Market Updates - 6 Sep 2007

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Malaysia

The stock market closed mixed yesterday with the early weak trend following concerns over the US economic developments reversed in the late afternoon on speculative buying ahead of the unveiling of Budget 2008 today.

The Kuala Lumpur Composite Index (KLCI) added 0.92 point to close at 1,298.85. It opened at 1,289.74 and hit an intra-day low of 1,286.41 before rebounding. Of the FTSE-BM Index series, the FBMEmas lost 16.40 points to 8,821.74 and the FBM30 shed 2.86 points to 1,237.81.

Gainers outnumbered losers by 521 to 326 while 246 counters were unchanged, 298 untraded and 29 suspended.

Turnover increased to 1.326 billion shares worth RM1.937 billion from 1.022 billion shares worth RM1.775 billion on Wednesday.

Pre-budget speculative buying gave property and oil and gas sectors a boost. Among the active stocks, Iris gained seven sen to 32 sen, Land & General lost eight sen to 75 sen, GPA gained 3.5 sen to 22 sen, SapuraCrest added nine sen to RM2.10 and Transmile rose 57 sen to RM5.05.

Among blue chips, Maybank was unchanged at RM11.70, Tenaga lost 10 sen to RM10.20, MISC shed 25 sen to RM9.30 and Genting added 20 sen to RM7.95.

Shares in Transmile Group Bhd seem to have sprung back to life, charging ahead yesterday to an intra-day high of RM5.40, up 92 sen from the previous day's close. The stock finished at a five-week high of RM5.05, rising 57 sen or nearly 13%. Yesterday's trading volume soared to 31.9 million shares. This is possibly the biggest volume recorded since the stock was listed in June 1997. Investment analysts attributed the sudden surge in buying interest to the nascent optimism that the chartered freight service provider would turn around under the stewardship of the new management led by managing director Wong Yoke Ming. Furthermore, Wong's remark that there was no indication that major shareholders Kuok group and Pos Malaysia Bhd would "abandon ship" boosted the investing public's confidence on Transmile.

Shares in Dialog Group Bhd also saw active trade yesterday on talk that a multinational oil and gas company may emerge as a substantial shareholder in the firm. Analysts said any potential sale by Dialog's existing shareholders would probably be at a premium to the share's current price. This, they added, was to reflect Dialog's healthy balance sheet and strong growth prospects. The stock was up 2 sen at RM1.78 on volume of 5.5 million shares after hitting an intra-day high of RM1.83.

Meanwhile, in off market news, Koperasi Permodalan Felda Bhd reduced its shareholding in Mah Sing Group Bhd to 58 million shares after it disposed of two million shares on Sept 4. A filing with Bursa Malaysia showed that after the disposal, the cooperative's shareholding was reduced to 9.34%. The share price of the property company closed at RM2.07. It posted net profit of RM20.42 million for the second quarter ended June 30, up RM16.48 million a year ago. Earnings per share was four sen while net asset per share was RM1.19.

News

An extraordinary general meeting (EGM) requisitioned by minority shareholders of The Ayer Molek Rubber Co Bhd will proceed as planned today, a spokesperson said, despite the company seeking to have the meeting deemed illegal.The EGM, which seeks to remove all seven of the company's directors, promises to be an interesting affair. According to Goh, 678 of the company's 2,030 shareholders have submitted proxies and 46 others have indicated that they will come in person to the EGM. This brings to total 724 people that could turn up, which collectively hold 34 per cent of the company, he said. The directors don't own shares in the company.

Analysts are keen on Melewar Industrial Group Bhd as its investment in an Australian iron ore mining company has hit paydirt, paving the way for potentially higher dividends for shareholders. Melewar has a 14.6 per cent stake in Perth-based Gindalbie Metals Ltd, which yesterday signed a deal with a leading Chinese iron ore and steel company - Anshan Iron & Steel Group Corp (Ansteel) - to spend A$1.8 billion (RM5.2 billion) to develop two iron ore projects in Australia. Gindalbie's share price rose to a record A$1.80 prior to that. This means that its investment in Gindalbie is now worth more than Melewar's entire market value of about RM381 million in Malaysia. Meanwhile, market sources say Melewar is looking to sell part of its stake in Gindalbie to realise some of its investment gains. "It is estimated that Melewar is looking to place out ten to 12 million shares out of the 74 million shares the group owns. Assuming the price is transacted at A$2, the group would recognise RM40 million to RM49 million in exceptional gain, after deducting 30 per cent gain tax imposed by the Australian government," Kamarulzaman said. Should the company keep half of the gain for reinvestment and use the balance to pay dividends, Melewar's shareholders could be in for an additional 10 sen payout, he said. "Coupled with the expected gross dividend of 12 sen (or 9 sen tax-exempt versus 6 sen tax-exempt in fiscal year 2007) in fiscal year 2008, which will be derived from its improving operation, the total distribution will be 22 sen, which translates into a phenomenal dividend yield of 13.1 per cent,"
he noted.

Permodalan Nasional Bhd says it preferred not to speculate on the board composition of Synergy Drive Bhd. President and chief executive officer Tan Sri Hamad Kama Piah Che Othman declined to say if the board that will take charge of the conglomerate has been been finalised.

National carmaker Proton Holdings Bhd will bank on more variants and new models over the next two years to regain market share. Proton, once the market leader in the local automotive market, controlled about 60 per cent of the market share in 2002. This has fallen to some 23 per cent currently, amid tough competition from foreign rivals.Proton will launch its Iswara replacement model in January next year. More variants of existing models will come next year, followed by a completely new model in 2009.

Further measures to tap Middle East funds are expected to be announced in today's budget, sources said. This follows the investment of US$1.2bil in acquisition of land at the Iskandar Development Region (IDR) by three
consortia from the Middle East. "Tapping investments from the Middle East will be a theme in this budget," a source told StarBiz. "The recent investment in the IDR is proof that Malaysia is capable of tapping wealth from the Middle East and there will be greater effort to try and get more of that money here." StarBiz had reported that apart from the land cost, overall investments at the three nodes of the IDR were projected at about US$12bil, with the Mubadala group of Abu Dhabi coming in with more than half of the expenditure.

Managed services provider VADS Bhd has secured its maiden offshore contract for contact centre services from Singapore-based mobile company MobileOne Ltd. Under this five-year contract of up to 200 seats, the company will provide managed contact centre services, which will involve fully managed facility and technology as well as providing personnel for customer care operations.

Second board-listed Hai-O Enterprise Bhd yesterday said Bursa Malaysia had approved in-principle the transfer of its entire shares to the main board.

SEG International Bhd (SEGi) has sold a four-hectare land where SEGi College stands in Kota Damansara, Petaling Jaya to AmanahRaya Real Estate Investment Trust (ArREIT) for RM145 million. SEGi and ArREIT, represented by CIMB Trustee Bhd, also sealed another deal allowing it to lease the property for 10 years, with an option of another five years. SEGi said the disposal was to unlock its capital resources from being tied up in
long-term assets and allow it to focus on its core business activities of providing educational and training services.

Kumpulan Guthrie Bhd aims to increase the annual production of clonal palms to two million units in the medium term. In a statement, the group said its research and development arm Guthrie Biotech Lab Sdn Bhd is able to produce 350,000 clonal palms annually. Clonal palms produced via tissue culture at laboratories have superior qualities capable of yielding more than 35 tonnes of fresh fruit bunches and have an oil extraction rate of more than 25 per cent - thus, giving a crude palm oil yield of more than eight tonnes in a hectare annually.

TMC Life Sciences Bhd is installing a multi-million ringgit integrated hospital information system at its flagship Tropicana Medical Centre and other branches in Sarawak, Johor and Selangor. Called the Total Hospital Information System (THIS), TMC Life has hired India's Sobha Renaissance Information Technologies Pte Ltd and People Associates Sdn Bhd to make the system ready for use by year-end.

IOI Corp Bhd made it to the third annual Forbes Asia Fabulous 50 List for the second year in a row, again becoming the sole Malaysian company to get on the list thus far. Forbes noted that IOI Corp, Malaysia's largest palm oil producer, posted sales of US$2.518mil and had a market value of US$8.857mil. The Fabulous 50 List, which appears in the Sept 17 issue of Forbes Asia, covers only companies with revenues or market capitalisation of at least US$5bil, and a five-year record of operating profits and return on equity. Other criteria include long-term profitability, sales and earnings growth, stock price appreciation and projected earnings. Indian companies led this year's list with 12, followed by Taiwan with 10 and seven companies from China.

Malaysia's international reserves stood at $96.8 billion on Aug 30, down 1.6 percent from mid-August, data from the central bank showed on Thursday.The reserves were enough to finance 8.8 months of retained imports and were 7.1 times the short-term external debt, Bank Negara said in a statement.

Weaker orders for electrical and electronic products may continue to affect Malaysia's industrial production in July. The Industrial Production Index (IPI), which monitors the growth of manufacturing, mining and electricity sectors, is expected to grow by 1.13 per cent in July, according to a Business Times poll of research houses. The Statistics Department is to release the data today.

Financial and property firm RCE Capital Bhd will raise up to 1.5 billion ringgit ($427.7 million) through the sale of asset-backed bonds, RCE said on Wednesday. Funds raised would be used partly for working capital, it
said.

The Baltic Dry Index (BDI) crossed the psychological 8,000-point level, closing at a new high of 8,090 on Wednesday. With the latest surge in the index, the BDI, which measures commodity shipping costs of various routes and ship sizes, has averaged 6,950 so far in the current quarter, 16% higher than the average 5,983 in the second quarter this year. The average in the current quarter is 93% higher than the average 3,593 in the
corresponding quarter last year.

In results, Bank Islam Malaysia Bhd bounced back with RM251 million in net profit for the year to June, its highest earnings ever, driven by the recovery of bad loans and a turnaround in operation. Total income grew
nine per cent to a record RM1.03 billion, which also marks the bank's full recovery from the last two years of losses, managing director Datuk Zukri Samat said. Bank Islam posted a loss before zakat and tax of RM1.28 billion in fiscal 2006, on revenue of RM948.87 million.

US

Stocks rose Thursday, recovering a bit after the previous session's big selloff, but gains were limited ahead of Friday's big monthly jobs report.

The Dow Jones industrial average (up 57.88 to 13,363.35) and the broader S&P 500 (up 6.26 to 1,478.55) index both gained around 0.4 percent. The tech-fueled Nasdaq Composite (up 8.37 to 2,614.32) gained 0.3 percent.

The major gauges had been on both sides of unchanged throughout the session as investors mulled upbeat August retail sales, volatile oil prices and the day's economic news, ahead of Friday's labor market report.

Employers are expected to have added 110,000 jobs to their payrolls in August after adding 92,000 in July.

On Thursday, the ADP employment report, which measures hiring in the private sector, showed surprisingly weak job growth, and could be a harbinger for Friday's broader national report.

But other recent economic reports were more positive, including Thursday's readings on weekly jobless claims, productivity and the services sector of the economy.

Meanwhile, another report Thursday showed a record number of homes entered the foreclosure process in the second-quarter, reflecting the ongoing problems in subprime and housing.

Treasury prices slipped a bit after Wednesday's big rally, raising the yield on the 10-year note to 4.50 percent from 4.46 percent late Wednesday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell versus the euro and inched higher against the yen.

U.S. light crude oil for October delivery rose 56 cents to $76.29 a barrel on the New York Mercantile Exchange. Oil prices were volatile after the weekly inventory report showed a drop in crude supplies and a big rise in distillates, which are used to make heating oil.