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Monday, April 13, 2009

Bursa Chat - News Highlights (13.04.2009)

Malaysia
Axiata Group Bhd (AXIATA MK, Hold, TP: RM1.77), formerly known as TM International Bhd, may start paying dividends to its shareholders in 2011 when the company is cash-flow positive, its president and group CEO, Datuk Seri Jamaludin Ibrahim said. He admits investors are now focusing on companies with steady dividend policies due to the economic downturn but added Axiata needs to improve results from all of its units first. He also said the priority now is in transforming the company from the bottom to the top over the medium-term to increase the revenue and profits of its operating units. By 2010, Jamaludin said the transformation programme will start to yield tangible results and give the group a strong cash position. (Malaysian Reserve)
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The federal government will allow the Selangor government to take the lead in the acquisition of the state’s water assets, sources say. Kumpulan Darul Ehsan Bhd (KDEB), the Selangor government’s investment arm, will consolidate the sector through its 60% owned unit, Kumpulan Perangsang Selangor Bhd (KUPS MK, Hold, TP: 1.40), as originally planned. The consolidation task will be left to the state before the federal government entity, Pengurusan Asset Air Bhd (PAAB), intervenes. This will put KPS in a better position in negotiations to operate and maintain the water assets. (The Edge)
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IOI Corporation Bhd (IOI MK, Hold, TP: RM3.90) will persist in buying out the remaining institutional shareholders, Permodalan Nasional Berhad (PNB) and Valuecap Sdn Bhd, in IOI Properties Bhd (IOIP), which was suspended last Tuesday to facilitate its delisting. IOI Corp will acquire the shares at the same offer price extended in the voluntary general offer at RM2.598. IOI Corp currently holds about 91.33% of IOIP, with Valuecap holding about 3.48%. (Financial Daily)
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IOI Corporation Bhd (IOI MK, Hold, TP: RM3.90) is optimistic of crude palm oil prices (CPO) averaging between RM2,600 and RM2,800 per tonne for the rest of the year because of robust global demand. He said that palm oil, being a very affordable vegetable oil, continues to see strong global demand. Compound with less harvest of palm fruits, stock levels have fallen for 4 consecutive months. (BT)
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Talks on a long-awaited joint venture (JV) between Malaysian Airline System Bhd (MAS MK, Sell, TP: RM2.44) and Australia’s Qantas to set up a maintenance, repair and overhaul (MRO) centre in Malaysia are off, said a Qantas official. However, MAS’ senior general manager of engineering and maintenance, Mohd Roslan Ismail said that the MRO JV, which ended last month, is currently being discussed with Qantas. However, no agreement has been reached yet. (The Edge)
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Malaysia Airlines Cargo Sdn Bhd (MASkargo), a unit of Malaysian Airline System Bhd (MAS MK, Sell, TP: RM2.44), will concentrate more on the charter market for its freighters after freeing the planes from scheduled operations. MASkargo has reduced 30% of scheduled freighter capacity and 7% of belly space in passenger planes. According to the air
argo operator’s website, it has 7 freighters, one A300-600F, two B747-400F and four B747-200F. (BT)
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Malaysian Airports Holding Bhd (MAHB) said passenger traffic at Kuala Lumpur International Airport fell 8.9% in February 2009 to 1.9m from 2.09m a year earlier. MAHB last Friday said passenger movement at its other international airport dropped 9.6% y-o-y to 1.37m from 1.52m. In total, MAHB said passenger traffic at its airports in February fell 9.2% y-o-y to 3.27m from 3.6m. Cargo movement in February declined 20.5% to 58.7m kg from 73.85m kg. (Bloomberg)
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OSK Property Holdings Bhd plans to build an office tower in the heart of Kuala Lumpur to capture rising demand for office space in the city centre area. The 40-storey building, which will cost RM150m, will sit on 0.6ha of prime land, located between Plaza OSK and Ampang Park mall at Jalan Ampang. (BT)
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INVESTMENT RESEARCH
Malaysia
Eastern Pacific Industrial Corporation Bhd (EPIC) plans to develop of about 24.2 ha of land at Pulau Kuching to boost its fabrication business, said its managing director and CEO, Ramli Shahul Hameed. Pulau Kuching is near the Kemaman Supply Base (KSB) and Kemaman Port, where EPIC’s fabrication arm, EPIC Mushtari Engineering Sdn Bhd, would be able to take on larger scale jobs after the expansion. Currently, EPIC’s fabrication yards at Telok Kalong and KSB only handle minor fabrication works. Ramli observed there is no other major company carrying out large scale fabrication works in the east coast, and sees potential for EPIC to expand the fabrication business on its own. (Financial Daily)
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Office rental rates in Kuala Lumpur are expected to drop by 10% to 15% from their peak of about RM8 per square ft this year amid the economic slowdown. Although office occupancy rates are still holding up quite well, rental rates are expected to fall from their earlier highs due partly to new office space coming onstream. (StarBiz)
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INVESTMENT RESEARCH
Global

U.S. retail sales probably rose in March, even as a drop in factory production and slower inflation signal the recession is far from over, economists said before reports this week. Purchases increased 0.3%, the second gain in the last three months, according to the median estimate in a Bloomberg survey. Industrial production dropped 0.9%, the 14th decline in the last 15 months, as figures from the Federal Reserve may show. Tax refunds and money from President Barack Obama’s stimulus plan are giving American consumers a temporary lift. Companies from General Motors Corp. to Gap Inc. are relying on incentives and promotions to move merchandise, keeping inflation in check. (Bloomberg)
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U.S. home mortgages insured over the past two years by the Federal Housing Administration (FHA) are falling into delinquency at a faster rate, adding to risks that could prompt the agency to request an infusion of taxpayer funds. Nearly 10.2% of borrowers who took out FHA-backed loans in the first quarter of 2008 had missed at least two consecutive monthly payments within the first 10 months. That was up from 2007, when 9.4% of FHA-based borrowers missed payments within the first 10 months. Florida accounted for 14 of the 50 markets with the highest FHA default rates at the end of 2008, up from two in 2007. In West Palm Beach, defaults nearly doubled to 10.7% in December, from 5.5% y-o-y. (WSJ)
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China’s central bank said it will ensure sufficient liquidity to sustain economic growth, damping speculation regulators may seek to restrain credit after new loans jumped six fold to a record in March. The People’s Bank of China “will implement moderately loose monetary policy and maintain the continuity and stability of policy,” the central bank said on its web site yesterday. It pledged “ample liquidity” to “ensure money supply and loan growth meet economic development needs.” The statement indicated that reviving growth remains China’s priority amid concern that the credit boom will lead to bad debts and asset bubbles. New loans rose to 1.89trn yuan (US$277bn) in March, the central bank said April 11. M2, the broadest measure of money supply, grew 25.5%, the most since Bloomberg began compiling data in 1998 and more than the 21.5% median estimate in a survey of 12 economists. (Bloomberg)
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China plans to create a US$10bn investment cooperation fund and offer US$15bn in credit to its Southeast Asian neighbours, extending its influence as the region attempts to weather the global financial crisis. The investment fund will promote infrastructure development linking China with the 10 members of the Association of Southeast Asian Nations, while the loans will be offered over three to five years, according to a statement on the Foreign Ministry Web site yesterday citing an interview with Foreign Minister Yang Jiechi. The measures may help speed recovery from the global financial crisis and cement China’s leadership in the region. China has already signed currency swap agreements with Indonesia, South Korea, Hong Kong and Malaysia this year to help ease foreign-exchange shortages and aid bilateral trade and investment. Other planned measures include 270m yuan (US$39.5m) in aid to Cambodia, Laos and Myanmar, and donation of 300,000 tons of rice to an emergency East Asia rice reserve to boost food security, the statement said. (Bloomberg)
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China is rolling out plans that would make the yuan more useful across Asia - and would gradually modernize its currency system while allowing Beijing to retain significant influence over the way the currency is used. In its latest move, China' government this week designated five of its biggest trading cities to take part in a planned program allowing foreign trade to be conducted fully in yuan, instead of in dollars or other major global currencies as it is now. The plan, which could start in a few months, will initially involve trade with merchants in Hong Kong and Southeast Asia, but it could be expanded to include other overseas locations. In a related effort, China' central bank has set up in recent weeks tens of billions of dollars in currency swaps with South Korea and other countries, which could make the yuan more widely available outside China. (WSJ)
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Japan’s record 15.4 trn yen (US$153 bn) stimulus package may give a short-term boost to the nation’s economy, while leaving it saddled with a debt burden that will smother future growth, economists said. The plan unveiled yesterday by Prime Minister Taro Aso, who faces elections this year, is aimed at creating jobs in an economy heading for the worst recession since 1945. Equal to 3% of gross domestic product, the measures will add to debt that the OECD already forecasts will rise to 197% of gross domestic product next year. (Bloomberg)
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INVESTMENT RESEARCH
Global
Japan will spend 370bn yen (US$3.69bn) to subsidise purchases of new, fuel-efficient vehicles to stem sliding sales amid the country’s worst postwar recession. The government would give consumers 250,000 yen to buy a new car or 125,000 yen for a minicar when they scrap vehicles that are 13 years or older. The government will pay 100,000 yen for a purchase of a new car and 50,000 yen for a minicar. In addition, weight-based taxes and a sales-related tax on fuel-efficient models were cut by 50% or 75% for 3 years from April this year. (StarBiz)
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The International Energy Agency expects global oil demand to decline by 2.4m barrels a day this year, about the same amount that Iraq produces, as the economic slump reduces consumption to the lowest since 2004. The adviser to 28 nations cut its 2009 forecast for an eighth consecutive month, slashing last month’s estimate by 1m barrels a day, or 1.2%, to 83.4m barrels a day. The IEA also said oil supply from outside the Organization of Petroleum Exporting Countries will drop this year. IEA said “the pace of contraction is close to early 1980s levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010.” Demand will shrink by 2.8% this year as worldwide gross domestic product shrinks by 1.4%, according to the IEA, which until now had assumed the global economy would expand in 2009. The decline outpaces supply from OPEC’s third-largest producer, Iraq, which last month pumped 2.27m barrels a day. The outlook “implicitly discards” the agency’s earlier view that industrial activity, and demand for fuels, would recover in 2H09. (Bloomberg)
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