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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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Malaysia
YTL Cement (YTLC MK, Buy, TP: RM4.50) was granted more time to complete its proposed issue of up to US$200m rd (RM718.6m) exchangeable bonds, marking the 3 time the company was given a time extension. YTLC told Bursa Malaysia yesterday it had on March 20, 2009 made an application to the Securities Commission (SC) for an extension of time up to October 4, 2009 to complete the proposed exercise. The group said that it needs the bonds issuance to raise funds to finance future investments and projects. (Malaysian Reserve)
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Proton Holdings Bhd said it is in preliminary discussions with Renault SA and General Motors Corp regarding a new technical alliance to make new models. Proton had ended partnership talks with Volkswagen AG in 2007. According to Proton’s managing director, Datuk Syed Zainal Abidin Syed Mohamad Tahir, the alliance is “vital” in achieving economies of scale. An alliance with a foreign car maker may also build other models which could be sold jointly in overseas markets. Proton is focusing on Middle East, China, India, and Southeast Asia to reduce its dependence on domestic sales. In addition, Proton needs a partner to develop a new version of its Perdana luxury sedan by 2010. (Financial Daily)
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Bank Negara Malaysia’s (BNM) international reserves rose to RM320.7bn on March 31 this year from RM314bn as at March 13 2009. In a statement yesterday, BNM said the reserves position was sufficient to finance 7.9 months of retained imports and was 4x the short-term external debt. The latest reserves level accounted the quarterly adjustment for the foreign exchange revaluation gain following the strengthening of some of the major currencies against the RM during the quarter (Malaysian Reserve)
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Malaysia’s crude palm oil (CPO) inventories in March are likely to lower to 1.5m tonnes compared to 1.56m tonnes in February as planters have embarked on their replanting plan on their plantation estates. Plantation Industries and Commodities Minster Datuk Peter Chin said the government had approved oil palm replanting on some 106,330 hectares. Under the replanting scheme announced late last year, the government has targeted some 200,00ha of land for replanting. Planters who carried out replanting would receive RM1k per ha of plantation land cleared for new plantings. (Financial Daily)
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Industrial production, which took a sharp 20.2% fall in January, is likely to see milder contraction in February. Economists expect the industrial production index (IPI) to improve following the better showing of exports in February, and last year' base effects due to the Chinese New Year festivities. The Statistics Department will release the data tomorrow. (BT)
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Barisan retained the Batang Ai state seat, which it won in 2006 elections while Pakatan coalition members PAS and PKR regained the Bukit Gantang parliamentary seat and Bukit Selambau state seats respectively which they won in the 2008 general election. (The Star)
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INVESTMENT RESEARCH
Global
Stocks fell Tuesday, retreating for a second straight session after a four-week advance, on worries about banks and autos and the start of the quarterly reporting period. The Dow Jones industrial average lost 2.3% (-186.3 pts, close 7,789.6). The Standard & Poor' 500 index lost 2.4% (-19.9 pts, close 815.6) and the Nasdaq composite lost 2.8% (-45.1 pts, close 1,561.6). In currency trading, the dollar gained versus the euro and the yen. U.S. light crude oil for May delivery fell US$1.90 to settle at US$49.15 a barrel on the New York Mercantile Exchange. (CNNMoney)
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The pace of borrowing by U.S. consumers fell in February as fewer Americans sought credit to make purchases amid what may become the worst recession in seven decades. Consumer credit fell by US$7.48bn, or 3.5% at an annual rate, to US$2.56trn, the Federal Reserve said yesterday. Credit increased by US$8.14bn in January, more than previously estimated. The Fed’s report doesn’t cover borrowing secured by real estate. Demand for credit in the U.S. probably shrank further in March, the fourth straight month job losses exceeded 650,000, as unemployment climbed and banks remained reluctant to extend affordable loans. Economists had forecast consumer credit would drop US$3bn in February, according to the median of 32 estimates in a Bloomberg News survey. (Bloomberg)
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Europe’s recession deepened more than estimated in 4Q08 after companies scaled back production and consumer spending declined. Gross domestic product in the euro region fell 1.6% from the previous three months, the most in at least 13 years, the European Union’s statistics office in Luxembourg said yesterday, revising a March 5 estimate of a 1.5% contraction. Investment plunged 4%, also more than estimated, and household spending fell 0.3%. The economy, which grew 0.8% in 2008, may shrink 4.1% this year, the Organization for Economic Cooperation and Development has forecast. The European Central Bank is examining new non-standard measures to stimulate the economy after cutting interest rates to a record low. (Bloomberg)
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U.K. manufacturing dropped the most in at least four decades as the global economic slump throttled demand for goods from cars to ceramics. Production fell 6.5 percent in the three months through February, the most since records began in 1968, the Office for National Statistics said yesterday. Output declined 0.9% from January. Economists predicted a 1.5% drop, the median of 30 forecasts in a Bloomberg News survey showed. The slump in factory production was led by transport equipment, basic metals and non-metallic mineral products such as ceramics, the statistics office said. While the monthly drop was the smallest in six months, the annual decline of 13.8% was the largest since 1981. (Bloomberg)
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U.K service industry sales declined at a slower pace in 1Q09 in a sign the recession may be starting to ease, the British Chambers of Commerce said. The net balance of services companies saying orders deteriorated was minus 23, compared with minus 31 in 4Q08, the London-based lobby group said. A gauge of factory sales slumped to minus 55, the lowest since records began in 1989. The BCC conducted its survey of 6,500 companies from Feb. 23 to March 16. The lobby group forecasts the British economy may contract 3% or more this year as the global credit squeeze stifles trade and boosts unemployment. Bank of England policy makers may keep the benchmark interest rate at a record low of 0.5% this week as they buy assets with newly created money to boost economic growth. (Bloomberg)
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China’s stimulus plan may fuel the nation’s economic recovery this year, helping counter a global recession that is likely to drag growth in Asia’s developing countries to the weakest in 11 years, the World Bank said. Developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea and Singapore, will expand 5.3% this year, less than a December estimate of 6.7%, the lender said in its semi-annual report yesterday. Growth was 8% last year, it said. China’s 4trn yuan (US$585bn) stimulus has already driven investment back to pre-crisis levels, fuelled rebounds in electricity and steel output, and restored consumer confidence, the lender said. Asian governments have unveiled more than US$700bn in spending, tax cuts and cash handouts, and the World Bank said countries like China and Thailand can afford more. China’s central bank Governor Zhou Xiaochuan has said leading economic indicators are pointing to a recovery in growth as the stimulus spending kicks in. Premier Wen Jiabao says it’s still “possible” to achieve the nation’s 8% growth target for 2009. (Bloomberg)
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Japan' central bank kept its benchmark interest rate steady yesterday but introduced new steps to spur lending and ease the strains of an increasingly painful recession. The Bank of Japan' eight-member policy board voted unanimously to leave the key overnight call rate target unchanged at 0.1%, as widely expected. With interest rates close to zero, the central bank has little room to tweak regular monetary policy and has instead focused on measures to boost corporate financing, which has shrivelled amid the global credit crisis. The central bank already buys commercial paper and corporate bonds to help shore up banks' balance sheets, but it acknowledged that "financial conditions have remained tight on the whole." In its latest move, the BOJ expanded the range of collateral it accepts in an effort to funnel more funds to commercial banks and subsequently, to companies seeking loans. The bank said it now welcomes "loans on deeds to municipal governments as eligible collateral." (StarBiz)
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Australia' central bank cut its key interest rate to the lowest level in almost 50 years yesterday, reinforcing fears the global financial crisis has dragged the country into recession. The cash rate was lowered by a quarter percentage point to 3% and since September has been slashed a total of four and a quarter percentage points. Economists had been divided about whether the Reserve Bank of Australia' board would cut the rate again at its monthly meeting. It left the rate unchanged last month. The cut comes after the latest official data showed gross domestic product shrank by 0.5% in 4Q08 and unemployment rose to its highest level in four years in February. Reserve Bank Governor Glenn Stevens said recent information showed the global recession continued from last year into 2009, and most assessments for the short term were gloomy despite huge government spending plans. Australia' economy is contracting at a slower rate than its trading partners and inflation is likely to fall as unemployment rises, so the rate cut "will provide significant support to domestic demand over the period ahead," he said. (StarBiz)
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Malaysia
PT Excelcomindo Pratama, a unit of Axiata Group Bhd (AXIATA MK, Hold, TP: RM1.77 ex-rights), plans to spend some US$600m to build more capacity in Indonesia and grow its revenue for this year. Its vice-president (finance) Johnson Chan said the company will raise funds for its expansion plans through bilateral means, syndicated bank loan, or export credit guarantee. Excelcomindo signed a US$214 million deal last month with Swedish export credit guarantee agency EKN for the purchase of second- and third-generation equipment and software licence from Ericsson. (BT)
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14 years after the RM5.4bn contract to build 6 offshore patrol vessels was awarded to Boustead Heavy Industries Corp Bhd (BHIC MK, Sell, TP: RM2.45), the last 4 of the 6 naval ships will be ready for delivery to the Royal Malaysian navy between next month and early 2010. The patrol vessels, built by Boustead Naval Shipyard Sdn Bhd at its Lumut yard are KD Selangor, KD Kelantan, KD Perak and KD Terengganu. (StarBiz)
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Media Prima Bhd (MPR MK, Hold, TP: RM1.25) has become a founding member of SMART Alliance. The alliance was formed by broadcasters in the region to create and deliver commercial benefits for its members by developing content, selling, marketing and technology. The six founding members - ABS-CBN (Philippines), BBTV (Thailand), International Media Corp Vietnam), Media Nusantara Citra (Indonesia), Media Prima and MediaCorp (Singapore) - met recently in Singapore and signed a memorandum of understanding pledging to work on specific areas. (BT)
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Alam Maritim Resources Bhd said an oil major has agreed to charter an anchor handling tug supply vessel from its unit, Alam Maritim (M) Sdn Bhd, for RM7.7m. The contract, which took effect on March 23, is for 200 days. It can be extended twice, once by 60 days and another by 120 days, Alam Maritim said in a statement to Bursa Malaysia. (BT)
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Thailand and Malaysia are planning to set up a joint Southeast Asian (ASEAN) fund that would pool excess foreign exchange reserves to finance infrastructure spending that would boost jobs and economic growth in the region. Finance ministers and leaders from Korea, Japan, China, South Korea, India, Australia, and New Zealand and the 10 members of ASEAN will meet in Thailand this week. (Financial Daily)
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INVESTMENT RESEARCH
Global
Stocks slipped Monday, retreating after a four-week run, on a bearish analyst note about the bank sector and a breakdown in merger talks between IBM and Sun Microsystems. The Dow Jones industrial average lost 0.5% (-41.7 pts, close 7,975.9). The S&P 500 index 0.8% (-7.0 pts, close 835.5) and the Nasdaq composite lost 0.9% (-15.2 pts, close 1,606.7). In currency trading, the dollar gained versus the euro and the yen. U.S. light crude oil for May delivery fell $1.46 to settle at $51.05 a barrel on the New York Mercantile Exchange. (CNNMoney)
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A measure of U.S. job prospects fell in March for a 14th straight month, indicating the labour market will deteriorate further, a private report showed. The Conference Board’s Employment Trends Index last month decreased 2.3% to 90.1, the lowest since February 1994, from a revised 92.2 in February, the New York-based research group said yesterday. The index declined 22% y-o-y. Payroll employment is likely to keep dropping as companies cut costs to ride out the recession, now in its second year. About 5.1m jobs have been lost since the start of the slump, the worst in the post-war era. The index aggregates eight labour-market indicators to forecast short-term hiring trends. On average, the employment trends gauge can predict job declines six to nine months in advance and can signal a rebound in hiring as many as three months before the fact, the Conference Board said. (Bloomberg)
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European producer prices fell more than economists forecast in February and retail sales dropped by a record, highlighting the increasing risk of deflation in the region. Factory-gate prices in the euro region fell 1.8% from the year-earlier month, the most since April 1999, the European Union’s statistics office said yesterday. Economists had forecast a 1.5% decline, according to the median of 21 estimates in a Bloomberg News survey. Retail sales dropped 4% y-o-y, a separate report showed. The deepening of the global slump and a 60% drop in oil prices from a July record have eased inflation pressures across the euro area. The region may record a temporary decline in annual consumer prices this year, European Central Bank President Jean-Claude Trichet said on April 2 after cutting the benchmark interest rate by a quarter-point to 1.25%, less than the half-point reduction economists expected. (Bloomberg)
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The Japanese government plans to unveil a new economic stimulus package worth more than 2% of GDP on Friday, the finance minister said, doubling such spending as the country grapples with its worst recession since World War Two. The new package will add around US$100bn (RM357bn) to spending already planned under previously announced stimulus measures, raising the total to around 4% of GDP. Finance Minister Kaoru Yosano did no explain how the new spending will be funded, saying there was no discussion on issuance of new bonds in his meeting with Prime Minister Taro Aso yesterday.
(Bloomberg)
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Axiata Group Bhd (formerly known as TM International Bhd) has paid RM2bn or half of the amount owing to Telekom Malaysia Bhd (T MK, Hold, TP: RM2.74) ahead of schedule. Axiata said the remaining RM2bn would be repaid by end-April. The amount due to Telekom is to be repaid by April 25, being 1 year from the completion of the demerger between the 2 companies. Axiata group chief financial officer Datuk Yusof Annuar Yaacob had said the company intended to pay Telekom ahead of April 25, given that the amount owing carried a 6.5% interest rate per annum, higher than its average borrowing cost of 4.67%. (Financial Daily)
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AirAsia Bhd (AIRA MK, Buy, TP: RM1.90) plans to borrow RM3bn next year to help pay for 24 new planes. The money is on top of the estimated RM2.1bn already lined up for 14 planes this year. AirAsia plans to expand its fleet as the region’s economic growth fuels travel demand. According to Boeing Co, air travel in the Asia-Pacific region, excluding within China, may
grow 6.2% a year on average until 2027. (Financial Daily)
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IOI Corp (IOI MK, Hold, TP: RM3.90) announced yesterday that the close of its VGO was 31 March and it held 91.33% of IOI Prop. However, all is not lost for minorities according to the MSGW and there are several options. MSGW said that minorities th could sell their shares in the market before 5pm on April 6 , write to IOI Corp and offer their shares, or remain in the unlisted entity of IOI Prop. Should they choose the latter, shareholders would have their investment locked in unlisted IOI Prop with limited exit strategy. On a positive note, minorities would be entitled to dividend payments but this would be at the Board’s discretion. Moreover, substantial property transactions by directors or substantial shareholders of IOI Corp would requite minority shareholders approval in general meetings. (Starbiz)
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Construction work on the Canal City project in Kuala Langat, Selangor, is going ahead as scheduled, except for the canal component which is being renegotiated with the state government, said IJM Land, the equity partner in the project. There is still around 2,700 acres left to be developed in the projects, IJM Land managing director Datuk Soam Heng Choon clarified after the launch of IJM Land’s “My Space Plan” homeownership promotion yesterday. IJM Land and Kumpulan Europlus are jointly developing the Canal City project. IJM Land’s parent company IJM Corporation (IJM MK, Buy, TP: RM5.10) also holds a 25% stake in Kumpulan Europlus. (Financial Daily)
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WCT Bhd aims to secure RM1bn worth of new projects in Malaysia and the Middle East this year. WCT regional general manager for the Middle East, Elina Abdul Aziz said the group was tendering for projects in Abu Dhabi and Oman. The group, with RM2.6bn order book as at December 31 2008, is now positioning itself in 3 major markets which is Malaysia, Vietnam and
he Middle East. (The Malaysian Reserve)
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Celcom will spend RM700m in capital expenditure this year of which RM300m will be for upgrading its wireless broadband infrastructure. Celcom CEO said there was a dire need to expand the infrastructure as demand was fast outstripping supply. He said that demand was coming not just from the Klang Valley but also from other states including Terengganu, Perak, Kelantan and even Sarawak. Just for March, Celcom had a record 30,000 new subscribers and just 2% of consumers are hogging 80% of network capacity. (Starbiz)
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After 30 years, Datuk Seri Abdul Hamidy Abdul Hafiz has called it a day at Affin Bank Berhad. He retired effective Tuesday, paving the way for Zulkiflee Abbas Abdul Hamid to helm the bank. (Starbiz)
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CIMB Group appointed Kenny Kim group CFO and head of group strategy and finance division and Lim Tiang Siew group chief internal auditor. (Starbiz)
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INVESTMENT RESEARCH
Global
Stocks recharged their advance Wednesday, with investors starting off the new quarter on the right foot, following better- than-expected readings on housing and manufacturing. The Dow Jones industrial average gained 2.0% (+152.7 pts, close 7,761.6). The Standard & Poor's 500 index gained 1.7% (+13.2 pts, close 811.1) and the Nasdaq composite gained 1.5% (+23.0 pts, close 1,551.6). In currency trading, the dollar gained against the euro and fell against the yen. U.S. light crude oil for May delivery settled down US$1.27 to US$48.39 a barrel on the New York Mercantile Exchange. (CNNmoney)
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The recession racking the U.S. may be turning less severe as reports yesterday showed improvements in manufacturing. The Institute for Supply Management’s factory index climbed to 36.3 in March, a third consecutive increase that brought it closer to the breakeven point of 50. The number of contracts to buy existing homes in February rose 2.1%, according to the National Association of Realtors. The smallest drop in orders in seven months propelled the advance in manufacturing, even as the industry now faces the spectre of the bankruptcy of General Motors Corp. (Bloomberg)
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Companies in the U.S. cut an estimated 742,000 workers in March, pointing to no relief in sight for the labour market amid the longest recession in seven decades, a private report based on payroll data showed yesterday. The drop in the ADP Employer Services gauge was larger than economists forecast and the most since records began in 2001. February’s reading was revised to show cut of 706,000 workers, up from a previous estimate of 697,000. The Labour Department may report tomorrow that employers cut payrolls in March for a 15th consecutive month, putting jobs losses in the current downturn at more than 5 million, according to a Bloomberg survey. (Bloomberg)
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European unemployment increased more than economists expected in February to the highest in almost three years as the recession forced companies across the continent to cut output. The jobless rate in the euro zone rose to 8.5% from a revised 8.3% in January, the European Union’s statistics office said yesterday. The February reading is the highest since May 2006 and exceeded the 8.3% economists forecast, according to the median of 23 estimates in a Bloomberg News survey. The January figure was revised higher from 8.2% reported on Feb. 27. (Bloomberg)
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Job prospects for Japanese workers just got worse. The Bank of Japan’s Tankan survey yesterday showed plunging demand has saddled companies with too many employees, signalling more people may lose their jobs. Rising unemployment threatens consumer spending, the strongest part of an economy that shrank an annualized 12.1% in 4Q08. The quarterly Tankan index of labour supply at Japan’s biggest companies rose to 20, the highest level since March 2003. A positive number indicates an excess of workers. Japan’s unemployment rate climbed to a three-year high of 4.4% in February and economists surveyed last month said it will reach 5.5% in 1Q10, matching a postwar high set in April 2003. (Bloomberg)
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Singapore's home prices plunged 14% in the first quarter, the most in at least 16 years, as the global financial crisis and a recession deterred buyers. The price index of private residential property fell to 140.3 points in the three months ended March 31 from 162.8 in the previous quarter, the Urban Redevelopment Authority said in an e-mailed statement yesterday. That's the largest drop since the first quarter of 1993, according to the earliest data provided by the government agency. Residential prices have retreated for three straight quarters, ending a four-year rally. (BT)
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Kumpulan Europlus (KEuro) announced yesterday that construction and the related work at Canal City project that commenced towards the end of 2007 has stopped. KEuro further mentioned that the new state government of Selangor has requested changes to the original privatisation plan, including omission of the main canal and its related work. KEuro is jointly controlled by Tan Sri Chan Ah Chye and IJM Corp (IJM MK, Buy, TP: RM5.10), which has a 25% stake. Under the Canal City project, KEuro is to undertake a flood mitigation programme in Selangor and construct a highway linking certain portion of Shah Alam. In return, KEuro will get land. But with the revised terms, KEuro has to pay for the land alienated. (Financial Daily)
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Malaysia Airlines (MAS MK, Sell, TP: RM2.44) is still keen to pursue the proposal with Australia’s Qantas Airways to set up a joint-venture (JV) company for the provision of airframe maintenance services, although the memorandum of understanding (MoU) signed for it has lapsed. The group told Bursa last Friday that the MoU for the JV signed in 2007 had expired but both parties were still working on the details for the intended venture. (StarBiz)
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EON Capital Bhd is evaluating its capital structure in light of the current economic environment. The financial group stated that this was only a preliminary exercise, and that no decision on new capital raising has been made. (Financial Daily)

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Perusahaan Otomobil Kedua Sdn Bhd (Perodua) expects its vehicle sales to drop by 6% to 10% due to the gloomy economic outlook. Last year, Perodua sold about 167,000 vehicles, an increase of 3% y-o-y. Currently, Perodua has 30.5% of local market share. Sales for the first two months amounted to about 24,000 units, a 10% drop compared to the previous corresponding period. Perodua will be launching its new multi-purpose vehicle in 4QCY09, in hopes to boost sales. According to managing director, Datuk Syed Abdul Hafiz Syed Abu Bakar, a clearer picture on how the industry will perform will likely emerge this month onwards. (Financial Daily)
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Proton expects RM2bn in revenue over the next five years from its strategic licensing and assembly agreement with Detroit Electric Holdings Ltd (DE). Under the agreements signed yesterday, Proton unit Perusahaan Otomobil Nasional Bhd will license the use of Persona and Gen.2 platforms to DE for the latter to build its full line of pure electric vehicles (PEV) for the global market over the next five years. The PEVs will be built in Proton’s Tanjong Malim plant. According to Proton managing director Datuk Syed Zainal Abidin Syed Mohamad Tahir, the RM2bn is on the basis of Proton assembling 40,000 cars per annum, to be rebadged and sold under the DE brand. The initial target markets for the PEVs are the UK, Europe, and China. DE plans to sell more than 270,000 PEVs by 2013. The cars will be priced between RM83,200 and RM94,120 for the city range. DE’s chairman and CEO, Albert Lam, said DE would invest up to RM150m in Malaysia to set up two plants to support the venture. (Financial Daily)
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The Cabinet will decide tomorrow whether Syarikat Bekalan Air Selangor (SYABAS) can raise water tariff by as much as 31% as provided for in the concession agreements. Energy, Water and Communications Minister, Datuk Shaziman Abu Mansor said he would be presenting a proposal to the Cabinet on SYABAS request for the tariff increase. Though the minister himself has the power to either delay or give the nod for the tariff hike under the Water Services Industry Act 2006 (WSIA), the ministry still has to present its opinion to the Cabinet on the proposed tariff hike and the quantum of increase, after which the Cabinet will decide. (StarBiz)
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Suria KLCC hopes to grow total retail sales by up to 5% to about RM2.1bn this year which will represent the 11th consecutive year of growth. The growth, though small compared to the 15% in 2007, is still better than its marginal growth in 2008. Retail sales were stable at Suria KLCC last year amidst lower traffic count as a result of an additional 2.9m sq ft of retail space in the market (at the Pavilion Kuala Lumpur, The Gardens Mid Valley and Sunway Pyramid) and high fuel price. (BT)
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INVESTMENT RESEARCH
Malaysia
TSR Capital Bhd looks set to build and equip a teaching hospital costing RM1.7bn for International Islamic University Malaysia (IIUM) in Nilai, Negeri Sembilan. Prime Minister Datuk Seri Abdullah Ahmad Badawi will today officiate the ground- breaking ceremony for the hospital which will be funded by private finance initiative (PFI). Under the PFI scheme, a private sector company will finance the development of infrastructure and lease it to the Government over a period of time. (StarBiz)
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Bursa Malaysia plans to launch a platform to facilitate regulated Islamic short selling and hedge fund activities towards the end of the year. Short selling is controversial among Islamic scholars, as some believe that syariah does not permit selling what one does not own. Bursa is still working out the platform’s structure, but one way to enable Islamic short- selling is for investors to buy, in stead of borrowing, a stock by paying a fraction of the stock price and executing a simultaneous agreement to sell it back to the seller at a later date. Meanwhile, Bursa said that it plans to cut expenses by 15% and capex by more than 15% this year as the economic crisis hits trading income. (Financial Daily)
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Industry experts from Malaysia’s palm and biodiesel sector plan to meet officials from the European Commission on its recent amendment to the renewable energy directives which hinder the export of biodiesel to the region. Malaysian Biodiesel Association vice-president UN Unnithan said palm players were discussing the EU’s sustainability criteria on the minimum greenhouse gas savings of 35%. Based on EU’s estimates, the default value of palm oils greenhouse gas savings was around 19%. However, based on Malaysia’s estimates, the palm industry is saving as much as 50% hence some differences between measurement methodologies need to be sorted out. He added that if palm users used the methane gas capture technology, saving would go as much as 60%. (Financial Daily)
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INVESTMENT RESEARCH
Global
Stocks slumped Monday, falling for a second straight session, as worries about the auto and bank industries sent investors running after the recent rally. The Dow Jones industrial average lost 3.3% (-254.2 pts, close 7,522.0). The Standard & Poor' s 500 index lost 3.5% (-28.4 pts, close 787.5) and the Nasdaq composite lost 2.8% (-43.4 pts, close 1,501.8). In currency trading, the dollar gained against the euro and fell against the yen. U.S. light crude oil for May delivery fell US$3.97 to settle at US$48.41 a barrel on the New York Mercantile Exchange. (CNNmoney)
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European confidence fell to the lowest on record in March as the Group of 20 nations prepared to discuss this week how best to fight the deepening global recession, which has prompted job cuts across the continent. An index of executive and consumer sentiment in the euro area declined to 64.6, the lowest since the indicator began in 1985, from 65.3 in February, the uropean Commission in Brussels said yesterday. Gauges for industry, services and consumer sentiment all reached record lows. Leaders from the G-20 emerging and developed nations will meet in London on April 2 to try to forge a common response to the crisis. U.S. calls for European nations to spend more on fiscal stimulus have met with some resistance by governments trying to keep their budget deficits under control. (Bloomberg)
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Ireland had its AAA credit rating removed by Standard & Poor’s in the fourth downgrade of a euro-region government this year as the global financial turmoil fuelled borrowing costs and swelled the budget deficit. The rating was lowered one step to AA+ with a “negative” outlook, S&P said yesterday, indicating the rating company is more likely to lower the classification again than raise it or leave it unchanged. S&P lowered the ratings of Spain, Portugal and Greece in January. The European Commission forecast in January that Ireland’s budget deficit may widen to 11% of gross domestic product this year, almost four times the European Union’s approved limit. (Bloomberg)
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Russia’s economy will probably shrink 4.5% this year after oil prices slumped and global contagion spread, driving up unemployment and pushing more people into poverty, the World Bank forecast. The slump may last longer and be deeper than in the aftermath of the 1998 government’s US$40bn debt default and 70% ruble devaluation, which triggered bank runs and
wiped out citizens’ savings. A contraction may be prolonged by a drop in household consumption and a “second wave” of non- performing corporate loans, Zeljko Bogetic, the World Bank’s Moscow-based lead economist, said yesterday. (Bloomberg)
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Japanese companies cut inventories at an unprecedented pace in February and said they would increase production in coming months, indicating the worst of the country’s manufacturing slump may be over. Inventories fell 4.2% last month, the biggest decrease since record-keeping began in 1953, the Trade Ministry said yesterday. Factory output slid 9.4% from January, when it plunged a record 10.2%. The second monthly reduction in stockpiles brought them to the lowest level since August 2007, the report showed. Manufacturers said they’ll raise output 2.9% in March and 3.1% in April, ending a five-month losing streak. (Bloomberg)
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AirAsia Bhd (AIRA MK, Buy, TP: RM1.90) has sealed a MobileOnAir Agreement with OnAir, which has its headquarters in Geneva Switzerland, for the provision of in-flight telephony services for use by its passengers. The move was part of the airline’s continuing efforts to increase the variety and improve the quality of its services to passengers in the course of business. OnAir is owned by SITA, the airline-owned provider of IT solutions and communications services to the air transport industry, and Airbus, one of the world’s leading aircraft manufacturers. (StarBiz)

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EON Capital Bhd is considering a rights issue, according to sources. It is learnt that Rin Kei Mei, a major shareholder of EON Capital with an 11.12% stake, is not agreeable to the proposed rights issue that is now being looked at by a European investment bank. Sources say the foreign investment bank has been mandated to study the need for it and to come up with recommendations if the bank needs the capital. According to EON Capital’s latest annual report, its risk-weighted capital ratio is 13.2%, which is above the industry average of 12.2%. (The Edge)

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Proton Holdings Bhd is believed to be close to finalising a technology collaboration pact with another foreign automaker. An announcement could be made as early as next month, sources say. It is believed that the foreign automaker is the Renaut-Nissan group, and the supposed collaboration should be for a Perdana replacement. The source says the new tie-up will not affect any of Proton’s existing partnerships, such as the product collaboration agreement with Mitsubishi to come up with a replacement for the Waja. (The Edge)
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DRB-Hicom Bhd is poised to take over as the importer of Volkswagen cars into the country from AutoStadt Asia Sdn Bhd, sources say. It is learnt that DRB’s wholly-owned unit DRB-Hicom Auto Solutions Sdn Bhd could commence importing the cars for Volkswagen Group Malaysia Sdn Bhd (VGM) as early as the middle of the year. It is not clear if DRB and VGM have included car assembly operations in their negotiations. (The Edge)
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Malaysia’s sales of 37,801 vehicles in January are the highest among the Asean countries, said the Malaysia Automotive Association (MAA) president Datuk Aishah Ahmad yesterday. She said Thailand had recorded the second highest sales with 32,085 units, followed by Indonesia (31,567), Philippines (8,791), Singapore (7,388), Vietnam (3,852) and Brunei (1,123).”This is the first time Malaysia has achieved the highest figure in Asean since the US financial crisis and global economic downturn plagued the region,” she told reporters after the MAA annual general meeting yesterday. (Bernama)

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Eastern & Oriental Bhd (E&O) is halting expansion work on its E&O Hotel in Penang due to the UNESCO ruling that buildings in heritage zones must not exceed 18m in height. E&O will wait for clarification from the relevant authorities, which is expected in June. The other 3 projects approved by the previous administration are the RM400m Pier Hub, the RM130m Royal Bintang, and the Low Yat Group’s proposed 23-storey hotel on Jalan Sultan Ahmad Shah. (StarBiz)
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Malaysia Airports Holdings Berhad (MAHB) has denied claims by Kazakhstan that it is ineffective in managing the International Airport Astana (IAA). MAHB said it started to manage the airport from May 2007. On 31 March 2007, Malaysia Airports Management & Technical Services (Labuan) Pte Ltd (MAMTS Labuan) signed a trust agreement with the Department of Finance of the Astana akimat (city mayor’s office), Kazakhstan. MAMTS Labuan is a subsidiary of MAHB. The IAA was managed by the Joint Stock Company International Airport Astana (JSC IAA), a wholly owned company of the Kazakhstan government. The government agreed to transfer its entire shareholding in the JSC IAA under trust management to MAMTS Labuan. The former has since reduced its active participation in the management of IAA. MAHB is presently in discussion with the government of Kazakhstan to resolve these issues. (Malaysian Reserve)
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INVESTMENT RESEARCH
Malaysia
The Government is likely to allocate RM200bn for the 2010 budget, says Deputy Prime Minister Datuk Seri Mohd Najib Razak, who is also Finance Minister, when winding up the motion on economy at the last day of the UMNO general assembly at the Putra World Trade Centre in Kuala Lumpur last Saturday. The government is expected to give out some RM28bn in subsidies this year. In addition, a special website will be launched in 2 weeks to monitor expenditure under the stimulus package to promote transparency in recovery efforts. (Malaysian Reserve)
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A total of 26,224 workers have been retrenched as of March 19, Malaysian Employers Federation (MEF) executive director Shamsuddin Bardan said. He told that out of this, 12,674 Malaysians and 6,651 foreigners lost their jobs outright while the rest were given voluntary separation schemes (VSS). Shamsuddin expected more workers to be retrenched in the weeks ahead if there was no immediate improvement in the economy. He said the recent mini budget did not have much an impact on the companies nor was there immediate incentive for companies to retain their workers. (Bernama)
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Property prices in Malaysia are expected to come down this year reflecting the softer market and oversupply as global economic and financial crises dampen demand, said president of International Real Estate Federation (FIABCI), Datuk Richard Fong. “The transactions have come down. The extent to which the prices will fall will also depend on the availability of financing now when the buyers are faced with financial difficulties due to job losses and uncertainties in the job market," he said at the 8th FIABCI Asia Pacific Regional Secretariat Summit 2009 here today. Fong said to support the property market, banks should be flexible in restructuring the duration of housing loans to meet the financial requirements of house buyers who were struggling with their commitments. “While the Malaysian economy is heading towards a pronounced slowdown, the banking sector remains relatively strong as compared to the 1997/98 Asian financial crisis,” he said. (Bernama)
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INVESTMENT RESEARCH
Global
Stocks tumbled on Friday at the end of an otherwise upbeat week, stretching the market rally to three straight weeks, for the best run in a year. The Dow Jones industrial average lost 1.91% (-148.38 pts, close 7,776.18). The Standard & Poor' 500 index lost 2.03% (-16.92 pts, close 815.94) and the Nasdaq composite lost 2.63% (-41.80 pts, close 1,545.20). In currency trading, the dollar weakened against the euro and the yen. U.S. light crude oil for May delivery fell by US$1.96 to settle at US$52.38 per barrel on the New York Mercantile Exchange. (CNNmoney)
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U.S. consumer spending rose for a second consecutive month in February and sentiment edged up in March, according to reports on Friday that backed views that the worst of the recession may be over. Spending increased 0.2% after rising by an upwardly revised 1.0% in January, the Commerce Department said. The hefty adjustment to January' figure, which was previously reported as a 0.6% gain, suggested that consumer spending rebounded in the first quarter after a big drop at the end of last year. (Reuters)
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The U.S. Treasury Department said it expects to have about $134.5bn left in its financial-rescue fund, giving the Obama administration a cushion as it implements a range of expensive programs aimed at unlocking the credit market and boosting ailing industries. The figure would mean that about 81% of the $700bn in the Troubled Asset Relief Program, or TARP, has been committed. But it also means that the Obama administration may not have to go to Congress to request additional funds, at least until well into the year. (WSJ)
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The European Central Bank could start buying corporate bonds in an unusual move to support the euro zone economy, ECB Vice President Lucas Papademos said on Thursday. His comments are the strongest signal yet about the ECB' plans to ramp up efforts to keep funds flowing through clogged euro-zone credit markets. The remarks indicate that s policy makers are prepared to take more-aggressive steps to stem the problem than they have thus far. (WSJ)
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The U.K. economy’s contraction in the fourth quarter was deeper than previously estimated, as consumer spending and construction slumped the most since 1980. Gross domestic product fell 1.6% from the third quarter, exceeding the prior measurement of 1.5%, which was also the median forecast of 27 economists in a Bloomberg News survey. Construction dropped 4.9% and consumer spending declined 1%. (Bloomberg)
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The Bank of England has rejected billions of pounds in aid to car firms, dealing a blow to the government’s promise to support the stricken industry. The refusal leaves struggling car manufacturers, which have slashed production, laid off thousands of workers and imposed wage cuts because of a collapse in demand, still waiting to receive any significant government response. (StarBiz)
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Spain mounted its first major bank rescue in 16 years as the state took over Caja Castilla-La Mancha after efforts to choreograph its purchase by a rival lender failed. The Bank of Spain said yesterday it appointed administrators to run the savings bank after removing its management. As part of the rescue, the government pledged to guarantee as much as 9bn euros (US$12bn) of the lender’s liabilities. Loan defaults in Spain have tripled since the global financial crisis began in 2007, ending the country’s real estate boom and boosting unemployment to a European-Union high of 14%. The economy is in the grip of its worst recession in half a century, with the government forecasting a contraction of 1.6% this year. (Bloomberg)
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INVESTMENT RESEARCH
Global
Japan' Parliament enacted a record 88.55trn yen ($897.16bn) budget for the next fiscal year, paving the way for the government to carry out its third stimulus package and accelerate work on its next steps to revive growth. The approval capped months of efforts by Prime Minister Taro Aso' Cabinet to put in action three stimulus plans crafted since last summer to fight the nation' recession. The national budget for the fiscal year starting April was needed to fund much of the last package, valued at 37trn yen. Introduced in December, this package includes steps to spur job growth, tax breaks to rejuvenate housing demand and help small companies as well as attempts to boost bank lending. (WSJ)
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Japan' core consumer price index was flat in February from the year-earlier month, but analysts say weakening private demand means it is a matter of time before deflation revisits the world' second largest economy. That was the second straight month of a flat reading in the core CPI, which excludes volatile fresh food prices, according to government data released Friday. Core CPI was flat in January after rising 0.2% in December. Still, many analysts say prices will very likely start falling from March because both overseas and domestic demand for Japanese goods is quickly decreasing due to the global economic downturn. (WSJ)
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Despite some recent signs of improvement in China' economy, profits at many Chinese companies continued to deteriorate in the first two months of the year, new data show. Profits of China' industrial companies in the January-February period fell 37% y-o-y to 219.1bn yuan (US$32.1bn), the National Bureau of Statistics said Friday. The drop contrasts with a y- o-y increase of 16.5% in the first two months of 2008 and was steeper than a 27% profit decline in the three months to November. While the performance in the coal and oil sector improved, profit in other industries including steel, power, chemicals, construction materials, equipment manufacturing, chemical fibre and non-ferrous metal all fell. The trend of declining profits follows a years-long string of 20% to 40% profit growth. At a time when Beijing is pouring four trillion yuan into a massive stimulus plan, falling profits mean companies have less money to buy new equipment or expand their businesses, increasing the burden on government stimulus to drive China' growth. (WSJ)
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The global economic crisis will hit jobs hard, with unemployment set to reach double digits in many developing and advanced countries, the Organisation for Economic Cooperation and Development (OECD) said yesterday. “By the end of 2010 the unemployment rate could be approaching double digit figures in all G8 countries with the sole exception of Japan, as well as in the OECD area as a whole,” the OECD forecast in a background paper to G8 labour and employment ministers gathering in Rome. In new projections to be issued on Tuesday the OECD will forecast growth in the 30-nation bloc will contract by 4.2% this year, the Paris-based body’s general secretary, Angel Gurria, told reporters on Friday. (BT)
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Vietnam’s An Binh Bank said yesterday it would sell another 5% stake to Maybank (MAY MK, Hold, TP: RM5.45) in May, raising the latter’s ownership to the ceiling rate of 20%. The unlisted bank said it would issue new shares to Maybank and the stake sale was to boost their capital base by 28.7% to US$205m. (Reuters)

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Malaysia' two low-cost carriers (LCCs) have been granted rights to fly to Singapore from several domestic destinations, including Subang and Penang. Transport Minister Datuk Seri Ong Tee Keat said that the Cabinet had granted permission to turboprop operator Firefly to fly to Singapore from Subang, Penang, Kuantan and Terengganu. It also allowed AirAsia (AIRA MK, BUY, TP: RM1.90) to fly to Singapore from Penang in addition to Langkawi, Sandakan and Tawau. Ong said that apart from the Penang-Singapore route, AirAsia has also obtained the go-ahead to fly from Kuala Lumpur to four Indian cities: Chennai, Hyderabad, Kolkatta and Bangalore. (BT)

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Glomac Bhd (GLMC MK, Hold, TP: RM0.62) appointed Datuk Fateh Iskandar Mohamed Mansor as its chief executive officer effective yesterday, taking over the post from his father, Tan Sri Mohamed Mansor Fateh Din. Fateh, 41, is also the group managing director, while Mohamed Mansor remains as the executive chairman. (Financial Daily)

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Steel players are concerned that banks will further cut their lending exposure to the sector, which is being plagued by a steep drop in prices and waning demand. Industry sources warned that the sector could fall into a dangerous financial whirlpool if banks were to severely cut lending due to the higher business risks in the steel industry, which has already been battered by shrinking profit margins and low capacity Among the listed steel companies in Malaysia are Ann Joo Resources Bhd, Kinsteel Bhd, Lion Corp Bhd and Mycron Steel Bhd. (Malaysian Reserve)

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The government is considering mandating owners of palm oil mills to upgrade their plants to be more friendly towards the environment as there are incentives already available. Datuk Peter Chin said the present technology used by millers in Malaysia are from the 1960-70’s, and are not good enough to minimise the amount of harmful gas emitted into the atmosphere. A dialog has been proposed with the Palm Oil Millers Association which represents some 400 mill owners in the country. Currently, only 20 out of 406 palm oil mills in Malaysia are involved in the clean development mechanism projects under the Kyoto Protocol. (Malaysian Reserve)

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The government may not defer the mandatory implementation of the B5 blend biofuel programme by 2010, but to address several critical issues first to ensure its success. Major issues to be addressed are logistics, infrastucture cost, blending facilities and the transportation of palm biodiesel. Datuk Peter Chin said also that the ministry was in talks with the Treasure to provide more incentives to biodiesel producers in Malaysia to ensure the business in viable. (Starbiz)

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RAM Ratings Services expects the local banking sector’s gross NPL’s ratio to reach about 9% this year. RAM ratings has an overall stable outlook on the banking sector given its parameters like asset quality, profitability, capitalisation and liquidity are healthy. (Starbiz)

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Felda and its Brazilian partner will embark on an oil palm cultivation project in Tefe this year, said Brazilian ambassador Sergio Arruda. The initial cultivation will involve 30,000 ha, and will be increased up to 100,000ha, he said. Felda was offered to open a 100,000 oil palm plantation in Manaus and Tefe near the Amazon River in Brazil. The joint venture, Felda Global Ventures Brazil Sdn Bhd, was set up with a paid-up capital of RM25m, in which Felda holds 70% equity while Braspalma of Brazil holds the rest. Arruda said a new port will also be available for transporting palm oil to refineries and the Manaus industrial area down river. (BT)
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INVESTMENT RESEARCH
Global
Technology and bank shares led a selloff Tuesday, as investors stepped back after the previous session' big rally, Wall Street' best in four months. The Dow Jones industrial average lost 1.5% (-115 pts, close 7,660.21). The S&P 500 index lost 2% (-17 pts, close 806.25) while the Nasdaq composite lost 2.5% (-40pts, close 1,516.52). In currency trading, the dollar gained against the euro and fell against the yen. U.S. light crude oil for May delivery rose 18 cents to settle at $53.98 a barrel. (CNNMoney)

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U.S. home prices rose 1.7% in January compared with December, the Federal Housing Finance Agency reported Tuesday. It was the first monthly increase in a year. Home prices are down 6.3% in the past year and are down 9.6% from the peak in April 2006, the agency said. In December, the year-over-year decline was 8.8%. The "unexpected rise" in January was partially due to stronger sales in some markets, FHFA said. The FHFA index attempts to control for such changes in sales patterns, but the adjustment is not perfect, the agency said. The agency warned that its estimate was uncertain and subject to large revisions. December' index, originally reported as a 0.2% increase, was revised down to a 0.1% decline.

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U.K. consumer price inflation accelerated on an annual basis in February, the Office for National Statistics said Tuesday, surprising economists who had expected a sharp decline. The unexpected rise required Bank of England Governor Mervyn King to write a letter to the treasury explaining why inflation was more than one percentage point above the 2.0% target. The consumer price index rose 0.9% on a month-to-month basis and 3.2% on a year-to-year basis. In January, the index fell 0.7% from a month earlier and increased 3% from a year earlier. (WSJ)
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Europe’s manufacturing and service industries contracted for a 10th month in March and job cuts accelerated, as companies slashed production and costs in response to the deepening global recession. A composite index of both industries was at 37.6 compared with a record low of 36.2 in February. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates contraction. The measures of employment and output prices both fell to record lows. (Bloomberg)
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South Korea unveiled a 28.9trn won ($20.83bn) supplementary budget, its largest ever, in an effort to cushion the economy' fall into its first recession in more than 10 years. Economists said the spending will provide much-needed support for the economy but won' likely head off a deep slump this year, driven by falling demand for Korean exports. Debt valued at 16.9 trillion won to pay for the package could also hurt the government' fiscal health in the longer term, they said. (WSJ)
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Global rubber demand could fall more sharply than expected this year, dropping as much as 8% if the recession that has slashed demand for cars worsens, industry officials said yesterday. Physical rubber prices have more than halved from July' peak above US$3 (RM11) a kg. "Our best scenario is still 6.4% down (in 2009) but it may even fall to 8 per cent if really the recession is worse than the IMF predicted in January," said Hidde Smit, secretary-general of the International Rubber Study Group (IRSG). (BT)

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World airlines are set to lose US$4.7bn (RM17.01bn) this year as a result of the global recession that shrunk passenger and cargo demand, said the International Air Transport Association (IATA). IATA also raised its estimate of international airline losses in 2008 to US$8.5bn, from its previous US$8bn estimate. It expects better prospects toward the end of 2009 or the beginning of 2010. (Financial Daily)
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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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NEWS HIGHLIGHTS

EPF declares 4.5% dividend for 2008 The EPF has declared a dividend of 4.5% for 2008, lower than the 5.8% in 2007. The lower dividend rate is due to the increase in investment provisioning resulting from the sharp decline in global equity prices brought about by the worldwide financial crisis, the pension fund said. However, despite the financial meltdown, the EPF recorded the highest ever earnings of RM20bn in gross income for 2008, an increase of 9.4% over the previous year's gross income of RM18.3bn. (Bernama)

PNB moves for another big merger PNB is creating a large property group with yearly revenue of RM1.3bn by combining three property companies under one roof, sources said. The merger of Island & Peninsular Bhd, Pelangi Bhd and Petaling Garden Bhd will help PNB to squeeze more profits from a leaner organisation. It expects to complete the deal next month. PNB has already set up a new company, PNB Property Holdings, to handle the merger, which is being done virtually out of sight as all three companies have been taken private. The merger could pave the way for an initial public offering for the new property group when the economy recovers. (Business Times)

IOI Corp to maintain IOI Prop offer price IOI Corp announced that it has no intention to revise the offer price of RM2.598/share or to maintain IOI Prop’s listing status. The group was responding to a news report quoting IOI Prop’s minority shareholders holding out for a better offer. IOI Corp said based on current economic downturn, the offer is fair and reasonable. (Bursa Malaysia) Maybank sinks below RM4 Maybank’s share price lost its footing, sinking below RM4
yesterday, the first time in almost a decade as the heavy selling prompted by the RM6bn cash call and concern over hefty impairment losses continued. Maybank’s shares had been battered down in the past three weeks, losing RM1.42 or 26.3% from RM5.40 on Feb 24 following the announcement on the capital rights issue to boost its capital. (Financial Daily)

Management buyout of KNM hinges on funds A management buyout (MBO) will be considered for KNM Group Bhd but funding must be available, said managing director Lee Swee Eng. Lee said KNM is undervalued, and the opportunity for privatisation is a good opportunity. A Bloomberg report yesterday quoted Lee as saying he would consider leading an MBO as long as banks will provide the funds. (Star Biz)

JCorp investing RM500m in phase two of port expansion Johor Corp (JCorp) will be investing RM500m under the second phase of the Tanjung Langsat Port expansion plan this year, said chief executive officer Tan Sri Muhammad Ali Hashim. Two new berths measuring 500m each dedicated to the handling of general cargo would be built at the port. Ali said the port was originally built to handle liquid petroleum-related cargo, not general or dry cargo. However some changes have to be made to include berths for handling general cargo as there is demand for such facilities here. The port would have between 12 and 14 berths under the port’s long-term expansion plan. (Star Biz)

Telekom Malaysia Bhd (T MK, Hold, RM2.74) is set to reveal next Monday all the terms and conditions of access to the high speed broadband (HSBB) network that it is building for industry players. TM will also brief them on the wholesale transmission services it will offer under the HSBB. The pricing structure would be another major focus for industry players but this was something that TM was not likely to announce on Monday as it was still working on the structure, sources said. (Bloomberg)

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KFC Holdings Malaysia Bhd, operator of KFC restaurants in Malaysia, Singapore and Brunei, sees better sales this year as it expects people to continue eating out despite a sluggish economy. Managing director Jamaludin Md Ali said the company aims to grow sales by double digits in percentage terms for the year to December 31, 2009. The company is pending RM3m on the marketing blitz. It has also budgeted RM25m to open 30 new outlets this year throughout the country. (BT)

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Kencana Petroleum Bhd is investing US$17m (RM62.73m) in an offshore support vessel business to broaden its earnings base. Its unit Kencana Petroleum Ventures Sdn Bhd will invest US$3m (RM11.07m) for 21% of Malaysian Engineering & Oilfield Services Sdn Bhd (MEOSSB) and US$14m (RM51.66m) for 27% of Teras Muhibbah Sdn Bhd. Teras is the firm that owns the vessels while MEOSSB is the service provider. (BT)

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Perwaja Steel Bhd has delayed expansion plans, is running at half capacity and has reduced inventory turnover as it braces for the country’s first recession in 10 years, a top company official said yesterday. However, the country’s largest steel maker had no plan to restructure its borrowings to tap shareholders’ money to raise fresh capital. The group expects global steel prices to remain highly volatile this year, and stated that it would be good enough if it could just break even this year. (Financial Daily)

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Construction of the RM2.5bn Four Seasons Place in Kuala Lumpur will go ahead although a global economic crisis threatens to hurt demand for expensive hotels and apartments. The much awaited property, located next to the Petronas Twin Towers, will be ready in 2012, says its developer Tan Sri Syed Yusof Syed Nasir. It comprises a hotel, apartments and a mall, and will be the world' tallest Four Seasons development. Four Seasons Place is being built by Venus Assets Sdn Bhd, a firms controlled by Ipoh-born tycoon Ong Beng Seng, Syed Yusof and the Sultan of Selangor. The 140 units of luxury apartments at the Four Seasons Place may fetch as much as RM1.4bn in sales when they are launched in the third quarter of the year. The 140 units will be sold for about RM2,500 psf. The smallest unit size starts at 3,000 sq ft. (BT)

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Malaysia’s industrial production index (IPI) plunged 20.2% in January from a year earlier, as output from the manufacturing, electricity and mining sectors continued to be suppressed by the global demand slowdown. According to the Statistics Department yesterday, the industrial production in the manufacturing sector fell 26.7%, followed by electricity and mining sectors that dropped 12.4% and 6.1% respectively. The IPI fell 15.9% y-o-y in December 2008 mainly ue to a contraction in manufacturing sector, especially in the electrical and electronics (E&E) industry. (Financial Daily)
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Malaysia is unlikely to achieve a firm recovery in growth until 2011 but will use the downturn to form a “new economic model” focused on services rather than manufacturing, said Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak yesterday. Najib, who is expected to become Malaysia’s prime minister on March 31, said his goal was to increase the service sector to 70% of gross domestic product, from 54%, in an effort to establish “a knowledge-based economy” that would be less reliant on manufactured exports. (Financial Daily)

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Ministry of International Trade and Industry (MITI) Tan Sri Muhyiddin Yassin said yesterday his ministry would submit proposals to the Finance Ministry, on a case-by-case basis, for additional measures to help the manufacturing sector. He said MITI had received feedback from the Federation of Malaysian Manufacturers (FMM) on the lack of direct measures in the mini-budget to assist them and would look into proposing measures to the government from time to time. FMM, in an earlier response to the recently announced RM60bn mini-budget, lamented that there were no specific measures identified to address the decline in exports and to stimulate domestic demand and consumption. (Financial Daily)

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Bursa Malaysia is looking at launching its Commodity Murabahah House (CMH), a commodity-based transaction that utilises crude palm oil (CPO)-based contracts as its underlying asset, by mid year. The exchange was keen to offer an alternative Islamic trading infrastructure to the world’s Islamic financial institutions that had been utilising commodities traded on the London Metal Exchange as the underlying assets for Islamic finance and investment products. (StarBiz)

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The local information and communications technology (ICT) industry may grow 4% to 5% in 2009, its lowest in 10 years, as demand for ICT products and services has been slow due to market turbulence. Since the dot-com boom in 2000, the sector has been growing by 10% to 12% year-on-year. But last year, it grew by 7% to RM43bn as it was hit by the subprime crises, said Ang Chin Joo, president of the Association of the Computer and Multimedia Industry Malaysia (Pikom). (BT)
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INVESTMENT RESEARCH
Global
Stocks jumped Thursday, gaining for the third session in a row, as investors scooped up banks and other shares hit in a selloff that left the Dow at 12-year lows. The Dow Jones industrial average gained 3.4% (+239.6 pts, close 7,170.1). The Standard & Poor' 500 index gained 4.1% (+29.38 pts, close 750.7) and the Nasdaq composite gained 3.9% (+54.4 pts, closes 1,426.1). In currency trading, the dollar fell against the euro and gained against the yen. U.S. light crude oil for April delivery rose US$4.70 to settle at US$45.27 a barrel on the New York Mercantile Exchange. (CNNmoney)

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U.S. Treasury Secretary Timothy Geithner said he wouldn’t prevent banks from returning government capital and predicted that “many” would. Still, Geithner urged firms that get money from the Troubled Asset Relief Program to keep it until they can replace it with private capital to “provide lending to the economy.” Restoring the flow of credit will help consumers and businesses struggling in a recession, he said. The Treasury’s most recent tally shows the government has invested most of the first half of TARP in 489 banks nationwide. The Treasury chief defended the effort to fix the financial system as a way to help average Americans rather than reward Wall Street executives. (Bloomberg)

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Sales at U.S. retailers in February fell less than forecast and a gain in January exceeded the previous estimate, indicating the biggest part of the economy may be starting to stabilize. The Commerce Department’s figures mean the decline in gross domestic product this quarter will probably be less than anticipated. Still, a sustained recovery in purchases is unlikely until later in the year because of mounting unemployment, falling home and stock values and shrinking wealth. Retail purchases decreased by 0.1% following a 1.8% jump in January, the Commerce Department said yesterday. Excluding cars, sales climbed 0.7%. (Bloomberg)

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U.S. household wealth fell by a record US$5.1trn in 4Q08, almost twice the decrease in the previous quarter, as home values and stock prices plunged, Federal Reserve figures showed. Net worth for households and non-profit groups decreased to US$51.5trn, the lowest level in four years, from US$56.6trn in 3Q08, according to the Fed’s quarterly Flow of Funds report today. The erosion of Americans’ wealth is one reason households will save more in coming months, restraining spending and economic growth. (Bloomberg)

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European Central Bank (ECB) President Jean-Claude Trichet’s new weapon to battle the recession is taking him closer than it seems to zero interest rates. Trichet is allowing the ECB’s deposit rate, which lenders earn on overnight deposits with the central bank, to usurp the benchmark refinancing rate and become the main driver of short-term borrowing costs. At just 0.5%, the deposit rate matches the Bank of England’s key setting and is only a step away from the zero-to-0.25% range the Federal Reserve uses. That is pushing interest rates for banks down, helping Trichet answer critics who accuse him of not doing enough as the euro-region economy sinks into its deepest recession since World War II. (Bloomberg)

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Germany is facing the biggest economic slump since World War II as a reliance on exports shows itself to be the country’s Achilles heel. Industrial production fell 7.5% in January m-o-m, the most on record, a report showed yesterday. Factory orders plunged a record 38% y-o-y that month, and the economy is likely to shrink the most since modern records began in 1950 this year. (Bloomberg)
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French companies shed the most jobs in 40 years in 4Q08 as manufacturing slumped and employers braced for the worst recession since World War II. Payrolls, excluding government employees, farm workers and the self-employed, dropped by 117,300, or 0.7%, to 15.89m, the Finance Ministry said yesterday. The decline is larger than originally estimated on Feb. 13, when the ministry said payrolls fell by 88,700, or 0.6%. President Nicolas Sarkozy’s multibillion-euro package of tax cuts and incentives to support companies may not be enough to boost an economy that the government forecasts will contract 1.5% this year. Finance Minister Christine Lagarde said in January that joblessness will keep rising as growth deteriorates, and manufacturers’ confidence remains at a record low. (Bloomberg)

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Japan’s economy contracted at the fastest pace since 1974 in 4Q08 as exports, output and business spending collapsed. Gross domestic product shrank an annualized 12.1% in 4Q08, less than the 12.7% reported last month, the Cabinet Office said yesterday. Factory output and overseas shipments plunged by records in January and Toyota Motor Corp., Japan’s biggest automaker, will cut production by more than half this quarter. The economy contracted 3.2% from 3Q08, compared with the initial estimate of a 3.3% drop. The revision reflected a higher-than-expected gain in inventories, which added 0.5 percentage point to GDP compared with the initial estimate of a 0.4 point contribution. (Bloomberg)
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China’s industrial-production growth slowed in the first two months of the year as exports slid at a record pace. Bank lending jumped as the nation’s 4trn (US$585bn) stimulus began to take effect. Output rose 3.8% y-o-y in January and February, slowing from a 5.7% increase in December, the statistics bureau said yesterday. New lending quadrupled in February to 1.07trn yuan y-o-y, the central bank said. Industrial production rose 11% in February alone, buoyed by extra working days in the month compared with a year earlier because of the timing of the Lunar New Year holiday. Growth for the two months combined was the weakest since 2004, when comparable Bloomberg data began. (Bloomberg)
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