On The Platter
1Q2012 REPORT CARD:
Turning Cautious
Despite elements of seasonality in the just concluded
reporting season, there was a greater number of earnings misses among the big
caps, with the upgrade to downgrade ratio (UDR)
falling to 0.5x from the 4Q2011 high of 0.9x. There were major disappointments
in the steel, plantation and oil & gas sectors but positive surprises in financials/insurers.
Given the potential bugbears in the form of (i) the upcoming makeor-break
elections for Greece slated for 17 June, (ii) possibility of a Spain bailout
(iii) FOMC’s meeting on 19-20 June, and (iv) the technical violation of the US
markets last Friday, there are enough reasons for investors to stay defensive
while positioning for rebound trades in the event of a sharp pullback. The
upcoming listing of 2 major IPOs (Gas Malaysia and Felda Global Ventures)
should provide near-term catalysts and support for the FBM KLCI. We like the
banking, consumer, construction and oil & gas sectors.
MALAYSIA AIRPORT
HOLDINGS (FV: RM7.53 – BUY) Company
Update: KLIA2 Takes Shape
Market Review
Weaker sentiment. The
FBM KLCI shed 7.08 pts to 1,573.59 on Friday. News over the weekend
included: Petronas Dagangan Bhd has
entered into 6 conditional share sale and
purchase agreements for the proposed acquisitions of downstream companies of Petronas
and its subsidiaries in the Philippines, Vietnam, Thailand and Malaysia for
about USD62m (RM197.3m) cash, AirAsia Bhd is mulling over the possibility of
entering India as the government there is considering allowing foreign airlines
to acquire stakes in ailing Indian carriers and Glomac Bhd is buying 191.75
acres of agricultural land in Dengkil, Selangor for RM66.8m or RM8/sq ft from
Lee Chin Cheng Dengkil Oil Palm Plantations SB.
Meanwhile, loan demand from both businesses and households was sustained
in April 2012 although household loans grew at a slower pace and MIMB
Investment Bank Bhd is now 100%-subsidiary of Hong Leong Capital Bhd. On the
global front, both the US markets and crude oil prices closed lower on Friday.
The price of crude oil
declined by USD3.30 to close at SD83.23/barrel.
MEDIA HIGHLIGHTS
Dow Jones declines
2.2%
The Dow Jones Industrial Average declined 2.2% after the Labor Department said payrolls
climbed by 69,000 last month, less than the most-pessimistic forecast in a
Bloomberg News survey of 87 economists. The unemployment rate increased to 8.2%
from 8.1% in April. More than USD1.63trn has been erased from US equity values
and USD5.92trn from world stocks this quarter as concern Greece will leave the
euro and slowing Chinese manufacturing pushed government bond yields in the US
and Germany to record lows. (Bloomberg)
KPJ acquires RM14m
building in Petaling for pharmaceutical expansion
KPJ Healthcare Bhd’s unit Pharmacy Alliance SB will acquire
a piece of freehold property in Petaling, Selangor, for RM14.2m from Lewre
International SB. In an exchange filing last Friday, it said the property,
located on land measuring 5,223 sq m, is strategic to the group’s plans to
develop and expand its pharmaceutical business. (Malaysian Reserve)
UMW Toyota mulls
assembling more models at Malaysian plant
Exclusive distributor of Toyota vehicles UMW Toyota SB said
the Japanese carmaker is mulling the idea of assembling more models, in
addition to the Avanza, Vios and the recently-launched all-new Camry, at its
plant in Malaysia. UMW Toyota Motor president Ismet Suki said the plan will,
however, depend on the potential market volume and the new National Automotive
Policy (NAP). (Malaysian Reserve)
Indonesia’s proposed
ownership cap favours CIMB, Maybank
The Indonesian central bank’s proposal to cap single
ownership at 40% for new investment will work in favour of CIMB Group Holdings
Bhd and Malayan Banking Bhd (Maybank) according to analysts. On the other hand,
analysts believe the imposition of bank ownership cap on new investments could
deter RHB Capital Bhd and Affin Holdings Bhd from venturing into Indonesia. It
is understood that banks with a high good corporate governance score would not
be subjected to changes in the ownership structure. (Financial Daily)
AirAsia hastens
search for Malaysia CEO
AirAsia Bhd is accelerating its search for a CEO to oversee
its Malaysian operations. Four names are being considered for the position,
said persons familiar with the matter. This comes as group CEO Tan Sri Tony Fernandes
relocates his office to Jakarta, which is the regional headquarters, in an
effort to boost AirAsia’s growth in Indonesia and the region. (Financial Daily)
Manulife: Room for
new players amid insurance consolidation
Malaysia’s insurance industry may be undergoing a
consolidation, but there is still room for new players in the market, says
Manulife Financial executive vice-president and general manager for South East
Asia, Philip Hampden-Smith. He likened the consolidation the local insurance
market is undergoing to the same development the banking sector went through
some years ago. (Financial Daily)
ECONOMIC
HIGHLIGHTS
China:
Non-manufacturing growth moderates for a second month
China’s non-manufacturing industries expanded at the slowest
pace in more than a year, as export orders declined and weakness in real estate
countered strength in retailing and leasing, an official survey indicated. The
purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National
Bureau of Statistics and China Federation of Logistics and Purchasing said.
That’s the lowest reading since March 2011 when the federation started
seasonally adjusting the data. The report adds to evidence of slower growth in
the world’s second-biggest economy as Europe’s debt crisis crimps overseas
demand and government curbs on real estate feed through to more industries.
(Bloomberg)
Japan: Noda to
reshuffle cabinet in bid for opposition backing
Japanese Prime Minister Yoshihiko Noda will reshuffle the
Cabinet today in an effort to win opposition backing for doubling the
consumption tax, after his bid to heal a breach in the ruling party failed.
“I’ll map out the scale of Cabinet changes,” Noda said. The prime minister may
bow to opposition pressure to fire Transport Minister Takeshi Maeda and Defense
Minister Naoki Tanaka, who were censured by parliament’s upper house in April. The
premier said he was unable yesterday, for the second time in a week, to
persuade ruling party powerbroker Ichiro Ozawa to drop his opposition to a tax
increase, hindering efforts to pay for rising welfare costs. Ozawa’s stance
threatens to widen a rift in the Democratic Party of Japan three years after it
ousted the Liberal Democratic Party from half a century of rule. Noda has
staked his career on reaching a deal with the opposition to double the 5% tax
and address a debt burden that Fitch Ratings cited in cutting Japan’s sovereign
credit rating. (Bloomberg)
EU: Spain seeks
united effort on banks as pressure builds on Merkel
Spanish Prime Minister Mariano Rajoy said European leaders
should reinforce efforts to protect euro-area banks, ratcheting up pressure on
German Chancellor Angela Merkel to back new ideas for a resolution of the debt
crisis. With markets bracing for further deterioration in Spain’s finance
sector and a possible Greek departure from the 17-member euro area, Rajoy on 2
June added his voice to calls for a more robust “banking union” in Europe,
lending his support for a centralized system to re-capitalize lenders. On the
same day, Merkel toughened her opposition to euro-area debt sharing, telling
members of her party in Berlin that “under no circumstances” would she agree to
German-backed euro bonds. “The EU needs to reinforce its common institutional
architecture so that investors regain confidence in the single currency,” Rajoy
said in the Spanish coastal town of Sitges near Barcelona. “Spain will emerge
from the storm through its own efforts and with the support of our European
partners.” (Bloomberg)
US: Employers add
fewest workers in year as jobless rate rises
The US labor market stumbled in May as employers added the
fewest workers in a year and the unemployment rate rose, dealing a blow to
President Barack Obama’s re-election bid and raising the odds the Federal
Reserve will take steps to boost growth. Payrolls climbed by 69,000 last month,
less than the most- pessimistic forecast in a Bloomberg News survey, after a
revised 77,000 gain in April that was smaller than initially estimated, Labor Department
figures showed. The median projection called for a 150,000 May advance. The
jobless rate rose to 8.2% from 8.1%. The Dow Jones Industrial Average wiped out
its 2012 advance, the yield on the benchmark 10-year Treasury note fell below
1.5% for the first time and commodity prices slumped. The labor data reinforced
concern that the global economy is heading for a third mid-year setback.
(Bloomberg)
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