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Tuesday, March 10, 2009

Bursa Chat - News Highlights (10.03.2009)

LOCAL
In Tenaga Nasional Bhd's (TNB MK, Buy, TP: RM7.00) perspective, the utility firm does not find that the existing pacts are sustainable, says its chairman. TNB believes that there is a "very strong case" to justify a review of all the power pacts it has with independent power producers (IPPs) to ensure reasonable tariffs for consumers and a sustainable sector. The utility giant' chairman Tan Sri Leo Moggie said a re-examination of the power purchase agreements (PPAs) would not s violate the sanctity of the contracts as it would involve a review by both parties, and not a unilateral decision. He said negotiations should not be linked with possible extension of current concessions or future planting up as this would depend on the availability of gas in future. We understand the talks will be coordinated by the Ministry of Energy, Water and Communications and the Energy Commission. We have indicated that we hope it can be started very quickly," Leo Moggie said in an interview. He said TNB has identified possible points to be reviewed under the PPAs, but declined to go into details. (BT)

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AmBank (M) Bhd, a unit of AMMB Holdings Bhd (AMM MK, Buy, TP: RM3.40) has completed its RM500m Non-Innovative tier-1 (RMNIT1) capital issuance. AmBank said the RMNIT1 was issued in the form of stapled securities, which comprised the issuance of non-cumulative perpetual capital securities by AmBank, stapled to a subordinated notes issued by AmPremier Capital Bhd, a unit of AmBank under the RMNIT1 programme. “The issue will further enhance AMMB Holding Bhd’s core capital ratio and risk-weighed capital ratio to 10.13% and 15.05% respectively,” group managing director Cheah Tek Kuang said. (StarBiz)

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MMC Corporation Bhd is understood to have commenced negotiations with China Harbour Engineering Co Ltd to sell a 19% stake in the Pelabuhan Tanjung Pelepas (PTP), sources say. It is learnt that talks have been going on for a while now but no conclusive deal has been reach. Conglomerate MMC controls 70% of PTP while Nordic shipping giant AP Moller- Maersk has the remaining 30% of the container terminal. The federal government holds a golden share, as the port is considered to be of national interest. (The Edge)

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Malaysian exports in January fell the worst in 28 years, slumping 27.8% to RM38.3bn from a year earlier, according to figures from the International Trade and Industry Ministry. Total imports fell 32% y-o-y to RM29.47bn. M-o-m, January exports fell 16.9% from December 2008 while imports decreased 14.7%. (StarBiz)

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Malaysia will see only a small rise in palm oil output this year due to tree stress after months of good harvests and less fertilizer usage, a top industry analyst said. Malaysian production is expected to rise slightly to 17.9-18m tonnes, said Thomas Mielke, head of German oilseeds research group Oil World. The Malaysian forecast is higher than the 17.6m tonnes prediction Mielke made in November and up from the 17.7m tonnes produced in 2008. Malaysian output is up only slightly due to expectations of a decline in yields after the very high production in the second half of 2007, the first 9-10 months of 2008, Mielke said. The trees are undergoing stress and the yields are declining, which will go on well into 2009. Slowing production is also supported in a few cases by less fertilizer application. (BT)

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Supply of hydro power from Sarawak to Peninsular Malaysia is no longer limited to electricity generated from the Bakun dam alone, Tenaga Nasional Bhd Chairman Tan Sri Leo Moggie said. “There are two major hydro power developments in Sarawak. One is Bakun. The other is Murum. For planning purposes, the two power plant capacities should be seen as one, so that it' easier for us to allocate how much is utilised for which component," he said in a recents interview. The RM7.5bn Bakun dam will have a generating capacity of 2,400MW, while the RM3bn Murum dam project will generate 944MW of power. Leo Moggie said an aluminium smelting plant being built in Samalaju would be a major user of power from Bakun when it is completed around 2011. But at the same time, to justify the cost of transferring power from Sarawak to the peninsula would require a take up of at least 1,600MW. (BT)

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Malaysia needs to have a new long-term energy policy. The current framework was formulated more than 20 years ago, TNB chairman said. He said the new policy should be broad and comprehensive, including aspects of energy security, efficiency and conservation. New sources of fuel, future trends of energy use and environmental concerns will also be part of the policy. On the electricity supply sector, Leo Moggie said with the current reserve margin at more than 50%, there is no urgent need for additional plant capacity and sufficient breathing space to plan ahead on what fuels to use in the future. He said hydro power would likely become more important that coal and gas, as the latter two either face supply constraints or are too expensive. (BT)

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The Selangor Government has embarked on a plan to implement a RM20bn clean up and rehabilitation of the Klang River towards creating a catalyst for economic development in the State. Menteri Besar Tan Sri Abdul Khalid Ibrahim said the project that could stretch over a decade was to enhance real-estate development along the river and land reserves, adding that the river itself could in the future be used for an alternative public transportation system for public and goods. According to him the cleanup alone might cost RM10bn but in the long run could enhance the tourism industry through the development of riverside café’s and restaurants as well as recreational activities. The state and the five major areas were expected to create an
investment of above RM50bn and more than 150,000 jobs. (Financial Daily)

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Venus Assets Sdn Bhd, controlled by property tycoon Ong Beng Seng, has postponed the launch of its RM2bn Four Seasons Hotel and Condominium tower project in Kuala Lumpur due to the worsening economic conditions. Sources said the launch was also being delayed as it was still firming up details on development matters. While it was unclear what the details were, the company has obtained Kuala Lumpur City Hall’s approval to increase the condominium block to 65 storeys from 60. (BT)

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United Malacca Bhd has aborted its maiden oil palm plantation joint venture in Indonesia after about one year of negotiations. Chief executive officer Dr Teong Tat Thim said the group decided not to venture into Indonesia “for the time being” after encountering many difficulties with its Indonesian partners. He aid United Malacca planned instead to actively explore opportunities in acquiring more landbank and newly established plantations in Malaysia, especially in Sabah. (StarBiz)

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Kuwait Finance House will be slowing down the expansion of new business in Malaysia owning to the more difficult operating environment at present. The banking house, which is slated to jointly develop property ventures in Kuala Lumpur and Iskandar Malaysia, did not specify what the “new business” was. (The Edge)

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INVESTMENT RESEARCH

Global

Stocks tumbled Monday, with the Dow and S&P 500 ending at fresh 12-year lows, as Merck' US$41bn purchase of Schering-Plough failed to distract investors from worries about the economy. The Dow Jones industrial average lost 1.2% (- 79.9 pts, close 6,547.1). The Standard & Poor' 500 index lost 1.0% (-6.8 pts, close 676.5) and the Nasdaq composite losts 1.9% (-25.2 pts, close 1,268.6). In currency trading, the dollar gained against the euro and the yen. U.S. light crude oil for April delivery rose US$1.55 to settle at US$47.07 a barrel on the New York Mercantile Exchange. (CNNmoney)

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The Federal Reserve reiterated it doesn’t expect U.S. taxpayer losses on the rescues of American International Group Inc. and Bear Stearns Cos. even after declines in assets the central bank acquired from the companies. The Fed made the statements Feb. 25 in its second bimonthly report to Congress on the central bank’s use of emergency-lending authority. The report was posted on the Fed’s website yesterday. The Fed agreed in March 2008 to take on a US$30bn portfolio of “less liquid” assets to spur the purchase of Bear Stearns by JPMorgan Chase & Co. While the portfolio’s value has since declined to US$25.9bn, the Fed doesn’t expect a “net loss” to itself or taxpayers in part because the securities can be sold over a 10-year period to repay a US$28.8bn Fed loan. The report doesn’t reflect changes to the AIG rescue announced March 2, including US$30bn in fresh capital from the Treasury. (Bloomberg)

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A measure of U.S. job prospects fell by a record in the 12 months ended February, indicating the labour market will slump further, a private survey showed. The Conference Board’s Employment Trends Index last month decreased 3.2% to 91, the lowest level since 1994, from a revised 94.0 in January, the research group said yesterday. The index declined 22% y-o-y, the biggest 12-month drop in its 35-year history. Payroll employment is likely to fall further as the plunge in consumer spending forces companies to cut costs, raising the risk of additional declines in spending in coming months. The 4.4m jobs lost so far already exceeds the 3.5m the Obama administration said its US$78bn stimulus plan will save or create, indicating additional measures may be needed. (Bloomberg)

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The jump in the U.S. unemployment rate to the highest level in a quarter century last month suggests the recession is deeper than the Obama administration forecasts and additional measures may be needed to restart growth. The jobless rate rose to 8.1 percent in February as employers reduced payrolls by 651,000, the U.S. Labour Department said yesterday in Washington. Losses have now exceeded 600,000 for three straight months, the first time that has happened since collection of the data began in 1939. Unemployment has already reached the average rate the White House projected for the whole year. The administration needs to keep its focus on repairing the banking system and implementing the stimulus rather than get diverted by other goals such as healthcare changes, said John Ryding, chief economist at RDQ Economics LLC in New York. (Bloomberg)

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Japan posted its first current account deficit in 13 years in January after exports collapsed amid the global recession. The deficit stood at 172.8bn yen ($1.8bn), the Ministry of Finance said in Tokyo today. Companies from Toyota Motor Corp. to Sharp Corp. are cutting output and firing workers as overseas shipments slump at an unprecedented pace, pushing Japan toward its worst post-war recession. (Bloomberg)

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The global economy is likely to shrink for the first time since World War II, and trade will decline by the most in 80 years, the World Bank said. The World Bank’s assessment is more pessimistic than an International Monetary Fund report in January predicting 0.5% global growth this year. The World Bank didn’t provide a specific estimate in its report on Sunday. World growth will be 5% below its potential, the bank said. Developing nations will bear the brunt of the contraction. They will face a shortfall of between US$270bn and US$700bn to pay for imports and service debts, the bank said. East Asia will be hit the hardest by the decline in global commerce, the bank also said. Global industrial production is expected to be as much as 15% lower than in 2008. The report said that 94 out of 116 developing countries had experienced a slowdown in economic growth, with poverty increasing in 43. (Bloomberg)

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European Central Bank President Jean-Claude Trichet, who chaired a meeting of global central bankers yesterday, said investors are underestimating the potential for a return to economic growth and that the world may be approaching a turning point. “We have a number of elements suggesting that we’re approaching the moment where we’re having a pickup,” Trichet said yesterday. “But we’re still at a level where the positives are not fully priced in.” He added the decline in oil prices in conjunction with the measures taken by central banks and governments should stimulate economic growth. (Bloomberg)

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European finance ministers are resisting doing more to boost their economies even as the World Bank forecasts the biggest global recession since World War II. Euro-area finance ministers met five days before those from the Group of 20 convene near London for talks on fighting the financial crisis. That conference may witness efforts by U.S. and Chinese policy makers to encourage other nations to join them in bolstering government spending in a bid to end the global recession. The International Monetary Fund said in a report last week that only the U.S., Saudi Arabia, China, Spain and Australia are on track to meet its target of introducing fiscal stimulus equivalent to 2% of gross domestic product this year. The IMF has recommended greater coordination so that the global economy can receive a bigger punch from individual budget policies. (Bloomberg)

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European Central Bank Executive Board member Juergen Stark said cutting interest rates won’t remedy the financial crisis and pushing them too low may backfire. “The financial crisis can’t be solved with rate cuts,” Stark said in an interview to be published in Luxembourg’s Tageblatt newspaper. “Too low a rate level can even be counter-productive.” The Frankfurt- based ECB this week lowered its key rate by a half point to a record low of 1.5% and President Jean- Claude Trichet indicated it may act again to combat the worst recession since World War II. At the same time, some central bankers are signaling unease with the prospect of rates falling much further for fear they may provoke future inflation and won’t do much to reverse the current economic and financial turmoil.” (Bloomberg)

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The value of global financial assets including stocks, bonds and currencies probably fell by more than US$50trn in 2008, equivalent to a year of world gross domestic product, according to an Asian Development Bank report. Asia excluding Japan probably lost about US$9.6trn, while the Latin American region saw the value of financial assets drop by about US$2.1trn, said Claudio Loser, a former International Monetary Fund director and the author of the report that was commissioned by the ADB. The report didn’t give a breakdown of asset declines in other regions. Global stock markets lost about US$28.7trn in 2008, and another US$6.6trn has been wiped from the value of world equities in 2009. (Bloomberg)
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