Thursday 5 April 2012

OSK 188 - 5 April 2012: DAIL RESEARCH REPORT


On The Platter
TECHNOLOGY (OVERWEIGHT) Sector Update: Turning Positive With the next results season just around the corner, we assess some coincident and lagging indicators for the global HDD and semiconductor industries  that could help us form expectations on the technology sector‟s upcoming numbers. Overall, we are positive on the local HDD component, and semiconductor packaging and testing companies under our coverage. For the former, we see rising demand and higher ASPs driving growth, while we expect the latter to see demand recovery in the second half of the year. That said, we are upgrading our call on the sector to OVERWEIGHT.

KURASIA (FV RM0.77– TRADING BUY) Corporate News Flash: BNM Approves KIMB Sale

Market Review
Takes a breather. The FBM KLCI erased 7.36 pts to 1,599.27, weighed down by a spike in Spanish bond  yields at a recent auction and  fading prospects of further monetary stimulus in the US. Among the key corporate headlines are: AMMB gets nod to acquire a 100% stake in Kurnia Insurans (M) Bhd, Pharmanagia expects to spend RM95m in capex this year, the Axiata Group has given its commitment for a stronger foothold in India and Xian Leng Bhd has been suspended ahead of the special audit results on its capex in recent years. Overnight, the Dow closed 124.8 points lower dampened by weaker demand at a Spanish debt auction and  the  Federal Reserve„s  reluctance to add more monetary stimulus, which raised concerns on the sustainability of the current economic recovery.

MEDIA HIGHLIGHTS
Wall Street down on stimulus doubt, Spain debt sale
US stocks fell for a second day on Wednesday as investors contemplated a world without monetary stimulus and a poorly received bond auction in Spain suggested the effects of Europe‟s funding operations were waning. Spanish borrowing costs jumped at bond auctions, raising concerns that the rally in the troubled sovereign debt of euro-zone peripheral nations may be coming to an end. The yield on Spain‟s 10-year bond leaped to 5.7%, its highest since January. Stocks continued to feel the fallout from the minutes from the Federal Reserve‟s latest meeting, published on Tuesday. The DJIA fell 124.80 pts, or 0.95%, to 13,074.15. The S&P 500 Index lost 14.42 pts, or 1.02%, to 1,398.96. The Nasdaq Composite Index dropped 45.48 pts, or 1.46%, to 3,068.09. (Financial Daily)

Axiata to stay put in India
The Axiata Group will stay put in the Indian mobile market but is hoping to operate in a more stable regulatory environment. The Indian Government‟s recent revocation of 122 of the 2G licences issued in 2008 had created uncertainty and angered some foreign investors, some of whom have threatened to withdraw from the market place and to even sue the government. However, Axiata president and group chief executive officer Datuk Seri Jamaludin Ibrahim said, “we want more of a stronger foothold there.” (StarBiz)

MSC up despite worries over Indonesia’s tax hike plan
The share price of Malaysia Smelting Corp (MSC) was not affected by the news that the Indonesian government may increase  the  export tax on coal and base metals this year. The firmness in the share price could be supported by a report by  Bloomberg yesterday that said Indonesia was not formally discussing a suggestion from the industry ministry to tax exports of coal and minerals, according to government and industry officials. (StarBiz)

AMMB gets nod to buy Kurnia
The proposed sale of Kurnia Insurans (M) to AmG Insurance takes another step forward. AMMB Holdings announced yesterday that it had received the Finance Ministry‟s approval, through Bank Negara, for the acquisition of a 100% equity interest in Kurnia Insurans by AmG. AMMB has a 51% stake in AmG, while Kurnia Insurans is wholly owned by Kurnia Asia. (StarBiz) Please see accompanying report

Maybank pushing for top 5 ranking in Cambodia
To further strengthen its regional footprint, Malayan Banking  (Maybank) recently incorporated its branch in Cambodia and aims to be among the top five banks in Cambodia by 2015. It is currently ranked seventh in terms or assets among 33 banks, and has 11 branches in Cambodia. Since establishing its presence in Cambodia in 1993, Maybank announced that it will be investing in a new 10-storey corporate office in Phnom Penh which is expected to be ready in two years. “Maybank Cambodia had been growing at a healthy pace with assets and deposits doubling in the last four years since its branch expansion got underway,”  said president and chief executive officer Datuk Seri Abdul Wahid Omar. (Malaysian Reserve)

Pharmaniaga to set up plant in Indonesia
Pharmaniaga has set side RM30m to build a manufacturing plant in Indonesia which the company hopes will act as a “gateway for exports” into the republic of almost 240m people. The funding is to come from internally generated funds. According to the company, it is now in discussions with a few parties and has yet to decide on the purchase target. (Malaysian Reserve)


ECONOMIC HIGHLIGHTS
Philippines: March inflation unexpectedly eases to 30-month low
Philippine inflation unexpectedly slowed to a 30-month low in March as gains in transport costs eased, supporting the central bank‟s decision to cut interest rates twice in the first quarter. Consumer prices rose 2.6% from a year earlier, after a 2.7% advance in February, the National Statistics Office said yesterday.  Inflation may accelerate in the coming months after the government approved an increase in minimum fares for jeepneys, a common form of public transport, and as wage boards study petitions to raise the minimum pay.  (Bloomberg)

US: Service industries kept expanding in March
Service industries in the U.S. grew in March, capping the strongest quarter in a year and indicating the world‟s largest economy will keep generating jobs. The Institute for Supply Management‟s non-manufacturing index fell to 56 from a one-year high of 57.3 in February, the Tempe, Arizona-based group‟s data showed yesterday. Last month‟s reading still topped the average for the previous economic expansion.  Another report showed companies added an estimated 209,000 workers to payrolls in March. Sales at businesses like restaurants and retailers are climbing as an improving labor market shores up household incomes and confidence in the face of more expensive gasoline. (Bloomberg)Indian services grew at the slowest pace in five months in March, bolstering the case for a cut in interest rates to support economic expansion.  The Purchasing Managers‟ Index fell to 52.3 from 56.5 in February, HSBC Holdings Plc and Markit Economics said yesterday. A reading above 50 indicates expansion. The report follows a decline in the manufacturing PMI for March that signaled slower Indian factory-output growth as the highest borrowing costs since 2008 sap domestic demand and the debt crisis in Europe crimps exports. The Reserve Bank of India is juggling the need to shield growth with inflation risks from a weaker rupee, rising energy costs and government spending. (Bloomberg)

China: Speeds opening as QFII quota increased to USD80bn
China accelerated the opening of its capital markets by more than doubling the amount foreigners can invest in stocks, bonds and bank deposits as the government shifts its growth model to domestic consumption from exports. The China Securities Regulatory Commission increased the quotas for qualified foreign institutional investors to USD80bn from USD30bn, according to a statement on its website yesterday. Offshore investors will also be allowed to pump an extra 50bn yuan (USD7.95bn) of local currency into the country, up from 20bn yuan.  China has pledged this year to free up control of the yuan and liberalize interest rates as the government deepens reforms to revive growth and offset slowing exports and a cooling housing market. (Bloomberg)

Australia: Export slump intensifies rate-cut pressure
Australia unexpectedly posted back-to-back trade deficits as coal and metal exports slumped, sending the currency lower and intensifying pressure on the central bank to resume cutting interest rates. Imports outpaced exports by AUD480m in February, from a  revised AUD971m deficit a month earlier, the first consecutive shortfalls in two years, a Bureau of Statistics report showed yesterday. The data boost the case for Reserve Bank of Australia Governor Glenn Stevens to lower rates at the 1 May policy meeting  because overseas shipments account for about a quarter of gross domestic product. (Bloomberg)

UK: House prices surge most in almost three years
U.K. house prices rose the most in almost three years in March, boosted by demand from first-time buyers before the expiry of a tax holiday on some home purchases, Halifax said. Prices jumped 2.2% from February to an average GBP163,803 (USD260,300), the mortgage unit of Lloyds Banking Group Plc said in a statement in London yesterday. That‟s the biggest monthly increase since May 2009. From a year earlier, values were up 0.8%. (Bloomberg)

EU: ECB keeps rate at 1% as economy shrinks, German price risks
The European Central Bank left interest rates unchanged as policy makers balance the threat of inflation in Germany against the need to fight the sovereign debt crisis. ECB officials meeting in Frankfurt yesterday kept the benchmark rate at a  record low of 1%. While nations from Greece to Spain are battling recessions and record unemployment, workers in Germany are winning some of the biggest pay increases in 20 years, widening the gaps between Europe‟s largest economy and its euro-area peers. (Bloomberg)

US: Service industries kept expanding in March
Service industries in the U.S. grew in March, capping the strongest quarter in a year and indicating the world‟s largest economy will keep generating jobs. The Institute for Supply Management‟s non-manufacturing index fell to 56 from a one-year high of 57.3 in February, the Tempe, Arizona-based group‟s data showed yesterday. Last month‟s reading still topped the average for the previous economic expansion.  Another report showed companies added an estimated 209,000 workers to payrolls in March. Sales at businesses like restaurants and retailers are climbing as an improving labor market shores up household incomes and confidence in the face of more expensive gasoline. (Bloomberg)

Source: OSK188 

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