minister Kevin Rudd said it will be “virtually impossible” for the nation to sustain growth as the global economy contracts. “The global economic recession is getting worse before it gets better,” Rudd said yesterday. “The impact of a worsening global economic recession will make it virtually impossible for Australia to sustain a positive economic growth for the period ahead, with impacts, of course, for budget and employment.” Australia’s economy will continue to slow amid the global slump, Treasurer Wayne Swan said yesterday. Australia’s economy unexpectedly shrank 0.5% q-o-q in 4Q08 for the first time in eight years as exports and housing slumped, the Bureau of Statistics said March 4. (Bloomberg)
*****
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Friday, March 20, 2009

Public Bank-Buy TP RM9.40

Obtains approval for RM5bn capital raising

•News
The Group announced the obtaining of Bank Negara’s approval for its proposal to raise up to RM5bn nominal value Non-Cumulative Perpetual Securities, under a non-innovative Tier 1 Stapled Securities Programme. (Bursa)

•Comments
The wording of the announcement may cause a little stir to the investment community, in that the Group has obtained approval to raise such a large quantum. It must however be highlighted that the approval is for a Programme, which will give the Group flexibility to act when required
without having to seek regulatory approvals again for subsequent exercises. In actual fact, the Group can only raise about RM2.7bn in fresh non- innovative Tier-1 capital (Figure 1).
Management has indicated that the Group is looking to raise between RM1.0bn to 1.4bn in the immediate term, at an estimated cost of between 7.5% to 8.0%. With the RM1.4bn raised, core and risk-weighted capital ratios will improve to 9.6% and 14.9% (Figure 3) respectively, giving it one of the better risk-weighted capital ratios in the industry (Figure 2).
We do recognise the need for financial institutions to raise capital especially in these trying times, and Public Bank should be no exception despite the fact that it is widely-acknowledged as one with the best asset quality in the industry and would probably be least affected by rising delinquencies. Though the additional capital raised will cost an approximate RM80+m (RM1.4bn @ 8.0%, net of tax), we are leaving estimates unchanged at this juncture as we opine that the Group will fully maximize the utilisation of these proceeds for the benefit of shareholders to mitigate the “negative” effects of this issue. Future dividend payments may be impaired somewhat, though not significant enough to warrant a de-rating of the stock. Our BUY call and target price is re-affirmed.











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Bursa Chat News Highlights (20.03.2009)

DiGi (DIGI MK, Hold, TP: RM22.60) intends to maintain its dividend payout. The firm is confident of keeping its free cash flow levels, despite tougher economic conditions and investments in broadband this year. Cash flow is expected to be equal to last year’s levels of RM1.28bn or higher. Capex this year is expected to be between RM200m to RM400m less from
management’s guidance of RM1.1bn to RM1.3bn. DiGi’s dividend policy pays out at least 50% of its net profit, but in recent years the firm has been paying dividends in excess of 90%. DiGi’s CEO, Johan Dennelind, stated that the firm’s long-term ambition is to be a key player in the broadband space. DiGi plans to invest RM300m to RM400m annually over the next 3 years on its 3G broadband rollout. (Financial Daily)

*****
Malaysia Airlines (MAS MK, Sell, TP: RM2.44) has secured a charter deal worth RM18.7m with the Defence Ministry to move some 36,000 national service (NS) trainees between Peninsular Malaysia and Sabah and Sarawak within two years. Its chairman, Tan Sri Dr Munir Majid said the national carrier has formed a dedicated unit to manage the NS trainees’ movement in order to ensure that all aspects of the process are taken care of. They would include seat reservations, check-in, meals and other necessities. (Financial Daily)

*****
Sime Darby (SIME MK, Buy, TP: RM6.40) leads the race for Tata franchise. Sime Darby Bhd has emerged the frontrunner to bag the Tata Motors franchise in Malaysia, according to sources familiar with the matter. The conglomerate, via its motor division, Sime Darby Motors, had placed a bid at the eleventh hour, amidst speculation that Naza Group and DRB-HICOM had been in talks with India’s largest carmaker. Tata’s marques includes Jaguar, Land Rover, Aston Martin and Daweoo, and it is scheduled to launch its Nano, touted to be the world’s cheapest car (Rp100,000 or RM 7,158), on Monday. Sime Darby has the capacity to assemble the Tata range of cars at its plants in Shah Alam and Kulim. DRB-HICOM group’s Tata franchise expired in the middle of 2008, and the group was reported as re-evaluating holding it. (Financial Daily)

*****
Celcom (M) Bhd aims to strengthen its dominance in mobile broadband services with the introduction of the first-ever data only prepaid mobile broadband services and targets a 120% growth in subscriber base for this year. Celcom’s chief operating officer for new business, Chee Pok Jin, said the mobile operator had the widest broadband coverage, reaching 71% of the total populated areas in the country and was the only one with service coverage in every state. (Financial Daily)

*****
The government does not intend to further reduce the corporate and individual tax as tax exemptions of up to RM1.5bn had been given under the mini-budget tabled last week. Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak said this was to spur economic activities and the government needs to collect tax to sustain expenditure for salaries, pension and at the end of the year, the bonus awaited by civil servants. (Financial Daily)

*****
The Government will not hesitate to withdraw licences or forfeit bonds of WiMAX licensed companies should they fail to roll out services according to their respective business plan. Energy, Water and Communications Minister Datuk Shaziman Abu Mansor said the Malaysian communications and Multimedia Commission (MCMC) was currently monitoring iMAX licence holders to see if they had met their business plan. (StarBiz)

*****
Malaysia’s manufacturing sales in January fell by 22.7% y-o-y to RM36.7bn, according to the Statistics Department. Compared with December 2008, sales value was down by RM564.5m or 1.5%, while December sales value was RM37.3bn. The decline in January’s sales value followed a drop in sales for 90 of 116 industries covered in the survey the Statistics Department said in a statement. The 5 major industries impacted were computer and computer peripherals manufacture, manufacture of basic iron and steel products, manufacture of refined petroleum products, manufacture of semi- conductor devices and manufacture of other basic industrial chemicals, except fertilisers and nitrogen compounds. (StarBiz)

*****
INVESTMENT RESEARCH
Global
Stocks slipped Thursday as rising oil and gold prices, a weaker dollar and more dour reads on the economy gave investors a reason to step back after the recent rally. The Dow Jones industrial average lost 1.2% (-85.8 pts, close 7,400.8). The Standard & Poor' 500 index lost 1.3% (-10.3 pts, close 784.0) and the Nasdaq composite lost 0.5% (-7.7 pts, close 1,483.5). In currency trading, the dollar fell against the euro and the yen. U.S. light crude oil for April delivery settled up US$3.47 to settle at US$51.61 a barrel on the New York Mercantile Exchange. (CNNmoney)

*****
A measure of the economy’s future performance dropped and the number of Americans collecting unemployment benefits surged to a record, evidence the recession is deepening as policy makers try to unfreeze credit markets. The Conference Board’s index of leading indicators, a gauge of the economy’s direction over the next three to six months, fell 0.4% in February, less than forecast. The Labour Department said 5.47m Americans are getting jobless benefits. (Bloomberg)

*****
German Deputy Economy Minister Walther Otremba said there’s a lack of progress in identifying ways to shift toxic assets from banks’ books, making it unlikely the government will announce measures soon. A government-led panel charged with untying the knot that’s frozen bank lending has “gone right round in a circle again,” Otremba said. The panel’s most promising recommendation to date, a proposal that envisaged banks and taxpayers sharing potential losses on the assets, is making no headway, he said. The government set up a 500bn-euro (US$683bn) bank-rescue fund comprising loans and guarantees in October. As much as 300bn euros in toxic assets still lurk on banks’ balance sheets, according to the regulator BaFin. (Bloomberg)

*****
The Bank of Japan said the world’s second-largest economy is worsening “significantly,” maintaining its evaluation for a second month. The central bank forecasts the sharpest economic contraction in more than 60 years as an unprecedented decline in exports forces companies to cut production and fire workers. “Exports are expected to continue to decrease due to the deterioration in overseas economic conditions and the appreciation of the yen,” the central bank said. Spending by businesses and consumers is likely to weaken as profits worsen, funding remains difficult and the job market “becomes increasingly severe,” the bank said. Declines in industrial output will “moderate gradually” as companies replace stockpiles they managed to offload when they left factories idle, the bank said. (Bloomberg)
*****
Russia won’t resort to printing money to cover budget deficits that Prime Minister Vladimir Putin said are likely to continue for the “next few years.” The government should tackle the deficit “by using the reserves that have been accumulated in recent years, or if necessary by borrowing under market conditions,” Putin told the Cabinet yesterday, adding that Russia doesn’t yet need to borrow and won’t seek loans abroad. “Resorting to a printing press would be unwise and extremely dangerous.” he said. Russia’s revised 2009 budget contains a deficit of 2.98trn rubles, or 7.4% of planned GDP of 40.4trn rubles. Kudrin said on March 14 that the deficit may exceed 8% of GDP. The deficit will be reduced to 3% of GDP in 2011, according to a draft of the government’s anti-crisis plan. The government approved the plan and the revised budget with Russia’s first deficit in a decade as it attempts to stabilize the economy with a 1.6trn ruble bailout modelled on plans developed by the U.S. and U.K. (Bloomberg)

*****
India’s inflation slowed to a two-decade low, providing room for the central bank to cut interest rates to protect the economy from the global recession. Wholesale prices rose 0.44% y-o-y in the week to March 7 after gaining 2.43% the previous week, the commerce ministry said yesterday. That’s the lowest inflation rate on record, according to data available since 1990 on Bloomberg. The International Monetary Fund said this week India should rely more on monetary policy to support the economy as high public debt makes fiscal efforts difficult. Governor Duvvuri Subbarao on March 4 cut the Reserve Bank of India’s key repurchase rate to an all-time low of 5%, having reduced the measure by 400 basis points since October. Still, India has more room to lower rates than other economies, with the Bank of England’s benchmark at 0.5% and the U.S. Fed’s target interest- rate range at 0% to 0.25%. (Bloomberg)
*****
Asia-Pacific airlines are at ‘tipping point’. The Centre for Asia Pacific Aviation (CAPA) predicted that airlines in the Asia Pacific region are only weeks away from grounding as much as 10% of their aircraft as they grapple with weak revenues, falling load factors and excess capacity. This prediction came a day after Singapore Airlines recorded one of its worst monthly falls in passenger loads, which dropped more than 20% or by nearly 300,000 passengers in February y-o-y. Cathay Pacific, which reported the biggest annual loss in its 63 year history, had cut capacity, grounded flights, delayed the construction of a cargo terminal and offered staff unpaid leave. According to Peter Harbison, executive chairman of CAPA, airlines in Asia were particularly vulnerable because of their heavier reliance on the premium market. Within Asia, the International Air Transport Association (IATA) found that premium travel was down 23.4%, and a decline of 24.7% across the Pacific. Premium travel between Europe and Asia was down 21.2%. (Financial Daily)
*****
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Wednesday, March 18, 2009

Bursa Chat News Highlights (18.03.2009)

IOI Corporation Bhd (IOI MK, Hold, TP: RM3.90) has extended the closing date for its offer to buy the remaining shares in IOI Properties Bhd to 5pm on March 31. All other terms and conditions of the offer remain unchanged. IOI Corp, which already holds 89.68% of IOI Prop as at 6pm yesterday, needs only the acceptance of 2.63mor a 0.32% stake in the property developer to delist the company. (BT)


*****
AMMB and MAA get green light from Bank Negara Malaysia (BNM). AmLife Insurance Bhd, the insurance arm of AMMB Holdings Bhd (AMM MK, Buy, TP: RM3.40) and MAA Holdings Bhd (MAA) have received approvals from BNM to commence negotiations for the proposed acquisition by the former on of an equity stake in MAA Takaful Bhd. (BT)


*****
Dubai Ventures Group sells 10.57% stake in property development company Guocoland. The shares sold by Dubai Ventures would be worth RM51.08m based on the price of RM0.69. The children of the controlling shareholder, Tan Sri Quek Leng Chan, acquired 25.03m shares of the company on the same day worth RM17.27m. (BT)


*****
Proton Holdings Bhd's maiden multi-purpose vehicle (MPV), the Exora, is scheduled to be launched on April 15, some buyers who had test-driven the MPV disclosed. They said the on-the-road price of the 1.6-litre Exora, excluding insurance, will be not more than RM77,000. "Two versions are available, with the entry-level unit selling at about RM72,000," one of them said. (BT)


*****
Eastern & Oriental Bhd (EOB) has disposed of its interest in a joint-venture vehicle mandated to develop several parcels od land in Kuala Lumpur to a wholly owned subsidiary of Selangor Properties Bhd (SPB) for RM261,550 cash. In an announcement yesterday, the company said it disposed of its 50% stake and preference shares in Puncak Madu Sdn Bhd to Damansara Development Sdn Bhd, a subsidiary of SPB. EOB is expected to incur a loss of approximately RM20m in the transaction but will recover shareholders advances of RM56.1m from the deal. (Financial Daily)


*****
Malaysia Airports Holdings Bhd (MAHB) hopes to recoup LCCT investment in two years. MAHB hopes to recover its costs through rising passenger traffic, demand for retail goods; food and beverages. The company had spent RM108m to set up a 35,920 sq m LCCT in Sepang, and allocated another RM124m for expansions in the international and departure halls, including a public concourse, government offices, a curbside and a parking area. The expansion is scheduled to be completed in April 2009, enabling the handling of 15m passengers per year from the current 10m. In 2008, the airport operator handled around 10.138m passengers, of which 5.088m passengers were from international flights. (BT)


*****
Malaysia's consumption of natural gas declined about 5% last month from a year earlier because of falling demand from power plants, a Petroliam Nasional Bhd (Petronas) (6033) official said. The country burned 2bn cu ft a day last year, and the power industry accounts for two-thirds of the usage, Ezhar Yazid Jaafar, Petronas senior manager of strategic business planning for gas business, said at the Gas Asia conference in Kuala Lumpur yesterday. "The power sector is not
taking as much because of the economic slowdown," Ezhar said. (BT)


*****
Alam Maritim Resources Bhd has signed a heads of agreement (HOA) with OCI Energy Sdn Bhd and Ombak Marine Sdn Bhd to jointly establish and participate in a working arrangement to execute and complete a shore approach project awarded by a local installation contractor. The HOA will bind the parties on the preliminary matters and to record their mutual basic understanding and intention pending finalisation of terms and conditions of joint operation agreement and/or other relevant documents. (BT)


*****

In a move to check unemployment in the country as a result of the weakening economy, the government is speeding up its recruitment process. Targeting fresh graduates and those who have been retrenched, the government hopes to fill up 46,000 existing vacancies quickly. “In the past, the government processes for hiring has been slow. But in view of the rising number of retrenchments, we have decided to quicken this process,” Deputy Minster in the Prime Minister’s Department Senator T Murugiah told reporters yesterday. (Financial Daily)


*****
Some 26,000 jobs have been lost in the country since the global financial crisis blew up last September and nearly twice as many jobs could be shed this year as struggling manufacturers cut output, a senior government official said. “It (unemployment) is going to be quite long and badly affected,” Human Resources Ministry deputy director of labour Sh Yahya Sh Mohamed said in an interview. Some 40,000 to 50,000 more jobs are expected to be lost this year, Yahya also said. (Financial Daily)


*****
INVESTMENT RESEARCH
Global


Stocks surged Tuesday, with the major stock gauges ending higher for the fifth out of six sessions, as investors continued to dig out from 12-year lows. A better-than-expected housing market report released yesterday gave investors a reason to cheer. The Dow Jones industrial average gained 2.5% (+178.7 pts, close 7,395.7). The Standard & Poor' 500 index gained 3.2%s
(+24.2 pts, close 778.1) and the Nasdaq composite gained 4.14% (+58.1 pts, close 1,462.1). In currency trading, the dollar fell against the euro and gained against the yen. U.S. light crude oil for April delivery rose US$1.81 to settle at US$49.16 a barrel on the New York Mercantile Exchange. (CNNmoney)


*****
U.S. housing starts in February unexpectedly snapped the longest streak of declines in 18 years, raising optimism the market may be finally finding a floor. Work began on 583,000 homes at an annual rate, a 22% increase from January that was propelled by a surge in condominiums, apartments and townhouses, Commerce Department figures in Washington showed yesterday. A separate report showed gains in producer prices slowed, underscoring a lack of inflationary pressures with the economy in a recession. U.S. producer prices rose 0.1% in February as the cost of energy products, cigarettes, light trucks and household appliances increased. (Bloomberg)

*****
Chairman Ben S. Bernanke and Federal Reserve policy makers may have to ramp up their purchases of mortgage securities and other assets after the economy and job market deteriorated further since they last met. The Federal Open Market Committee needs to redouble its efforts after the central bank’s balance sheet shrank 17% from a US$2.3trn December peak, Fed watchers said. The retreat came even as Bernanke acknowledged the chance that the unemployment rate will exceed 10% for the first time in a quarter century. This week’s FOMC meeting could mark a shift toward more aggressive monetary expansion to fight deflation after demand waned for many of the Fed’s existing programs. One top consideration is an increase in the pace and size of a US$600bn program to buy bonds issued and backed by U.S. housing agencies such as Fannie Mae, while other measures could include everything from purchases of Treasuries to corporate bonds. (Bloomberg)

*****
The Federal Reserve will delay by two years limits on capital held at bank-holding companies to help lenders maintain adequate funding as they weather the worst financial crisis since the Great Depression. The Fed action postpones implementation of rules initially set to take effect March 31. The requirements would have limited the amount of cumulative perpetual preferred stock, trust preferred securities and minority interests in the equity accounts included in banks’ Tier 1
capital. The Fed rule, adopted in 2005, would create “a substantial burden” on lenders if implemented this month, the central bank said. The delay allows banks to hold higher levels of Tier 1 capital, a measure of financial strength and ability to absorb losses. (Bloomberg)
*****
European Central Bank President Jean-Claude Trichet said policy makers are in an “ongoing process” of considering whether to adopt more unconventional monetary policies. The ECB is under pressure to outline a strategy for how it would help the euro-region economy once it runs out of room to cut interest rates. Policy makers reduced the benchmark to a record low of 1.5% on March 5. (Bloomberg)
*****
The Bank of Japan may step up purchases of government bonds as Prime Minister Taro Aso prepares a third stimulus package to ease the nation’s recession. The central bank will increase its monthly government debt purchases to 1.6trn yen (US$13bn) from 1.4trn yen, economists said. The bank yesterday said it may provide as much as 1trn yen of subordinated loans to banks to replenish capital depleted by falling stock prices. Governor Masaaki Shirakawa last week signalled he would endorse plans for more government spending, saying Japan needed “appropriate fiscal measures.” More purchases of government bonds would help avert a jump in bond yields, which have risen on concern that the government will have to sell more debt to pay for the stimulus. The yield on Japan’s benchmark 10-year bond rose to 1.295% at yesterday’s close from 1.165%. (Bloomberg)

*****

German investor confidence unexpectedly rose to the highest level in almost two years in March after the European Central Bank reduced borrowing costs to a record low. The ZEW Center for European Economic Research said its index of investor and analyst expectations increased to minus 3.5 from minus 5.8 in February. That’s the highest reading since July 2007. Economists expected a drop to minus 8, according to the median of 39 forecasts in a Bloomberg News survey. The ECB on March 5 lowered its key rate by 50 basis points to 1.5% to stem the worst economic slump in 60 years. In Germany, Chancellor Angela Merkel’s coalition has agreed to spend about 80bn euros (US$104bn) to stimulate economic growth. The euro rose almost half a cent to US$1.3021 on ZEW’s report. ZEW’s gauge of current conditions fell to minus 89.4 from minus 86.2 in February. That’s the lowest since September 2003. (Bloomberg)
*****




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