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Monday, March 23, 2009

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)

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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)

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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)

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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)

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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)
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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)

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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)

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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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