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Thursday, June 11, 2009

Bursa Chat- News Highlights

Selangor government officials are meeting the state’s four water concessionaires looking to make renewed offers for their assets. State officials met representatives of water treatment companies such as Konsortium Abass Sdn Bhd and were slated to meet representatives from Syarikat Pengeluar Air Selangor Holdings Bhd (Splash) and Puncak Niaga Holdings Bhd (PNH MK, Hold, TP: RM3.00), which has a 70% stake in Syarikat Bekalan Air Selangor Sdn Bhd (Syabas). The state’s plan is to consolidate the water assets under its investment arm Kumpulan Darul Ehsan Bhd (KDEB) and KDEB’s 61% unit, publicly traded Kumpulan Perangsang Selangor Bhd (KPS) (KUPS MK, Hold, TP: RM1.40). This will be the second attempt by the state to acquire the assets after a botched up affair in February this year. (Financial Daily)

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Sunway City Bhd (SunCity) (SCITY MK, Buy, TP: RM3.60), is buying a hotel called Sunway Hotel Hanoi from its sister company Sunway Holdings Bhd (Sunway) (SGW MK, Hold, TP: RM1.09) for US$17m (RM60m) cash. SunCity said its subsidiary Mega Methods Sdn Bhd has entered into a share sale and purchase agreement with Sunway Holdings (Vietnam) Sdn Bhd (SVSB) and Sunway Property (China) Ltd to take over the 142 room, 10 storey hotel in Hanoi, Vietnam. Both SVSB and Sunway Property are subsidiaries of Sunway. According to SunCity, the net book value of Sunway Hotel Hanoi was around RM20.65m as at the financial year ended 30 June 2008. The decision to acquire Sunway Hotel Hanoi was to expand the group’s hospitality division in Vietnam and is to be funded through internally generated funds and bank borrowings. (Financial Daily)

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Malaysia has become the preferred listing destination for Sunway City Bhd’s (SCITY MK, Buy, TP: RM3.60) proposed REIT although it has not ruled out other proposals for reverse takeovers in Singapore and Australia. In terms of mandate, this represents a fresh opportunity to select possibly new parties that can give the best terms. This was confirmed by ED Datuk Jeffrey Ng who said that there could be new parties involving global and local investment banks. (Starbiz)

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Genting Bhd (GENT MK, Hold, TP: RM5.95) has paid US$100m (RM351m) for a 3.2% stake in US casino operator MGM Mirage, an official from the US company said yesterday. The stake was offered under a US$1bn (RM3.51bn) equity placement by MGM Mirage last month. "We take this as a sign of great confidence in our company," said Alan Feldman, senior vice-president of public affairs for MGM Mirage. (BT)

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Datuk Ahmad Abdul Talib has been appointed executive director of Media Prima Bhd (MPR MK, Hold, TP: RM1.25) and the News Straits Times Press effective July 1st. A journalist by profession, Ahmad has extended his services in many important editorial positions in the NSTP group, where his last position was group general manager, communications and editorial marketing. (Starbiz)

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UEM Land Bhd, the master builder of the massive Nusajaya development in Johor, is focusing on becoming a national and regional property developer and is looking at ways to divest its legacy projects in the overseas market. Its chairman Tan Sri Dr Ahmad Tajuddin Ali said the overseas subsidiaries were legacy issues and that the firm is evaluating options in order to focus on property projects closer to home. (The Malaysian Reserve)

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Kuala Lumpur, Johor Baharu and Georgetown are among the cities earning the reputation as most expensive in Asia, according to a latest cost living survey. KL is ranked 38th, JB 40th and Georgetown 42nd, said the survey on the 50 most expensive cities in Asia carried out by ECA International (ECA) for 2009. Globally, KL is ranked 210, JB 216 and Georgetown

218. ECA said that Tokyo remained the most expensive city in Asia, due largely to the appreciation of the yen against other major currencies, and joining the Japanese capital in the region’s top ten are Beijing (ranked 5th) and Shanghai (6th) as well as Hong Kong (7th) and Singapore (10th). (The Malaysian Reserve)

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Malaysia's industrial output in April shrank 11.4% year-on-year, showing a slower deceleration pace than previous months although market watchers say a lift in numbers is only expected by the end of the year. The Statistics Department said the Industrial Production Index (IPI) improved from a revised 12.7% decline in March. It attributed the fall to manufacturing (15.7%); and electricity and mining (2.9%) sectors. (BT)

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Asian economies are poised to recover early from the global downturn, due to their stable financial systems and new efforts to boost domestic demand. Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said Asian countries were working more closely together to support each other’s economies, which should contribute to a more balanced global economy and greater stability. She said that while we did not escape the economic contraction that occurs through the trade channel, our financial systems remain sound and solid, as can be seen from the continued credit growth in many Asian countries. Zeti said that adjustments were now needed in Asia’s economies. “You cannot just focus on export led growth,” she added. (Financial Daily)

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Stocks cut losses, but still ended lower Wednesday, as spiking Treasury yields and rising commodity prices added to worries that inflation could limit any recovery effort. The Dow Jones industrial average lost 0.3% (-24.0 pts, close 8,739.0). The Standard & Poor's 500 lost 0.4% (-3.3 pts, close 939.2) and the Nasdaq composite lost 0.4% (-7.1 pts, close 1,853.1). In currency trading, the dollar gained versus the euro and the yen. U.S. light crude oil for July delivery rose US$1.32 to settle at US$71.33 a barrel on the New York Mercantile Exchange. (CNNmoney)

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The U.S. budget deficit, already approaching US$1trn so far this fiscal year, widened in May from a year earlier as the recession subtracted from revenue and the government spent more to rejuvenate the economy. The excess of spending over revenue climbed to US$189.7bn, a record for the month and compared with a gap of US$165.9bn a year earlier, the Treasury said yesterday in Washington. Spending rose 5.8% to US$306.9bn and revenue fell 5.7% to US$117.2bn. For the fiscal year to date, the shortfall totalled a record US$991.9bn. For the fiscal year that ends Sept. 30, the CBO forecasts the deficit to reach a record US$1.845trn, almost four times the previous fiscal year’s US$454.8bn shortfall. Geithner has committed to cutting the budget deficit as concern about deteriorating U.S. creditworthiness deepened. (Bloomberg)

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The U.S. trade deficit widened in April for a second month as some of the world’s largest economies continued to contract, pushing exports to the lowest level in almost three years. The gap between imports and exports grew 2.2% to US$29.2bn, in line with forecasts, from a revised US$28.5bn in March that was larger than previously estimated, Commerce Department figures showed yesterday in Washington. Foreign demand for U.S. goods dropped 2.3%, exceeding a decrease in imports. Imports may be first to rebound later this year as the U.S. economy begins to expand, while exports languish until a recovery takes hold among trading partners from Japan to Germany, widening the deficit further. That danger underscores Treasury Secretary Timothy Geithner’s call for other nations to implement stimulus and financial-rescue plans. (Bloomberg)

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The Federal Reserve unveiled its most detailed picture yet of its record US$1trn expansion of credit, as Chairman Ben S. Bernanke responded to congressional pressure for greater transparency from the central bank. For the first time, the Fed announced details on the number of borrowers and the ratings of securities pledged as collateral for loans. The data came in a new monthly report released by the central bank yesterday in Washington. The Fed said a total of 378 banks borrowed from its discount window in May or got funds from auctions of cash aimed at combating the liquidity crisis. Officials still stopped short of identifying the firms, a measure called for by some lawmakers and the subject of freedom-of-information requests and lawsuits. Fed officials believe naming companies would undermine the central bank’s efforts to stabilize the economy, a senior Fed official said. (Bloomberg)

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Confidence in the world economy rose for a third month as U.S. payroll losses slowed and global production improved, adding to signs the worst of the crisis is over, a Bloomberg survey of users on six continents showed. The Bloomberg Professional Global Confidence Index climbed to 43.57 in June from 38.72 in May, reaching the highest level since the survey began in November 2007. A reading below 50 means pessimists still outnumbers optimists. Rising confidence may extend the equity rally that added more than US$11trn to the value of global stocks in the past three months as reports showed Chinese and Japanese producers increased output, and declines in Europe’s manufacturing and service industries eased. Treasury Secretary Timothy Geithner said June 9 that the “global storm” is showing signs of receding. The survey of more than 2,400 Bloomberg users was conducted between June 1 and June 5. (Bloomberg)

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European Central Bank Governing Council member Axel Weber said central banks may have to raise interest rates before inflation risks materialize as a precaution to prevent future crises. The comments don’t refer to current ECB policy, Weber added. The ECB has lagged the Federal Reserve and the Bank of England, which have cut their key rates close to zero and started buying government and corporate bonds to pump money into their economies. At 1%, the ECB’s benchmark rate is the highest among Group of Seven countries. The ECB last week predicted the economy of the 16 euro nations will shrink about 4.6% this year, with inflation expected to average just 0.3%. Weber, who has argued against the ECB lowering rates any further, said a more symmetrical approach to monetary policy would help to smooth out the boom-and-bust cycle. (Bloomberg)

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Germany’s inflation rate fell to zero in May for the first time in at least 13 years on lower energy costs and weakening demand. Consumer prices, calculated using a harmonized European Union method, were unchanged from a year earlier after increasing 0.8% in April, the Federal Statistics Office in Wiesbaden said yesterday. The May figure, revised from an initial estimate of minus 0.1%, is the lowest inflation reading since harmonized data were first compiled in 1996. A 46% decline in crude oil prices over the past year is pushing down inflation at the same time as companies cut prices to tackle the deepest recession since World War II. The European Central Bank has downplayed the chance of deflation in Europe, with President Jean-Claude Trichet saying inflation will only temporarily move into negative territory this year. From the previous month, German consumer prices fell 0.1%, the statistics office said. (Bloomberg)

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U.K. manufacturing rose for a second month in April as a rebound in motor vehicle production helped end the year-long factory slump and temper Britain’s recession. Output climbed 0.2% from March, when it increased by the same amount after being revised up from a drop, the Office for National Statistics said yesterday in London. Economists predicted a 0.1% gain, according to the median of 26 forecasts in a Bloomberg News survey. This data suggests the recession may have slowed in 2Q09 after the economy shrank the most since 1979. (Bloomberg)

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China’s consumer prices fell for a fourth month, making it easier for the government to keep interest rates low and boost spending to revive the world’s third-largest economy. Prices dropped 1.4% y-o-y in May, after falling 1.5% in April, the statistics bureau said yesterday. The median estimate in a Bloomberg News survey of 16 economists was for a 1.3% decline. Producer prices fell 7.2%, the most on record. Inflation may return as the economy recovers and commodity prices climb from last year’s lows. The central bank triggered an explosion in credit this year by scrapping restrictions on growth in new loans and keeping the one-year lending rate at a four-year low of 5.31%. Declines in prices in China span consumer goods, food and housing. Producer prices are constrained by industrial overcapacity, the statistics bureau said. (Bloomberg)

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China’s property market is rebounding, allaying concern that a potential collapse could undermine the nation’s economic recovery. Sales rose 45.3% in the first five months to 1trn yuan (US$146bn) from a year earlier, the statistics bureau said yesterday. That compares with a 19.5% decline for all of 2008. Falling house prices, record new loans of 5.17trn yuan in the first four months of the year and lower interest rates helped spur the comeback. Developers China Vanke Co., Guangzhou R&F Properties Co., and Shimao Property Holdings Ltd. said they resumed land acquisitions in May and June. Increased construction will create jobs and boost industries from steel to home appliances and furniture. (Bloomberg)

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New Zealand’s central bank kept its benchmark interest rate unchanged for the first time in a year amid signs that a pickup in the housing market may bring the worst recession in more than three decades to an end. “We expect the New Zealand economy to begin growing again toward the end of this year, but the recovery is likely to be slow and fragile,” Reserve Bank Governor Alan Bollard said in a statement in Wellington today after leaving the official cash rate at 2.5%. “It’s likely to be some time before monetary policy support can be withdrawn.” Bollard has cut interest rates by 5.75 points since last July to help kick-start an economy that began contracting in 1Q08. House sales are rising and businesses are more optimistic about sales and profits, adding to signs the economy may return to growth before the end of the year. Bollard reiterated his expectation that he won’t raise borrowing costs until late next year. (Bloomberg)

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