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Monday, July 13, 2009

Market Waiting On CPO/News Highlights

The FBM-KLCI remains largely unchanged last week, shedding a marginal 0.47% for the week to close at 1,067.7 last Friday. Where will it go from here?

FBM-KLCI uncertain
Though the 1,065 support still held steady, our local FBM-KLCI market looks uncertain with several “doji”shaped candlestick patterns in the last few days. The bulls want to push the index higher, but are fearful of plunging commodities prices particularly Crude Palm Oil (CPO) prices.

Plantation Stocks key to FBM-KLCI direction
Looking forward, plantation stocks which form 18.6% of the FBM-KLCI will dictate where our local market goes from here. If CPO prices continue toweaken and drag the plantation index lower to break the important 5,200 support level, it could spell negative repercussions for our local market. If the 5,200 support holds, the bulls could very well still be in control of the steering wheel.

We maintain our status quo positive view on the KLCI but would be watching the plantation index closely to detect any possible negativity that might drag the FBM-KLCI down.
FAJAR (RM0.93)
FajarBaruBuilder Group Bhdis currently forming a technical platform and stabilizing at the RM0.90 support level. If it can breach its immediate resistance at the RM0.95 level, it could rally upwards to re-challenge the RM1.00 resistance level. S : 0.90 FAJAR is currently trading at a P/E ratio of 6.5x (Bloomberg). Its warrants, which is trading at RM0.43 with zero premium, could be a good trading proxy to ride any potential rally in its mother share.


Bursa Chat New Highlights

Malaysia

Tenaga Nasional Bhd (TNB) (TNB MK, Hold, TP: RM7.00) and Sarawak Energy Bhd (SEB) signed a share sale agreement with Sime Darby Energy Sdn Bhd (SDESB) in relation to their acquisition of 100% interest in Sime Darby Power Link Sdn Bhd (SDPLSB). The purchase consideration was RM15.6m plus an adjustment amount to cater for additional cash advances made by SDESB to SDPLSB being payment for consultants before the completion of the deal. TNB and SEB will each hold 50% of the issued and fully paid-up capital of SDPLSB, while it is also intended that the Minister of Finance Inc participate in the equity of SDPLSB at the appropriate juncture. (Starbiz)
* * * * *
CIMB Bank has issued 667m new shares to Bumiputra Commerce Holdings Bhd (BCHB) (BCHB MK, Hold, TP: RM8.80) to pay off debt. The new CIMB shares were issued to settle the coupon payments and principal on the RM667m irredeemable convertible unsecured loan stocks (ICULS) which are due and payable to BCHB, it said in a filing with the stock exchange. (BT)
* * * * *
Boustead Holdings Bhd’s (BOUS MK, Hold, TP: RM3.60) plan to raise some RM729.1m in a rights issue has been approved by the Securities Commission. In a filing to Bursa Malaysia on Friday, Boustead said it plans to issue 260.4m new shares at the ratio of two rights shares, at RM2.80 each, for every five ordinary shares held. (BT)
* * * * *
General Motors Corp’s (GM) joint-venture (JV) with DRB-Hicom Bhd through Hicom-Cheverolet Sdn Bhd is believed to be on the rocks and may be coming to an end soon. The partnership between the 2 companies has been shaky of late and both sides have set a deadline to resolve their issues by the end of this month. As a result of the breakdown in the partnership,
it is understood that GM is starting to look at the possibility of finding a new partner for its operations in Malaysia. (The Malaysia Reserve)
* * * * *
Lenstar Investments Ltd is now looking at the possibility of constructing a petroleum refinery and petrochemical complex in Malaysia with total investment of up to US$8bn. According to the United Kingdom based investment holding company’s managing director, Mohamad Munir Malik, the company will start conducting feasibility studies in Melaka and Perak, as is even looking at Sabah and Sarawak as possible locations for the facilities. “The refinery and petrochemical complex will cost around US$4bn each. Our commitment here shows that we have full confidence that Malaysia is the right location and has what it takes to be the hub for oil and gas industry in the Asean region,” he added. (Financial Daily)
* * * * *
The number of passengers travelling through the KL International Airport (KLIA) fell 0.5%to 2.32m in May compared with the same month in 2008 due to a decline in international passengers. International passenger traffic was down 0.8% to 1.51m, while domestic passengers dropped marginally from 811,289 to 810,927. Passenger traffic at all other airports operated by Malaysia Airports Holdings Bhd grew 3.4% to 1.74m, driven by domestic passengers which rose 5.6% to 1.5m. International passengers, however, dropped 9.3% to 223,135. Systemwide, overall passenger traffic in May grew 1.1% to 4.05m. (BT)
* * * * *
Good news for motorists plying the nation©s tolled roads. Prime Minister Datuk Seri Najib Razak said a 20% discount would be given to users of SmartTAG and Touch 'n Go cards who pay toll 80 times or more a month. He said the move was an interim solution pending the completion of a comprehensive study on toll rates. (NST)
* * * * *
Hotel occupancy rates in the country fell at annual rates of between 15% and 20% in 1H09 due to the economic crisis and compounded by the A(H1N1) pandemic. According to data from the Tourism Malaysia website, there were 3.78m visitors in 2Q09, down 32.8% from 5.62m a year earlier. The biggest drop was from the United Arab Emirates (UAE), falling 68.9% to 2,177 visitors from 6,998 a year earlier. There was also a sizeable decline of tourists from Asean countries, with tourist arrivals from Singapore posting a 29.2% decline to 2.02m from 2.85m, while visitors from Indonesia showed a 35.5% decline to 376,890 from 584,664. Despite the challenging period, hotels are cautiously hopeful of a recovery in 2H09 with festivities and events to make up for part of the decline in tourist arrivals, including those from emerging markets of India and China. (Financial Daily)
* * * * *

Global


Blue chips slipped Friday, after a profit warning from Chevron dragged on oil stocks, but the Nasdaq managed modest gains for the day at the end of a down week for Wall Street. The Dow Jones industrial average lost 0.45% (-36.7 pts, close 8,146.5). The Nasdaq gained 0.2% (+3.5 pts, close 1,756.0) and the S&P 500 index dropped 0.4% (-3.6 pts, close 879.1). In currency trading, the dollar gained against the euro and fell against the Japanese yen. U.S. light crude oil for August delivery fell 52 cents to settle at US$59.89 a barrel on the New York Mercantile Exchange. (CNNmoney)
* * * * *
Sentiment among U.S. consumers dropped in July after four months of gains as unemployment approached 10%. The Reuters/University of Michigan preliminary index of consumer sentiment fell by more than forecast to 64.6 from 70.8 in the prior month. Consumers in the survey said they are less likely to buy cars or appliances, suggesting that the recovery may be weaker than anticipated. “Until the employment picture clears up, we can’t anticipate persistent gains in consumer spending.” said Jonathan Basile, an economist at Credit Suisse Holdings Inc. (Bloomberg)
* * * * *
The U.S. trade deficit unexpectedly narrowed in May to the lowest level in almost a decade as exports jumped while imports of crude oil and auto parts declined. The gap between imports and exports decreased 9.8% to US$26bn, the smallest deficit since November 1999, from a revised US$28.8bn in April that was lower than previously estimated, the Commerce Department said today in Washington. Imports fell while exports rose the most since July 2008. (Bloomberg)
* * * * *
The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession, a Bloomberg News survey showed. The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession. Signs of stability in the housing market, improving consumer confidence and smaller declines in auto sales are reinforcing forecasts for gains in consumer purchases. While the recovery is likely to be tempered by job cuts and shrinking household wealth, most economists said a second stimulus package won’t be needed. (Bloomberg)
* * * * *
The United States financial crisis is expected to complete its cycle through the turmoil within a year, given its accelerated pace compared to the Japanese experience in 1997/98, holder of the Tun Ismail Ali Chair in monetary and financial economics Takatoshi Ito said. He said unlike in the US, where the crisis began in early 2007 and was now in the recovery process, Japan’s banking crisis lasted around 10 years. Speaking on the differences between the two crises, he also cited that the US had avoided nationalising its banks, compared to Japan. (Financial Daily)
* * * * *
China’s urban home prices rose for the first time in seven months, adding to evidence that record bank lending is driving a recovery in the world’s third-largest economy. Prices in 70 major Chinese cities gained 0.2% in June from a year earlier, the National Development and Reform Commission said. Home values increased 0.8% from May, the fourth straight monthly gain. The China Se Shang Property Index of 24 real-estate companies rose 1.6%, beating the 0.3% drop in the benchmark. Property sales rose 32% by floor space and 53% by value, according to the National Bureau of Statistics. New loans rose almost fivefold in June from a year earlier to 1.53trn yuan, according to preliminary calculations, the central bank said July 8. (Bloomberg)
* * * * *
China’s exports fell for an eighth month as the global recession cut demand, highlighting the economy’s dependence on stimulus spending to revive growth. Overseas sales slid 21.4% in June from a year earlier, the customs bureau said Friday, after a record 26.4% drop in May. Imports fell a less-than-estimated 13.2%, the smallest decline in eight months, signaling that the worst may almost be over for the nation’s trade. (Bloomberg)
* * * * *
China’s economy is showing positive signs although that doesn’t mean the country’s difficulties are over, Premier Wen Jiabao said. The impact of the international financial crisis hasn’t eased and the foundations for an economic rebound are not solid, he said. The government will stick to its pro-active fiscal policy and moderately loose monetary policy, he added. (Bloomberg)
* * * * *

Russia’s central bank cut its main interest rates for the fourth time in less than three months after the economy contracted 10.2% through May and government spending failed to reverse the decline. Bank Rossii cut the refinancing rate to 11% from 11.5% and the repurchase rate charged on central bank loans to 10% from 10.5% effective July 13. The bank cut rates for the first time since 2007 on April 24 and again on May 13 and June 5. The average rate in May for one-year loans for non- financial companies was 15.9%, the statement said. (Bloomberg)
* * * * *
The International Energy Agency predicts global oil demand will rebound next year, recovering from the fastest drop since the early 1980s as the world economy emerges from its slump. Worldwide consumption of crude oil will increase by 1.4m barrels a day, or 1.7%, to 85.2m barrels a day next year, the adviser said in its first monthly report to include a forecast for 2010. The growth will be concentrated in emerging economies outside the Organization for Economic Cooperation and Development. The International Monetary Fund, in a forecast before the IEA prepared its outlook, estimated that the world economy will expand by 2.5% in 2010. The IEA said its 2010 view may remain “broadly unchanged” once it includes the revised IMF forecast, whose changes mainly reflected developed economies, where crude use is less intense. (Bloomberg)
* * * * *
Singapore’s economy probably expanded for the first time in five quarters as a rebound in manufacturing helped the
Southeast Asian nation emerge from its worse recession since independence in 1965. Gross domestic product rose an annualized 13.4% last quarter from the previous three months, after shrinking 14.6% between January and March, according to the median estimate of 12 economists surveyed by Bloomberg News. The trade ministry will release the data at 8 a.m. tomorrow. Singapore’s industrial output climbed in the first two months last quarter, while the decline in the island’s exports narrowed in May amid gains in drug shipments. Manufacturing, which slid 26.1% in the three months ended March, accounts for about a quarter of the economy. (Bloomberg)
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