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Thursday, March 12, 2009

Bursa Chat - News Highlights (12.03.2009)

Malaysia

AirAsia X is looking to continental Europe for its second European destination after London, its chief executive officer Datuk Seri Tony Fernandes told CNN in an interview. Fernandes, who is in London to receive the inaugural AirAsia X flight from KL to Stansted Airport, however, did not identify the city during the interview by CNN journalist. AirAsia X, an affiliate of AirAsia Bhd (AIRA MK, Buy, TP: RM1.90), finally took off for London from KL yesterday, with 286 passengers on board, after the delay of almost two years. (Financial Daily)

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Malaysian Airline System Bhd (MAS MK, Sell, TP: RM2.44) expects to save at least RM30m annually from the 50% discount on landing charges under the mini-budget. The rebate, announced by Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak on Tuesday, would come into effect on April 1. (Financial Daily)

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Malaysian Airline System Bhd (MAS MK, Sell, TP: RM2.44) expects to make a net profit of RM52m this year from third party engineering and maintenance (E&M) work, despite an ailing airline industry. Revenue is due to grow by a fifth to RM520m. E&M senior general manager Mohd Roslan Ismail said demand has slowed down but he believes the division can weather the slowdown, given its cost controls implemented since 2006. Airlines have opted to ground aircraft that need scheduled major overhaul, rather than spend on the scheduled maintenance to save costs. Around 80% of E&M unit revenue comes from air frame maintenance work. (BT)

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The government is paying RM4.03bn to take over Johor's water assets from concessionaire Ranhill Utilities Bhd subsidiary SAJ Holdings Bhd. The deal was done yesterday through government-owned Pengurusan Aset Air Bhd (PAAB), which will also assume the concessionaire's liabilities of RM3.18bn. This is PAAB's third successful transaction, after similar
deals with the state governments of Malacca and Negri Sembilan in December last year and January this year respectively. Pahang and Kelantan will be next. In addition, PAAB is expediting talks with Selangor's private concessionaires. (BT)

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LMC International’s Dr James Fry believes that the decoupling of crude oil and CPO will not last forever and the correlation will emerge again when the market corrects. Speaking to reporters, he said that the CPO sector outlook was bleak due to the global recession. Vegetable oil demand is expected to remain weak in the coming 6 months he added. The demand globally is almost flat and the only demand will come from the biofuel sector. In terms of Malaysia, he said that time was needed to create a new biodiesel system for use. He also said that CPO prices could weaken by some 10% in the coming 6 months. (Financial Daily)

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The Ipoh-Padang Besar electrified double-tracking railway project costing RM12.48bn is expected to be completed on schedule despite the global economic slowdown, said Transport Minister Datuk Seri Ong Tee Keat. He said the project undertaken by MMC-Gamuda JV was proceeding smoothly in Perak, Kedah, Penang and Perlis and was expected to be completed in 2012. (Financial Daily)

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The government is expected to issue between RM25bn and RM30bn worth of additional MGS this year to finance the recently announced stimulus package, said economists. RAM chief economist said this would raise the total MGS issuance to some RM90bn this year from RM60bn in 2008. The increase in supply may result in yield pick-up but should be absorbed given investors needs for high-quality papers, he added. (Malaysian Reserve)

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The government should consider arranging soft loans for oil palm small holders to further spur replanting activities, said Sime Darby MD. Given the nature of the industry with a long gestation period, he suggested that the soft loans have a low nterest rate and longer repayment period. He said that small holders needed special attention from the government to ride out the current economic downturn due to high planting costs of some RM12,000 per ha. This was in relation to the RM1,000 per ha subsidy which he claimed was not sufficient. (Malaysian Reserve)

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Foreign shareholdings in Malaysia have fallen to 17% now from 19% at the beginning of last year, as investors globally scrambled to bring money home amid the financial crisis. "A lot of this selling is typical when there's de-leveraging and repatriation of funds worldwide. Our market is probably more resilient than some others," Securities Commission managing irector and executive director of market supervision Datuk Ranjit Ajit Singh said. In the past 10 years, foreign shareholdings in local firms had dipped to the lowest level of 15% in 2002. (BT)

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INVESTMENT RESEARCH
Global

Stocks gained Wednesday, with tech stocks leading the way, as the Dow Jones industrial average squeaked out a higher close for the second session in a row for the first time in five weeks. After the close, mortgage lender Freddie Mac reported its sixth straight quarterly loss and asked the government for another US$30.8bn. The Dow Jones industrial average gained 0.1% (+3.9 pts, close 6,930.4). The Standard & Poor's 500 index gained 0.2% (+1.7 pts, close 721.3) and the Nasdaq composite gained 1.0% (+13.4 pts, close 1,371.6). In currency trading, the dollar fell against the euro and the yen. U.S. light crude oil for April delivery fell US$3.38 to settle at US$42.33 a barrel on the New York Mercantile Exchange. (CNNmoney)

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The Obama administration plans to use capital injections as an incentive to get U.S. banks to sell distressed securities to investors. The private investors will also get federal loans to buy the assets, in a two-pronged strategy intended to revive trading in mortgage-backed debt. Geithner’s initiative reflects a bet that it will be cheaper to provide taxpayer financing than have the government buy the assets outright, as contemplated by the Bush administration. Since the Treasury’s US$700bn bank-rescue package was approved last October, regulators have had difficulty devising a pricing mechanism for the toxic securities. That complication, coupled with the potential cost, caused then-Treasury Secretary Henry Paulson to drop his effort to deal with the assets. (Bloomberg)

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The record U.S. budget deficit widened further in February as a shrinking economy cut income-tax payments by companies and individuals. The excess of spending over revenue rose to US$192.8bn, still less than economists forecast, compared with a gap of US$175.6bn in the same month a year earlier. Spending was little changed at US$280.1bn, and revenue dropped 17% to US$87.3bn. Corporate tax revenue in the past five months has plunged 45% y-o-y. The deficit five months into the 2009 fiscal year already exceeds the record set in the entire previous year. Rising foreclosures and 14 straight months of job losses are cutting tax receipts while the government commits hundreds of billions of dollars of taxpayer funds to bolster the economy,
ow in its second year of recession. (Bloomberg)

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U.S. Federal Reserve Chairman Ben S. Bernanke said more regulation may be needed for money-market mutual funds, though he didn’t endorse rules backed by former Fed chief Paul Volcker that would treat the industry more like banks. Lawmakers and regulators should consider added restrictions on assets that money funds can own and a new “limited system of insurance” to protect investors, Bernanke said yesterday urging broad changes to U.S. financial oversight. The comments signal Bernanke favors less aggressive rules for money funds than those recommended by a group including Volcker, an adviser to President Barack Obama. Money-market mutual funds have drawn scrutiny since the collapse of the US$62.5bn Reserve Primary Fund in September. The New York-based money fund was the first in 14 years to break the buck, or drop below US$1 a share. Its collapse, caused by losses on debt issued by bankrupt Lehman Brothers Holdings Inc., rattled confidence in the money funds, long considered the safest investments after bank accounts and Treasury debt. (Bloomberg)

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Confidence in the world economy dropped in March as the slump proved deeper than forecast and the Obama administration launched new rescues of financial institutions, a survey of Bloomberg users on six continents showed. The Bloomberg Professional Global Confidence Index fell to 5.95 this month from 8.5 in February. A reading below 50 means pessimists outnumbers optimists. Sentiment about Europe and the U.S. slid, while respondents in Asia were less pessimistic about their region, the survey showed. (Bloomberg)
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German manufacturing orders collapsed in January as the global recession smothered exports. Orders plunged 38% y-o-y, the biggest drop since data for a reunified Germany started in 1991, the Economy Ministry said yesterday. From December they fell 8%, four times as much as economists expected and extending their worst decline on record. Germany’s reliance on exports for economic growth has become its Achilles heel as the worst global recession since World War II curbs foreign demand for its goods. (Bloomberg)

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The Bank of England opened a new front in its effort to ward off deflation today as it bought government bonds with newly created money. The central bank yesterday purchased 2bn pounds (US$2.8bn) of gilts, its first deployment in a three- month plan that may see it spend 75bn pounds. Investors offered more than five times as much as the bank said it would buy. The move marks a departure for British monetary policy after officials cut the interest rate to a record low of 0.5% on March 5, requiring them to seek new tools to stop the economy’s downward spiral. While Governor Mervyn King hopes that pumping money into the financial system will work, he’s relying on banks battered by the crisis to pass it onto lenders. (Bloomberg)

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New Zealand’s central bank cut its benchmark interest rate by half a percentage point to a record-low 3% to help steer the economy out of it worst recession in more than 30 years. “The combined effects of a weakening domestic housing market and the global financial and economic crisis are weighing heavily on the economy,” Reserve Bank Governor Alan Bollard said today. Interest rates are “very stimulatory” and should help the economy to start growing in 3Q09, he said. Record-low rates haven’t yet bolstered consumer spending or the housing market, while exports are being buffeted by a global recession that the World Bank says will be the worst since World War II. (Bloomberg)

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China’s investment spending surged as the nation poured money into roads, railways and power grids to counter a plunge in exports, which a separate report showed fell by a record in February. Urban fixed-asset investment climbed a more- than-estimated 26.5% y-o-y in January and February combined to 1.03trn yuan (US$150bn), the statistics bureau yesterday. Exports tumbled 25.7%, while imports fell 24.1%. (Bloomberg)
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