Bursa Chat - News Highlights (11.03.2009)

Malaysia

TSH Resources Bhd (TSH MK, Buy, TP:RM1.80) said it produced 16,840 metric tonnes of crude palm oil and 4,339 metric tonnes of palm kernel last month, a significant drop against its January production. In January, the company produced 20,629 metric tonnes of crude palm oil and 5,279 metric tonnes of palm kernel, which is at least 20% more than last month’s production. (BT)

Thoughts: This is within expectations due to the seasonal downcycle that the industry is currently going through. We believe that despite this, TSH should turn in decent profits for the quarter given that CPO prices have improved if compared to 4QFY08. To note, there is potential for more for writedowns for the Group’s USD denominated borrowings and that would be the main short term dampener for the stock besides poor sales from Ekowood. We are nonetheless long term positive on TSH given its expansion plans in Indonesia which will bring up group output come 2011 onwards. Maintain Buy.

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Malaysia Airlines Bhd (MAS MK, Sell, TP: RM2.44) is suspending its Macau-bound flights from March 26 due to the non- viability of the route after the load factor fell by some 30% in the last six months. Its senior general manager for sales Datuk Bernard Francis told The Edge Financial Daily that intense competition from other airlines such as Cathay Pacific made the Kuala Lumpur-Macau route unprofitable for MAS. (Financial Daily)

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Boustead Holdings Bhd’s (BOUS MK, Buy, TP:RM3.80) wholly-owned unit Boustead Estate Agency Sdn Bhd is selling 43% of Boustead Bulking Sdn Bhd to Green Land Garden Trading (M) Sdn Bhd for RM860,000. “The disposal will not have any effect on the issued and paid up capital of BHB and the substantial shareholders’ shareholdings. “Also, it will not have any effect on the net assets per share, gearing or earnings of the BHB group for the financial year ending 31 December 2009,” said the company in its filing to Bursa Malaysia Bhd yesterday. (BT)

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Despite a challenging year in 2008, the insurance industry has maintained an overall high volume of business. Bank Negara Malaysia director of insurance and takaful supervision department Yap Lai Kuen said total gross direct premiums for general insurance totalled RM10.5bn last year, an increase of 3.2% from RM10.2bn in 2007. "This is due to the strong performance of the non-motor sectors, in particularly medical and health, liability and personal accident which grew at 16.7% , 10.5% and 9.2% respectively," she said. For the life insurance sector, Yap said there was a slight decrease from RM7.2bn in 2008 compared with RM7.6bn in 2007, mainly due to a drop in sales of investment-linked businesses. (BT)

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The Malacca state government has received the green light from the federal government to extend the runway at Batu Berendam Airport, which is slated for completion in six months. Chief Minister Datuk Seri Mohd Ali Mohd Rustam said that the extension at the airport, which will be renamed Malacca International Airport, will cost RM65m. The extension is to accommodate larger carriers like Boeing B737 and Airbus A320, in line with its goal of making the historical state a top tourist destination. "The runway will be extended to 2,200m from 1,800m now and the state will take a loan from the federal government for this," Mohd Ali said. This is in addition to the RM135m grant given to renovate and refurbish the airport, which is operated by Malaysia Airports Holdings Bhd. Mohd Ali said budget carrier AirAsia (AIRA MK, Buy, TP: RM1.90) has indicated that it will fly to three destinations in Sumatra, Indonesia, namely Pekan Baru, Bukit Tinggi and Medan, from Malacca, once the runway is ready. (BT)

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Bank Muamalat Malaysia Bhd has completed a capital-raising exercise amounting to RM500m of Tier-1 capital. The exercise relates to the issuance of 500m ordinary shares to its shareholders, DRB-HICOM Bhd (70%) and Khazanah Nasional Bhd (30%), effectively raising the bank’s total capital to RM1bn. (Bernama)

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INVESTMENT RESEARCH
Global

Stocks rallied Tuesday - with all three major indexes logging their biggest gains of the year - after Citigroup cooled some worries about its future and regulators said they may reinstate a key trading rule. The Dow Jones industrial average gained 5.8% (+379.4 pts, close 6,926.5). The Standard & Poor's 500 index gained 6.4% (+43.1 pts, close 719.6) and the Nasdaq composite gained 7.1% (+89.6 pts, close 1,358.3). In currency trading, the dollar fell against the euro and the yen. U.S. light crude oil for April delivery fell US$1.36 to settle at US$45.71 a barrel on the New York Mercantile Exchange. (CNNmoney)

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Treasury Secretary Timothy Geithner said the Obama administration will do “what is necessary” to help revive bank lending and fix the faltering U.S. economy. He added that Wall Street boards of directors “made things worse” by continuing to pay large bonuses to executives even as banks fell apart. The Obama administration plans to move forward soon with its
proposed public-private investment fund, intended to provide financing for investors interested in buying the toxic assets clogging banks balance sheets. The program will be constructed to give banks an incentive to start selling assets, rather than keeping them on their books in order to avoid recognizing losses, he said. Geithner predicted the initiative, along with other efforts, would help the U.S. economy “get traction” and recover from the current recession. (Bloomberg)

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Federal Reserve Chairman Ben S. Bernanke urged a sweeping overhaul of U.S. financial regulations in an effort to smooth out the boom-and-bust cycles in financial markets. “We should review regulatory policies and accounting rules to ensure that they do not induce excessive” swings in the financial system and economy, the central bank chief said yesterday. Bernanke recommended that lawmakers and supervisors rethink everything from the amounts firms set aside against potential trading losses and deposit-insurance fees to protections for money-market funds. His remarks reflect a judgment that the U.S., just like emerging-market nations in the past, failed to properly manage a flood of capital over the past decade and a half. (Bloomberg)

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The U.S. jobless rate will reach 9.4% this year and remain elevated through at least 2011, threatening the nation’s longer- term growth potential, a monthly Bloomberg News survey indicated. The peak in unemployment surpasses the 8.8% estimated last month, according to the median of 54 projections in a survey taken from March 2 to March 9. The average rate for the next two years will exceed the 25-year high of 8.1% reached in February, the survey shows. The survey shows that the Obama administration’s forecasts, submitted with its budget proposal last month, are out of kilter with those of most analysts. The White House projected the jobless rate will decline to 7.9% next year; a worse performance means President Barack Obama’s US$787bn stimulus plan may not prove sufficient. (Bloomberg)

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Sales at U.S. wholesalers fell four times faster than inventories in January, indicating businesses will pare orders further in coming months. Sales slumped 2.9% to US$326.1bn, the lowest level in more than three years, the Commerce Department said yesterday. The 0.7% decrease in the value of stockpiles followed a revised 1.5% decrease in the prior month. It was the fifth straight monthly drop, the longest such stretch in almost seven years. At the current sales pace, it would take 1.3 months for distributors to deplete the amount of goods on hand, the most since January 2002. Plummeting demand as the U.S. recession worsens and weakening orders from overseas will keep factories scaling back to draw down stockpiles, hurting economic growth. (Bloomberg)

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European Union finance ministers rejected calls from the U.S. to do more to battle the economic crisis, setting the stage for a possible conflict at the Group of 20 meeting later this week. “Recent American appeals insisting that the Europeans make an additional budgetary effort to combat the effects of the crisis were not to our liking,” said Luxembourg Finance Minister Jean-Claude Juncker yesterday. “We want to see what the effect of the recovery package is going to be.” The EU talks come ahead of a meeting of G-20 finance officials near London later this week to discuss fighting the financial crisis. (Bloomberg)

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Industrial production plunged in the U.K. and France in January, threatening to push Europe into a deeper recession. U.K. factory output fell 2.9% from December and 6.4% in the three months through January, the most in at least four decades. French industrial production sank 3.1% on the month, five times the pace predicted by economists, and 13.8% y-o-y. With the worst recession since World War II driving up unemployment, the European Central Bank and Bank of England are under mounting pressure to keep easing monetary policy. (Bloomberg)

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Brazil’s economy shrank the most on record in 4Q08, going against predictions that Latin America’s largest economy would be a bright spot in the deepening global recession. Gross domestic product fell 3.6% y-o-y as companies slashed output, the national statistics agency said yesterday. The drop exceeded forecasts from all 31 analysts surveyed by Bloomberg. The biggest quarterly contraction since the series started in 1996 may lead central bank policy makers to cut lending costs 1.5 percentage points today to bolster the economy. It is predicted the bank will trim the lending rate to 11.25%, matching a record low reached in September 2007, according to the median estimate of 49 economists surveyed by Bloomberg..(Bloomberg)

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China fell into deflation at the consumer level last month for the first time in more than six years, as ministers painted a gloomy picture of the economy's near-term prospects. The 1.6% drop in the consumer price index (CPI) in the year to February gives the central bank ample scope to cut interest rates further if need be to boost the economy. The y-o-y drop in the CPI, eported by the National Bureau of Statistics, was the first since December 2002. Economists worry that, unless China's 4trn yuan (US$585bn) stimulus plan kicks in soon, these deflationary pressures will intensify because the economy is saddled with eexcess capacity at a time of depressed demand. Consumers who expect more price declines in future may delay their purchases, weakening the economy and undermining corporate profits. By contrast, the government of Premier Wen Jiabao, who has sought to bolster confidence by talking up the economy's fundamentals, expects inflation to average around 4%. (Reuters)

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India, the world's second biggest vegetable oil importer, will slow purchases of palm and soyoil as its import inventories have doubled to 500,000 tonnes now from three months ago, a top analyst said yesterday. Dorab Mistry, head of vegetable oils trading at Indian conglomerate Godrej International, said overall vegetable oil stockpiles would rise by the end of 2008/2009 in Oct to 1.2m tonnes from 1m now. Stocks at 1.2m tonnes are sufficient for a full month of consumption, Mistry said, a significant figure as India's stockpiles have traditionally been very low. On China's moves to spend an extra US$10bn to bulk up its commodity reserves by buying excess supplies of resources and imports of the edible oils, grains and materials it does not have, Mistry said the impact on palm oil markets would be minimal. "There has not been active, or rather increased buying of palm oil, from China. They are mostly focusing on soyoil and rapeseed oil at home," Mistry said. "Neverthless, it will be a positive tone for the global vegetable oil complex." (Reuters)

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A Government of Singapore Investment Corp (GIC) official said yesterday he expects more forced selling of assets by investors in the next 12-18 months as the "de-leveraging" in financial markets continues. GIC also sees investment-grade corporate bonds as more attractive than equities currently, the fund's director of economics and strategy Yeoh Lam Keong, told the Investment Management Association of Singapore conference. (Reuters)
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