Written by DBS Group Research
Friday, 30 October 2009 10:44
Asia’s V-shaped recovery continues and may be the sharpest on record. Industrial output in the Asia-9 has now surpassed pre-crisis levels and shows little evidence of slowing. The rebound in the Asia-8, which excludes China, is even sharper, though that’s mainly because the fall in the Asia-8 was sharper too.
There are two important points to remember when considering this V-shaped recovery. First, Asia managed this with zero help from the US. By July, Asia’s industrial output had returned to pre-crisis levels but import demand from the US had turned up only in June.
Second, it’s not the first time this has happened. Asia beat the US out of the 2000/01 downturn by a good four months. This fact and the reasons behind it are what allowed us to say, all the way back in December 2008, that Asia would pull the same trick this time — even more forcefully — when everyone else was saying that the region would have to wait for the US to recover before it could.
Times change, and the biggest change under way in the global economy today is how much Asia contributes each year to global growth relative to how much the US does, or used to. More than anything else, this shift explains why Asia was able to pull off the V-shaped recovery that it did with no help from the US.
What next?
The V-shaped recovery has manifested itself in double-digit GDP growth since 2Q09. Virtually all of Asia, save for Taiwan and Indonesia, recorded growth rates in the teens in 2Q09 — Singapore 19% (quarter-on-quarter, saar), China (14%), Hong Kong, Malaysia, India and Korea, all 11%-13%.
So far into 3Q, the race continues. Three countries have reported 3Q growth and all remain in double-digit territory. Singapore came first with a 15% showing, followed by China at 10% and Korea at 12%. Korea’s growth was an acceleration from an already high 11% in 2Q09.
The square root of V
The question is, can this continue? The answer is, of course not, for any of a thousand reasons (three are discussed below).
Double-digit growth will soon give way to sideways movement in output levels. Asia’s V-shaped recovery will turn into a square-root-shaped recovery. That is, a sharp drop, a sharp rise, and then a palpable turn sideways.
When will Asia hit the kink in the square-root sign? Probably by the end of this year or early-2010. In terms of GDP growth, Asia will experience a second quarter of double-digit growth in 3Q09 that should drop to high single digits (6%-8%) in the fourth quarter.
By 1Q10, growth should be back to “normal” for most of the countries in the region.
What will slow things down?
Three things will constrain growth very soon: demand, supply and policy. On the demand side, growth is running at double-digit rates only because it fell at double-digit rates earlier on.
What Asia is experiencing now is the ‘snapback’ from a series of 4-5 events in late-2008 that included, perhaps most notably, the shell shock from the collapse of Lehman Bros in September 2008. The sharp collapse had a bottom.
The equally sharp rebound will have a top. With speeds on both sides of the trough about the same, the upswing should last for about as long as the downswing did: two quarters. And only as long as the downturn — for the upswing is no less and no more than its flip side.
And if demand did surge for considerably longer, there’s the supply side to contend with. Output can grow as fast as demand does so long as there is excess capacity, as is the case now. But with demand and supply soaring back, excess capacity will soon vanish. And once demand hits the brick wall of capacity constraints, output can expand only as fast as those walls can be moved.
Policy tightening on the way
Finally, policy will start to rein in demand and growth too, and probably sooner than most have been imagining. Two quarters of double-digit demand and output growth is marvellous but once excess capacity is exhausted — and at current rates it will be by year-end — double-digit demand growth implies double-digit inflation in most countries. That’s too high. Policies will change.
In some countries, policies will tighten “automatically” as expansionary fiscal policies run their course and are not renewed. In some, planned spending may even be clawed back as the need diminishes and the weight of deficits grows on the minds of authorities.
In all countries, monetary tightening will be a key feature of 2010. In general, we have been expecting monetary tightening to begin in earnest around 2Q10, with a few exceptions.
On the tighter side, we have been looking for India to start hiking rates in January and that remains very much on the cards after yesterday’s hike in the SLR by the RBI. We have also been expecting Korea to start hiking rates in 1Q and with the acceleration in GDP there in 3Q09 (to 12% from 11%) the risk is surely that hikes come sooner rather than later.
For Asia overall, much will depend on China, where we expect rate hikes and currency appreciation to begin in 2Q10. We look for gradually higher interest rates with the benchmark 1Y lending rate rising by 81bps (to 6.12%) by the end of the year.
We also expect the authorities to allow the currency to resume its appreciation vis-a-vis the US dollar in 2Q10 and to strengthen to 6.61 per dollar by year-end.
Currency appreciation in China will set the stage for appreciation elsewhere in Asia. With China’s yuan headed north, other countries will be able to follow suit more comfortably than if they went solo.
Asia-10 currencies have already risen 5.5% on average against the dollar since December 2008 and we expect another 6%-7% rise from current levels in 2010.
Inflows at the gate: bolt it shut?
Other things equal, currency appreciation and higher interest rates would help cool regional economies and keep a lid on imported inflation as well. The trouble is, higher interest rates and the prospect of currency gains have the tendency to attract foreign capital.
And such inflows have the tendency to wreak havoc with the best laid monetary plans. Inflows drive interest rates back down and push currencies further north than officials wanted. Hike rates again and you just get another round of inflow: Asia-vu.
There’s no easy “exit strategy” for loose monetary policies when capital accounts are open and inflows are pounding on the gate. Central banks can target interest rates or they can target the currency. But so long as capital accounts are open, they can’t target both. It’s one of those tough facts of life for central bankers.
The solution, if it can be called such, is to control inflows. The trouble is, everyone hates controls and for good reason. They are clumsy and messy and partly for this reason have the awful tendency to change from day to day.
But they do give central banks a stronger hand in controlling interest rates and exchange rates. And for this reason the control option always comes back to the fore when inflows are pounding on the door.
We have little doubt central banks will be trying to raise interest rates in 2010. We have even less doubt that strong capital inflows into the region will be a key feature of 2010 and that currencies will be under a lot of upward pressure. Better prepare for yet another controls debate in 2010 too.
This article appeared in The Edge Financial Daily, October 30, 2009.
October 31, 2009
Local bond market to pick up next year
Written by Joy Lee
Friday, 30 October 2009 11:01
KUALA LUMPUR: The local bond market could get a boost next year as demand is expected to increase with likely re-ratings on corporate earnings and smaller Malaysian Government Securities (MGS) issuance.
“We expect a lot of re-rating on corporate earnings, which is positive for the bond market especially on the credit side.
“You will start to see re-rating on bond issuers rather than downgrades as what we saw previously. So, the trend in the bond market will tweak and turn a bit next year,” AmInvestment Group Bhd’s head of fixed income funds management, Goh Wee Peng, said yesterday.
Speaking after the launch of AmMutual’s latest close-ended bond fund, AmConstant 11/11, Goh said the government’s forecast of a smaller fiscal deficit for 2010 would also mean a smaller issuance of MGS.
During the announcement of the Budget last week, the government had said it would trim fiscal deficit to 5.6% of gross domestic product (GDP) from 7.4% of GDP in 2010, given that the country posted the largest deficit in the region this year.
“They have drastically shrunk deficit to 5.6%, which is out of everyone’s expectations. That is hinting to the market that there will be smaller -than-expected bond issuance for next year, which is very positive for the bond market,” she said.
Goh said the issuance of multi-billion worth of MGS this year caused market players to grow “tired” and most “reserved their bullets” in anticipation of more bonds to come on board in the near term.
Goh. Photo by Chu Juck Seng
“Next year, with the shrink in the deficit, we will likely see about close to RM30 billion reduction in MGS issuance. This will spur a bit of demand. With less MGS issuance, more people will be inclined to buy as they know it is limited,” she said.
AmConstant 11/11, the fifth under the AmConstant series, will be investing mainly in MGS and local bonds carrying a minimum ‘A’ rating by Rating Agency Malaysia Bhd (RAM) during the tenure of the fund, which is two years. The fund would buy and hold short-term local bonds to minimise volatility and interest rate fluctuations while preserving its capital.
Goh noted that FD rates were at an average of 2.5% to 3% and the low interest rate environment was expected to prevail at least till the middle of next year.
Although there was certainty of a global recovery, she said the mixed set of data coming from the US created volatility in the market.
“In Asia, our peers have slowly come out of the woods. But in Malaysia, although we benefited from global recovery, you don’t see a very fast-paced pick-up on export figures or CPI (consumer price index) in the last few months. It is a better-than-expected contraction but it is not a positive trend yet.
“And next year, the government’s forecast GDP is not that rosy to go back to our previous GDP growth of 5% to 6%. So, we don’t think they will take the drastic step of raising interest rates as it would be detrimental to growth.
“They will still let the interest rate stay very accommodative in this low environment for at least two to three quarters to come before all the follow-through data points to a clearer picture of a clear light at the end of the tunnel. But any possibility of a rate hike would be very small and very slow,” she said.
This article appeared in The Edge Financial Daily, October 30, 2009.
Friday, 30 October 2009 11:01
KUALA LUMPUR: The local bond market could get a boost next year as demand is expected to increase with likely re-ratings on corporate earnings and smaller Malaysian Government Securities (MGS) issuance.
“We expect a lot of re-rating on corporate earnings, which is positive for the bond market especially on the credit side.
“You will start to see re-rating on bond issuers rather than downgrades as what we saw previously. So, the trend in the bond market will tweak and turn a bit next year,” AmInvestment Group Bhd’s head of fixed income funds management, Goh Wee Peng, said yesterday.
Speaking after the launch of AmMutual’s latest close-ended bond fund, AmConstant 11/11, Goh said the government’s forecast of a smaller fiscal deficit for 2010 would also mean a smaller issuance of MGS.
During the announcement of the Budget last week, the government had said it would trim fiscal deficit to 5.6% of gross domestic product (GDP) from 7.4% of GDP in 2010, given that the country posted the largest deficit in the region this year.
“They have drastically shrunk deficit to 5.6%, which is out of everyone’s expectations. That is hinting to the market that there will be smaller -than-expected bond issuance for next year, which is very positive for the bond market,” she said.
Goh said the issuance of multi-billion worth of MGS this year caused market players to grow “tired” and most “reserved their bullets” in anticipation of more bonds to come on board in the near term.
Goh. Photo by Chu Juck Seng
“Next year, with the shrink in the deficit, we will likely see about close to RM30 billion reduction in MGS issuance. This will spur a bit of demand. With less MGS issuance, more people will be inclined to buy as they know it is limited,” she said.
AmConstant 11/11, the fifth under the AmConstant series, will be investing mainly in MGS and local bonds carrying a minimum ‘A’ rating by Rating Agency Malaysia Bhd (RAM) during the tenure of the fund, which is two years. The fund would buy and hold short-term local bonds to minimise volatility and interest rate fluctuations while preserving its capital.
Goh noted that FD rates were at an average of 2.5% to 3% and the low interest rate environment was expected to prevail at least till the middle of next year.
Although there was certainty of a global recovery, she said the mixed set of data coming from the US created volatility in the market.
“In Asia, our peers have slowly come out of the woods. But in Malaysia, although we benefited from global recovery, you don’t see a very fast-paced pick-up on export figures or CPI (consumer price index) in the last few months. It is a better-than-expected contraction but it is not a positive trend yet.
“And next year, the government’s forecast GDP is not that rosy to go back to our previous GDP growth of 5% to 6%. So, we don’t think they will take the drastic step of raising interest rates as it would be detrimental to growth.
“They will still let the interest rate stay very accommodative in this low environment for at least two to three quarters to come before all the follow-through data points to a clearer picture of a clear light at the end of the tunnel. But any possibility of a rate hike would be very small and very slow,” she said.
This article appeared in The Edge Financial Daily, October 30, 2009.
Market rises, but well off highs
Written by InsiderAsia
Friday, 30 October 2009 17:37
The overnight rally on Wall Street lifted share prices on Bursa Malaysia higher at the open on Friday, Oct 30.
However, the local market closed well off its earlier highs due to profit-taking activities and uncertainty over the sustainability of gains on Wall Street. Most regional bourses fared similarly, opening sharply higher but paring much of their gains later in the day.
The FBM KLCI rose as much as seven points in the early morning, but ended the day just 1.5 points higher at 1,243.3. Market breadth was positive, with advancing stocks beating declining ones by a two-to-one ratio at the close. Trading volume totalled 999 million shares, roughly the same for this week.
Actively traded stocks include Time, KNM, Time dotCom, Sernkou, 3A Resources, MRCB and Lityan. Major gainers include Lityan, LKT, Berjaya Land and CIMB. Major losers include PPB, Petronas Dagangan and MISC.
Investors were earlier assuaged by the US’ 3Q GDP data, which showed the US economy returning to growth with a 3.5% annualised growth – after four quarters of contraction. The rise was higher than market expectations of 3.2%. This in turn led Wall Street’s major indices rallying with their best one-day percentage gain in three months.
The GDP data, which confirms the US has finally moved out of the recession, helped calm investors’ fears after the recent steep falls on Wall Street, and more mixed US economic signals, especially on housing and consumer confidence in the past week. Investors also welcomed data from Japan showing its unemployment rate fell to 5.3% in September from 5.5% in August.
Investors have looked towards further signs of economic recovery and better-than-expected US corporate earnings to justify the rally, although many view that global stock prices in general have also run ahead of the recovery.
While the recession is officially over, the road to recovery will likely be slow, especially in the US. Unemployment is still high, while the recovery in consumer confidence and the housing sector is still patchy, even though the worst is behind us. On the local front, investors will look towards the upcoming earnings season for further leads.
Friday, 30 October 2009 17:37
The overnight rally on Wall Street lifted share prices on Bursa Malaysia higher at the open on Friday, Oct 30.
However, the local market closed well off its earlier highs due to profit-taking activities and uncertainty over the sustainability of gains on Wall Street. Most regional bourses fared similarly, opening sharply higher but paring much of their gains later in the day.
The FBM KLCI rose as much as seven points in the early morning, but ended the day just 1.5 points higher at 1,243.3. Market breadth was positive, with advancing stocks beating declining ones by a two-to-one ratio at the close. Trading volume totalled 999 million shares, roughly the same for this week.
Actively traded stocks include Time, KNM, Time dotCom, Sernkou, 3A Resources, MRCB and Lityan. Major gainers include Lityan, LKT, Berjaya Land and CIMB. Major losers include PPB, Petronas Dagangan and MISC.
Investors were earlier assuaged by the US’ 3Q GDP data, which showed the US economy returning to growth with a 3.5% annualised growth – after four quarters of contraction. The rise was higher than market expectations of 3.2%. This in turn led Wall Street’s major indices rallying with their best one-day percentage gain in three months.
The GDP data, which confirms the US has finally moved out of the recession, helped calm investors’ fears after the recent steep falls on Wall Street, and more mixed US economic signals, especially on housing and consumer confidence in the past week. Investors also welcomed data from Japan showing its unemployment rate fell to 5.3% in September from 5.5% in August.
Investors have looked towards further signs of economic recovery and better-than-expected US corporate earnings to justify the rally, although many view that global stock prices in general have also run ahead of the recovery.
While the recession is officially over, the road to recovery will likely be slow, especially in the US. Unemployment is still high, while the recovery in consumer confidence and the housing sector is still patchy, even though the worst is behind us. On the local front, investors will look towards the upcoming earnings season for further leads.
October 30, 2009
Follow-through rebound likely
SHARE prices on Bursa Malaysia continued to head south in tandem with the weak performances on regional stock markets on Wednesday. Its overall declining counters outpaced advancing counters by 468 to 216.
The Kuala Lumpur Composite Index (KLCI) fell from its intra-day high of 1,244.04 to intra-week low of 1,236.20 yesterday.
It closed at 1,241.75 points, giving a day-on-day loss of 7.30 points, or 0.58 per cent.
SILK Holdings Bhd staged a technical rebound yesterday. Its daily price trend closed at 46 sen, posting a day-on-day gain of 5.5 sen, or 13.58 per cent.
Chartwise, SILK Holdings' daily price trend rose from a low of 19 sen on September 18 to an intra-day high of 54.5 sen on October 14, recording a gain of 35.5 sen, or 186.84 per cent.
Its hourly price trend staged a decisive breach of the upper resistance (B1:B2) of its short-term downtrend channel (B1:B2 and B3:B4) yesterday and had since continued to stay above it.
Its hourly fast MACD (moving average convergence divergence) continued to stay above its hourly slow MACD yesterday. Both its hourly fast and slow MACDs continued to stay above their respective neutral reference lines.
SILK Holdings' hourly price trend is likely to stage a follow-through rebound in its bid to stage a re-challenge of its previous resistance high.
The Kuala Lumpur Composite Index (KLCI) fell from its intra-day high of 1,244.04 to intra-week low of 1,236.20 yesterday.
It closed at 1,241.75 points, giving a day-on-day loss of 7.30 points, or 0.58 per cent.
SILK Holdings Bhd staged a technical rebound yesterday. Its daily price trend closed at 46 sen, posting a day-on-day gain of 5.5 sen, or 13.58 per cent.
Chartwise, SILK Holdings' daily price trend rose from a low of 19 sen on September 18 to an intra-day high of 54.5 sen on October 14, recording a gain of 35.5 sen, or 186.84 per cent.
Its hourly price trend staged a decisive breach of the upper resistance (B1:B2) of its short-term downtrend channel (B1:B2 and B3:B4) yesterday and had since continued to stay above it.
Its hourly fast MACD (moving average convergence divergence) continued to stay above its hourly slow MACD yesterday. Both its hourly fast and slow MACDs continued to stay above their respective neutral reference lines.
SILK Holdings' hourly price trend is likely to stage a follow-through rebound in its bid to stage a re-challenge of its previous resistance high.
KL lower on economic concerns
Share prices on Bursa Malaysia ended easier yesterday as the market stayed in negative territory in tandem with the losses on regional markets, dealers said.
Thye also said investors had reassessed their risk on renewed concerns over the pace of the global economy, after discouraging data on new US housing sales.
The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) was 7.3 points lower at 1,241.75 after opening 5.46 points easier at 1,243.59. The FBM Emas Index dropped 54.11 points to 8,313, the FBM Top 100 gave up 51.78 points to 8,113.29 while the FBM 70 fell 67.78 points to 8,102.13 and the FBM ACE Index declined 89.9 points to 4,259.10. The Finance Index plunged 107.19 points to 10,441.14, the Industrial Index dropped 9.09 points to 2,670.16 and the plantation Index declined 43.4 points to 6,112.53.
Losers led gainers by 467 to 216 while 234 counters were unchanged and 357 others untraded. Turnover was lower at 932.963 million shares worth RM1.3 billion from the 939.326 million shares worth RM1.093 billion on Wednesday.
For the heavyweights, Sime Darby eased 9 sen to RM8.90, Maybank declined 12 sen to RM6.63, CIMB Group Holdings lost 12 sen to RM12.32 and Tenaga Nasional slid 4 sen to RM8.44. As for the actives, KNM Group declined 2 sen to 77.5 sen, Ingress slipped 7 sen to 76 sen, TPC Plus added 1 sen to 30 sen and DPS Resources rose 1.5 sen to 19 sen.
Shares of auto parts suppliers such as Tracoma and Hirotako rose following the announcement of the revised National Automotive Policy (NAP) on Wednesday.
Hirotako rose 1.5 sen to 91 sen and Tracoma increased 1 sen to 30 sen.
The main market turnover rose to 806.231 million shares worth RM1.251 billion from 791.859 million shares worth RM1.042 billion on Wednesday.
The ACE Market volume declined to 35.911 million units valued at RM8.884 million from 71.012 million units valued at RM16.766 million previously.
Warrants increased to 31.88 million shares worth RM7.383 million from 18.642 million shares worth RM4.281 million previously.
Meanwhile, the FBM KLCI futures closed lower in line with the easier cash market, dealers said.
Spot month October 2009 declined seven points to 1,238.5, November 2009 lost six points to 1,239, December 2009 dropped 4.5 points to 1,240.5 and March 2010 went down 5.5 points to 1,240.5.
Turnover was lower at 13,397 lots compared with 14,439 lots on Wednesday while open interests rose to 22,664 contracts from 17,602 contracts previously. - Bernama
Thye also said investors had reassessed their risk on renewed concerns over the pace of the global economy, after discouraging data on new US housing sales.
The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) was 7.3 points lower at 1,241.75 after opening 5.46 points easier at 1,243.59. The FBM Emas Index dropped 54.11 points to 8,313, the FBM Top 100 gave up 51.78 points to 8,113.29 while the FBM 70 fell 67.78 points to 8,102.13 and the FBM ACE Index declined 89.9 points to 4,259.10. The Finance Index plunged 107.19 points to 10,441.14, the Industrial Index dropped 9.09 points to 2,670.16 and the plantation Index declined 43.4 points to 6,112.53.
Losers led gainers by 467 to 216 while 234 counters were unchanged and 357 others untraded. Turnover was lower at 932.963 million shares worth RM1.3 billion from the 939.326 million shares worth RM1.093 billion on Wednesday.
For the heavyweights, Sime Darby eased 9 sen to RM8.90, Maybank declined 12 sen to RM6.63, CIMB Group Holdings lost 12 sen to RM12.32 and Tenaga Nasional slid 4 sen to RM8.44. As for the actives, KNM Group declined 2 sen to 77.5 sen, Ingress slipped 7 sen to 76 sen, TPC Plus added 1 sen to 30 sen and DPS Resources rose 1.5 sen to 19 sen.
Shares of auto parts suppliers such as Tracoma and Hirotako rose following the announcement of the revised National Automotive Policy (NAP) on Wednesday.
Hirotako rose 1.5 sen to 91 sen and Tracoma increased 1 sen to 30 sen.
The main market turnover rose to 806.231 million shares worth RM1.251 billion from 791.859 million shares worth RM1.042 billion on Wednesday.
The ACE Market volume declined to 35.911 million units valued at RM8.884 million from 71.012 million units valued at RM16.766 million previously.
Warrants increased to 31.88 million shares worth RM7.383 million from 18.642 million shares worth RM4.281 million previously.
Meanwhile, the FBM KLCI futures closed lower in line with the easier cash market, dealers said.
Spot month October 2009 declined seven points to 1,238.5, November 2009 lost six points to 1,239, December 2009 dropped 4.5 points to 1,240.5 and March 2010 went down 5.5 points to 1,240.5.
Turnover was lower at 13,397 lots compared with 14,439 lots on Wednesday while open interests rose to 22,664 contracts from 17,602 contracts previously. - Bernama
Ringgit depreciates as as stock marts fall
RINGGIT
THE ringgit ended lower against the US dollar yesterday due to losses on stock markets locally and regionally, dealers said.
At 5pm, the ringgit depreciated to 3.4230/4280 against the US dollar from Wednesday's closing of 3.4215/4245.
One of the dealers said that Bank Negara Malaysia's decision to leave interest rates unchanged at two per cent yesterday was also among the factors behind the weakening ringgit.
"Expectation is building up that monetary conditions will remain easy at least until the first half of 2010, reflective of fiscal policy making its way into the real sector of the economy," the dealer said.
The strengthening US dollar also further pressured the ringgit, the dealer said, adding that concern over a global economic recovery was dampening demand for emerging-market assets.
At close, the ringgit was traded mixed against other major currencies.
The local currency rose against the Singapore dollar to 2.4440/4491 from 2.4445/4471 on Wednesday but weakened against the Japanese yen at 3.7744/7803 from 3.7496/7552 previously.
The ringgit declined against the British pound to 5.6209/6305 from 5.6007/6093 on Wednesday but gained against the euro at 5.0472/0556 from 5.0635/0708 previously.
INTERBANK RATES
SHORT-TERM rates were steady at close yesterday after Bank Negara intervened in the money market to absorb surplus funds, dealers said.
Following that, the overnight rate was fixed at 1.92 per cent while the one-week, two-week and three-week rates were at 1.96 per cent, 1.98 per cent and 2.01 per cent, respectively.
The total liquidity in the conventional system declined to RM23.03 billion from an earlier estimate of RM29.57 billion while Islamic funds decreased to RM5.44 billion from an earlier forecast of RM4.89 billion.
Bank Negara conducted four conventional and two Al-Wadiah tenders as well as one repo and one Commodity Murabahah Programme tender, this morning. The central bank later called a conventional tender for RM23 billion for one-day money and an Al-Wadiah tender for RM5.4 billion also for one-day money. - Bernama
KLIBOR
THE three-month Kuala Lumpur Interbank Offered Rates (KLIBOR) futures contracts on Bursa Malaysia Derivatives closed higher in thin trading yesterday, dealers said.
At close, only one contract month was traded with March 2010 increasing two ticks to settle at 97.63 with 30 lots traded.
The underlying three-month KLIBOR was fixed at 2.16 per cent.
As for the five-year Malaysian Government Securities (MGS) futures, there was no trading recorded throughout the day. - Bernama
THE ringgit ended lower against the US dollar yesterday due to losses on stock markets locally and regionally, dealers said.
At 5pm, the ringgit depreciated to 3.4230/4280 against the US dollar from Wednesday's closing of 3.4215/4245.
One of the dealers said that Bank Negara Malaysia's decision to leave interest rates unchanged at two per cent yesterday was also among the factors behind the weakening ringgit.
"Expectation is building up that monetary conditions will remain easy at least until the first half of 2010, reflective of fiscal policy making its way into the real sector of the economy," the dealer said.
The strengthening US dollar also further pressured the ringgit, the dealer said, adding that concern over a global economic recovery was dampening demand for emerging-market assets.
At close, the ringgit was traded mixed against other major currencies.
The local currency rose against the Singapore dollar to 2.4440/4491 from 2.4445/4471 on Wednesday but weakened against the Japanese yen at 3.7744/7803 from 3.7496/7552 previously.
The ringgit declined against the British pound to 5.6209/6305 from 5.6007/6093 on Wednesday but gained against the euro at 5.0472/0556 from 5.0635/0708 previously.
INTERBANK RATES
SHORT-TERM rates were steady at close yesterday after Bank Negara intervened in the money market to absorb surplus funds, dealers said.
Following that, the overnight rate was fixed at 1.92 per cent while the one-week, two-week and three-week rates were at 1.96 per cent, 1.98 per cent and 2.01 per cent, respectively.
The total liquidity in the conventional system declined to RM23.03 billion from an earlier estimate of RM29.57 billion while Islamic funds decreased to RM5.44 billion from an earlier forecast of RM4.89 billion.
Bank Negara conducted four conventional and two Al-Wadiah tenders as well as one repo and one Commodity Murabahah Programme tender, this morning. The central bank later called a conventional tender for RM23 billion for one-day money and an Al-Wadiah tender for RM5.4 billion also for one-day money. - Bernama
KLIBOR
THE three-month Kuala Lumpur Interbank Offered Rates (KLIBOR) futures contracts on Bursa Malaysia Derivatives closed higher in thin trading yesterday, dealers said.
At close, only one contract month was traded with March 2010 increasing two ticks to settle at 97.63 with 30 lots traded.
The underlying three-month KLIBOR was fixed at 2.16 per cent.
As for the five-year Malaysian Government Securities (MGS) futures, there was no trading recorded throughout the day. - Bernama
#Stocks to watch:* LKT, Lityan, Scomi, Alam Maritim
Written by Loong Tse Min
Friday, 30 October 2009 08:02
KUALA LUMPUR: After several days of losses, investors sentiment could perk up on Friday, Oct 30, as Wall Street snapped its recent losses following a recovery in the US economy in the third quarter.
The US government's first estimate of US gross domestic product showed the economy expanded at an annual rate of 3.5% in 3Q, showing signs it was emerging from the worst recession in 70 years. However, economists' concerns are whether the growth is sustainable once the subsidies end.
The Dow Jones industrial average gained 199.89 points, or 2.05%, to end at 9,962.58. The Standard & Poor's 500 Index jumped 2.25%, to 1,066.11 -- marking its biggest one-day percentage gain in three months. The Nasdaq Composite Index jumped 37.94 points, or 1.84%, to close at 2,097.55.
At Bursa, stocks to watch are LKT INDUSTRIAL BHD [], LITYAN HOLDINGS BHD [], SCOMI GROUP BHD [], ALAM MARITIM RESOURCES BHD [] while other companies which could attract interest are banks, PLANTATION []s, SUNRISE BHD [], KURNIA ASIA BHD [], YTL E-SOLUTIONS BHD [] and Rubberex Corp (M) Bhd.
LKT minority shareholders were offered RM2.10 per share, or 30 sen above the last traded price, by major shareholder Precision Engineering - a unit of Temasek Holdings - which wants to take it private.
Lityan, which has regularised its financial condition, will resume trading on Friday. The reference price is RM1 and the upper trading limit shall be 400% above the reference price whereas the lower limit shall be 30% for the whole day.
Scomi subsidiary Scomi International Pte Ltd has sealed a multi-year distributor agreement with UK's Artevea Digital Ltd, an expert in terrestrial trunked radio communication systems, to offer the latter's extensive line of radio mobile communication solutions globally.
Alam Maritim's 60% owned subsidiary Workboat International DMCCO was awarded two contracts from a main contractor of oil majors that is cumulatively worth RM36.98 million.
Banks and plantations, which came under profit taking recently, should show some recovery, underpinned by the improved market sentiment.
Sunrise expects to launch at least two real estate projects in the Klang Valley within its current financial year ending June 2010 and add to its unbilled property sales, which stand at some RM860 million.
Kurnia Asia posted a net profit of RM32.25 million in the three months to Sept 30, 2009 versus a net loss of RM12.11 million a year earlier due to a turnaround in the investment portfolio and improved underwriting performance.
YTL E-Solutions has appealed to the Malaysian Communications and Multimedia Commission (MCMC) against a RM1.9 million fine meted out by the latter for its failure to meet stipulated targets in its WiMAX rollout.
Rubberex's 3Q earnings rose owing to better profit margins and better sales contributions from its China subsidiaries. Net profit nearly doubled to RM5.55 million from RM2.35 million a year earlier, while revenue fell to RM85.23 million from RM87.3 million. It declared a first interim tax-exempt dividend of six sen per share.
Friday, 30 October 2009 08:02
KUALA LUMPUR: After several days of losses, investors sentiment could perk up on Friday, Oct 30, as Wall Street snapped its recent losses following a recovery in the US economy in the third quarter.
The US government's first estimate of US gross domestic product showed the economy expanded at an annual rate of 3.5% in 3Q, showing signs it was emerging from the worst recession in 70 years. However, economists' concerns are whether the growth is sustainable once the subsidies end.
The Dow Jones industrial average gained 199.89 points, or 2.05%, to end at 9,962.58. The Standard & Poor's 500 Index jumped 2.25%, to 1,066.11 -- marking its biggest one-day percentage gain in three months. The Nasdaq Composite Index jumped 37.94 points, or 1.84%, to close at 2,097.55.
At Bursa, stocks to watch are LKT INDUSTRIAL BHD [], LITYAN HOLDINGS BHD [], SCOMI GROUP BHD [], ALAM MARITIM RESOURCES BHD [] while other companies which could attract interest are banks, PLANTATION []s, SUNRISE BHD [], KURNIA ASIA BHD [], YTL E-SOLUTIONS BHD [] and Rubberex Corp (M) Bhd.
LKT minority shareholders were offered RM2.10 per share, or 30 sen above the last traded price, by major shareholder Precision Engineering - a unit of Temasek Holdings - which wants to take it private.
Lityan, which has regularised its financial condition, will resume trading on Friday. The reference price is RM1 and the upper trading limit shall be 400% above the reference price whereas the lower limit shall be 30% for the whole day.
Scomi subsidiary Scomi International Pte Ltd has sealed a multi-year distributor agreement with UK's Artevea Digital Ltd, an expert in terrestrial trunked radio communication systems, to offer the latter's extensive line of radio mobile communication solutions globally.
Alam Maritim's 60% owned subsidiary Workboat International DMCCO was awarded two contracts from a main contractor of oil majors that is cumulatively worth RM36.98 million.
Banks and plantations, which came under profit taking recently, should show some recovery, underpinned by the improved market sentiment.
Sunrise expects to launch at least two real estate projects in the Klang Valley within its current financial year ending June 2010 and add to its unbilled property sales, which stand at some RM860 million.
Kurnia Asia posted a net profit of RM32.25 million in the three months to Sept 30, 2009 versus a net loss of RM12.11 million a year earlier due to a turnaround in the investment portfolio and improved underwriting performance.
YTL E-Solutions has appealed to the Malaysian Communications and Multimedia Commission (MCMC) against a RM1.9 million fine meted out by the latter for its failure to meet stipulated targets in its WiMAX rollout.
Rubberex's 3Q earnings rose owing to better profit margins and better sales contributions from its China subsidiaries. Net profit nearly doubled to RM5.55 million from RM2.35 million a year earlier, while revenue fell to RM85.23 million from RM87.3 million. It declared a first interim tax-exempt dividend of six sen per share.
S economy returns to growth in 3Q after deep slump
Written by Reuters
Friday, 30 October 2009 06:49
WASHINGTON: The U.S. economy grew in the third quarter for the first time in more than a year as government stimulus helped lift consumer spending and home building, fueling an unexpectedly strong advance, according to Reuters on Thursday, Oct 29.
Signaling the end of the worst recession in 70 years, the Commerce Department on Thursday said the economy expanded at an annual rate of 3.5 percent in the July-September period, snapping four down quarters with its fastest growth pace since the third quarter of 2007.
The report buoyed global stock markets, which were also cheered by improving third-quarter corporate earnings, including higher-than-expected profits from consumer product giants Procter & Gamble Co and Colgate-Palmolive Co.
It raised hopes for further improvement in corporate profits and sent stocks on Wall Street rallying after four days of losses. The Dow Jones industrial average and the Standard & Poor's 500 Index notched their biggest percentage gains since July 23.
Prices for U.S. government debt and the U.S. dollar fell as traders exited safe havens.
"The economy has emerged with gusto from the deepest recession since World War Two," said Harm Bandholz, economist at UniCredit Markets and Investment Banking in New York. "The short-term prospects for the economy remain good."
Economists polled last week had expected a 3.3 percent GDP gain, but many had cut those estimates in the past couple days. As it turned out, growth was fairly broad-based with solid gains in consumer spending, exports and home CONSTRUCTION [].
But it was also driven by emergency government programs like the popular "cash for clunkers" incentive for new auto purchases and an US$8,000 tax credit for first-time home buyers.
The auto discount program ended in August and the home tax credit is due to expire next month, although Congress is working on a plan to extend it.
Stripping out auto output, the economy would have expanded at only a 1.9 percent rate in the third quarter.
In the absence of government support, there are fears the brisk growth pace will not extend into coming quarters, with rampant unemployment also inflicting damage.
"The economy is entirely dependent on federal deficit spending at the moment. But the stimulus will not fade right away ... that means we can rely on solid growth continuing through the first quarter of next year," said Chris Low, chief economist at FTN Financial in New York.
"Once the government steps aside, growth is likely to fall back to a 1 to 2 percent rate of growth."
The United States is entering recovery following in the footsteps of major economies like China and the euro zone. - Reuters
Friday, 30 October 2009 06:49
WASHINGTON: The U.S. economy grew in the third quarter for the first time in more than a year as government stimulus helped lift consumer spending and home building, fueling an unexpectedly strong advance, according to Reuters on Thursday, Oct 29.
Signaling the end of the worst recession in 70 years, the Commerce Department on Thursday said the economy expanded at an annual rate of 3.5 percent in the July-September period, snapping four down quarters with its fastest growth pace since the third quarter of 2007.
The report buoyed global stock markets, which were also cheered by improving third-quarter corporate earnings, including higher-than-expected profits from consumer product giants Procter & Gamble Co and Colgate-Palmolive Co.
It raised hopes for further improvement in corporate profits and sent stocks on Wall Street rallying after four days of losses. The Dow Jones industrial average and the Standard & Poor's 500 Index notched their biggest percentage gains since July 23.
Prices for U.S. government debt and the U.S. dollar fell as traders exited safe havens.
"The economy has emerged with gusto from the deepest recession since World War Two," said Harm Bandholz, economist at UniCredit Markets and Investment Banking in New York. "The short-term prospects for the economy remain good."
Economists polled last week had expected a 3.3 percent GDP gain, but many had cut those estimates in the past couple days. As it turned out, growth was fairly broad-based with solid gains in consumer spending, exports and home CONSTRUCTION [].
But it was also driven by emergency government programs like the popular "cash for clunkers" incentive for new auto purchases and an US$8,000 tax credit for first-time home buyers.
The auto discount program ended in August and the home tax credit is due to expire next month, although Congress is working on a plan to extend it.
Stripping out auto output, the economy would have expanded at only a 1.9 percent rate in the third quarter.
In the absence of government support, there are fears the brisk growth pace will not extend into coming quarters, with rampant unemployment also inflicting damage.
"The economy is entirely dependent on federal deficit spending at the moment. But the stimulus will not fade right away ... that means we can rely on solid growth continuing through the first quarter of next year," said Chris Low, chief economist at FTN Financial in New York.
"Once the government steps aside, growth is likely to fall back to a 1 to 2 percent rate of growth."
The United States is entering recovery following in the footsteps of major economies like China and the euro zone. - Reuters
Markets down as recovery stutters
Written by Fong Min Hun
Friday, 30 October 2009 00:41
KUALA LUMPUR: Asian bourses succumbed to selling pressure on Oct 29, continuing a three-day losing streak and reminding investors that the global economy is not out of the woods yet.
Disappointing US economic data and company earnings prompted investors to take profit, dragging the Dow Jones Industrial Average index 1.21% lower by the close of Oct 28’s trade on Wall Street. The jitters spread to Asia and Europe on Oct 29, sending all Asian markets into the red zone.
China markets were among the hardest-hit major Asian bourses, with Shanghai and Shenzhen indices falling 2.34% and 2.17% respectively while Hong Kong’s Hang Seng lost 2.28%.
The FBM KLCI was among the least affected benchmarks, dipping 7.3 points or 0.58% to close at 1,241.75 points. The local bourse was mostly weighed down by PLANTATION [] and banking counters, which had picked up considerably in recent weeks.
The catalysts for the reversal in the market trends included an unexpected fall in US housing data for September, raising doubts about the strength of recovery in the housing sector and economy in general, as the housing sector is traditionally an indicator for the health of the US economy.
Market sentiments were further weakened by lower-than-expected profits at major corporations such as Petrochina Co and the Australia & New Zealand Banking Group Ltd (ANZ), which has an equity stake in AMMB HOLDINGS BHD [].
However, local heads of equities research believe the blip in the markets did not portend an end to their upward momentum.
“It’s not the start of a bear market,” UOB Kay Hian (M) Holdings Sdn Bhd head of research Vincent Khoo told The Edge Financial Daily. “My sense is that it’s part of a healthy profit-taking and consolidation since global markets have been essentially going north since March without a break.”
There had not been a meaningful retracement in the market since March, and this correction, which could stretch into early next week, was timely, Khoo added. The market, he said, had advanced “way ahead” of a strong sustained recovery, a view that was shared by Chris Eng, the head of research at OSK Research.
“The market has followed a V-shaped recovery too far above the economic recovery, and we were expecting to see a retracement sometime in the middle of next year,” Eng said.
The market correction came even as major brokerages called for a sharper recovery in Asia. Last Wednesday, Singapore-based DBS Bank’s economist David Carbon said in a note that Asia’s V-shaped recovery may be the sharpest on record, although it may turn into a “square-root-shaped recovery” should it start hovering sideways.
However, Eng believed the consensus on Asia’s recovery has been too bullish. OSK Research was still taking a more conservative stance on the recovery, he said, adding he expected more profit-taking activities over the next few trading days.
Khoo took a similar stance, saying that a V-shaped recovery for the Asian economy might not be realistic as it was still very much reliant on the US recovery.
“We have seen a fairly robust recovery in exports but that was inventory-led,” he said. “Asia might be a bit more resilient but there needs to be a meaningful export recovery.”
Friday, 30 October 2009 00:41
KUALA LUMPUR: Asian bourses succumbed to selling pressure on Oct 29, continuing a three-day losing streak and reminding investors that the global economy is not out of the woods yet.
Disappointing US economic data and company earnings prompted investors to take profit, dragging the Dow Jones Industrial Average index 1.21% lower by the close of Oct 28’s trade on Wall Street. The jitters spread to Asia and Europe on Oct 29, sending all Asian markets into the red zone.
China markets were among the hardest-hit major Asian bourses, with Shanghai and Shenzhen indices falling 2.34% and 2.17% respectively while Hong Kong’s Hang Seng lost 2.28%.
The FBM KLCI was among the least affected benchmarks, dipping 7.3 points or 0.58% to close at 1,241.75 points. The local bourse was mostly weighed down by PLANTATION [] and banking counters, which had picked up considerably in recent weeks.
The catalysts for the reversal in the market trends included an unexpected fall in US housing data for September, raising doubts about the strength of recovery in the housing sector and economy in general, as the housing sector is traditionally an indicator for the health of the US economy.
Market sentiments were further weakened by lower-than-expected profits at major corporations such as Petrochina Co and the Australia & New Zealand Banking Group Ltd (ANZ), which has an equity stake in AMMB HOLDINGS BHD [].
However, local heads of equities research believe the blip in the markets did not portend an end to their upward momentum.
“It’s not the start of a bear market,” UOB Kay Hian (M) Holdings Sdn Bhd head of research Vincent Khoo told The Edge Financial Daily. “My sense is that it’s part of a healthy profit-taking and consolidation since global markets have been essentially going north since March without a break.”
There had not been a meaningful retracement in the market since March, and this correction, which could stretch into early next week, was timely, Khoo added. The market, he said, had advanced “way ahead” of a strong sustained recovery, a view that was shared by Chris Eng, the head of research at OSK Research.
“The market has followed a V-shaped recovery too far above the economic recovery, and we were expecting to see a retracement sometime in the middle of next year,” Eng said.
The market correction came even as major brokerages called for a sharper recovery in Asia. Last Wednesday, Singapore-based DBS Bank’s economist David Carbon said in a note that Asia’s V-shaped recovery may be the sharpest on record, although it may turn into a “square-root-shaped recovery” should it start hovering sideways.
However, Eng believed the consensus on Asia’s recovery has been too bullish. OSK Research was still taking a more conservative stance on the recovery, he said, adding he expected more profit-taking activities over the next few trading days.
Khoo took a similar stance, saying that a V-shaped recovery for the Asian economy might not be realistic as it was still very much reliant on the US recovery.
“We have seen a fairly robust recovery in exports but that was inventory-led,” he said. “Asia might be a bit more resilient but there needs to be a meaningful export recovery.”
Bursa fines Energreen, Kosmo directors over RM900,000
Written by The Edge Financial Daily
Friday, 30 October 2009 00:36
KUALA LUMPUR: Former Bursa Malaysia Securities-listed Energreen Corporation Bhd’s directors have been publicly reprimanded and fined a total of nearly RM650,000 for failure to submit its financial statements by the stipulated deadlines and failure to provide accurate information to investors.
In a statement on Oct 29, Bursa Securities said it had found Energreen and 12 directors to be in breach of several listing requirements (LRs) while the company was listed on Bursa Securities.
They are former chairman Datuk Seri Prof Dr Ibrahim Saad, who was fined RM2,250, former managing director Ang Sun Beng (a total of RM240,000), Choong Khoong Beng (RM4,500), Ong Wee Meng (RM4,500), Datuk Wira Jamaludin Abd Rahim (RM5,000), former audit committee chairman Badrul Hassan Mohamed Kassim (RM16,000), group managing director Datuk Abd Ghani Ali Kadir (RM274,000), Chin Kuet Lee (RM55,200), former chairman Datuk Seri Mohd Shariff Omar (RM9,050), Datuk Chee Hong Leong (RM13,300), Soh Yew Aun (RM17,000) and Dr Roslan A Ghaffar (RM8,500).
Bursa Securities also publicly reprimanded and fined two directors of another delisted company, KOSMO TECHNOLOGY [] INDUSTRIAL [] Bhd, a total of RM257,300 for similar breaches of LRs. Bursa Securities said the breaches were also committed when the company was still listed.
Friday, 30 October 2009 00:36
KUALA LUMPUR: Former Bursa Malaysia Securities-listed Energreen Corporation Bhd’s directors have been publicly reprimanded and fined a total of nearly RM650,000 for failure to submit its financial statements by the stipulated deadlines and failure to provide accurate information to investors.
In a statement on Oct 29, Bursa Securities said it had found Energreen and 12 directors to be in breach of several listing requirements (LRs) while the company was listed on Bursa Securities.
They are former chairman Datuk Seri Prof Dr Ibrahim Saad, who was fined RM2,250, former managing director Ang Sun Beng (a total of RM240,000), Choong Khoong Beng (RM4,500), Ong Wee Meng (RM4,500), Datuk Wira Jamaludin Abd Rahim (RM5,000), former audit committee chairman Badrul Hassan Mohamed Kassim (RM16,000), group managing director Datuk Abd Ghani Ali Kadir (RM274,000), Chin Kuet Lee (RM55,200), former chairman Datuk Seri Mohd Shariff Omar (RM9,050), Datuk Chee Hong Leong (RM13,300), Soh Yew Aun (RM17,000) and Dr Roslan A Ghaffar (RM8,500).
Bursa Securities also publicly reprimanded and fined two directors of another delisted company, KOSMO TECHNOLOGY [] INDUSTRIAL [] Bhd, a total of RM257,300 for similar breaches of LRs. Bursa Securities said the breaches were also committed when the company was still listed.
US economy grows in 3Q, unofficially ends recession
Written by Reuters
Thursday, 29 October 2009 21:32
WASHINGTON: The US economy grew in 3Q for the first time in a year as consumer spending and investment in new home-building rebounded, data on Oct 29 showed , unofficially ending the worst recession in 70 years.
The US Commerce Department, in its first estimate of 3Q GDP, said the economy grew at a 3.5% annual rate, the fastest pace since 3Q2007, after contracting 0.7% in the April to June period.
The growth pace in GDP, which measures total goods and services output within US borders, was above market expectations for a 3.3% rate. The economy last grew in 2Q2008.
Recessions in the US are dated by the National Bureau of Economic Research and the private-sector group often takes months to make determinations. The economy slipped into recession at the end of 2007 and has been in the worst downturn since the Great Depression of the 1930s.
The 3Q recovery was generally broad-based, with solid gains in consumer spending, exports and investment in home-CONSTRUCTION [].
Consumer spending, which accounts for over two-thirds of US economic activity, surged at a 3.4% rate in 3Q, the fastest advance since 1Q2007. Spending fell at a 0.9% rate in the previous quarter.
Residential investment, which was the main force behind the downturn, jumped at a 23.4% rate in 3Q, contributing to GDP for the first time since 2005, after declining 23.3% in the April to June period.
The surge in consumer spending and residential investment was likely driven by government stimulus programs.
The economic recovery in 3Q was also supported by a sharp moderation in the pace of inventory liquidation by business. Business inventories fell US$130.8 billion (RM448.6 billion), slowing from a record US$160.2 billion plunge in 2Q. The change in inventories added 0.94 percentage points to real GDP in 3Q.
Analysts are hoping that the slowdown in the inventory decline by businesses will continue to support the economy in 4Q, even as consumer spending is expected to retreat under the weight of the worst labour market in 26 years.
Excluding inventories, GDP rose at a 2.5% rate compared to a 0.7% increase in 2Q.
The weak US dollar boosted exports, but a rise in imports subtracted from real GDP during the quarter. Federal government spending contributed to growth, but both state and local governments were a drag.
Business investment fell at 2.5% pace, with investment nonresidential structures dropping 9%, a reflection of ongoing problems in the commercial property market. -- Reuters
Thursday, 29 October 2009 21:32
WASHINGTON: The US economy grew in 3Q for the first time in a year as consumer spending and investment in new home-building rebounded, data on Oct 29 showed , unofficially ending the worst recession in 70 years.
The US Commerce Department, in its first estimate of 3Q GDP, said the economy grew at a 3.5% annual rate, the fastest pace since 3Q2007, after contracting 0.7% in the April to June period.
The growth pace in GDP, which measures total goods and services output within US borders, was above market expectations for a 3.3% rate. The economy last grew in 2Q2008.
Recessions in the US are dated by the National Bureau of Economic Research and the private-sector group often takes months to make determinations. The economy slipped into recession at the end of 2007 and has been in the worst downturn since the Great Depression of the 1930s.
The 3Q recovery was generally broad-based, with solid gains in consumer spending, exports and investment in home-CONSTRUCTION [].
Consumer spending, which accounts for over two-thirds of US economic activity, surged at a 3.4% rate in 3Q, the fastest advance since 1Q2007. Spending fell at a 0.9% rate in the previous quarter.
Residential investment, which was the main force behind the downturn, jumped at a 23.4% rate in 3Q, contributing to GDP for the first time since 2005, after declining 23.3% in the April to June period.
The surge in consumer spending and residential investment was likely driven by government stimulus programs.
The economic recovery in 3Q was also supported by a sharp moderation in the pace of inventory liquidation by business. Business inventories fell US$130.8 billion (RM448.6 billion), slowing from a record US$160.2 billion plunge in 2Q. The change in inventories added 0.94 percentage points to real GDP in 3Q.
Analysts are hoping that the slowdown in the inventory decline by businesses will continue to support the economy in 4Q, even as consumer spending is expected to retreat under the weight of the worst labour market in 26 years.
Excluding inventories, GDP rose at a 2.5% rate compared to a 0.7% increase in 2Q.
The weak US dollar boosted exports, but a rise in imports subtracted from real GDP during the quarter. Federal government spending contributed to growth, but both state and local governments were a drag.
Business investment fell at 2.5% pace, with investment nonresidential structures dropping 9%, a reflection of ongoing problems in the commercial property market. -- Reuters
Today's Diary What to expect on Oct 30, 2009
Written by The Edge Financial Daily
Thursday, 29 October 2009 18:02
1. Deputy Finance Minister to tee-off at NAMLIFA-LIAM charity golf tournament at The Mines Resort & Golf Club, KL at 8am
2. Re-quotation of shares on Bursa Malaysia Securities for LITYAN HOLDINGS BHD [] at Banquet hall, 26th Flr, Bangunan AmBank Group, Jln Raja Chulan, KL at 8.15am
3. Securities Commission organises special presentation entitled Going forward: What will it mean for Regulation in Emerging Economies? by Datuk Seri Panglima Andrew Sheng at SC, KL at 9am
4. Official launch of TA Global's prospectus at Idaman Residences, Multipurpose Hall, No.8 Jln Law Yew Swee, Off Jln P Ramlee, KL at 9.30am
5. 1Malaysia F1 Team to announce CEO by Datuk Seri Tony Fernandes at Perdana Suite, Sepang International Circuit, Sepang at 10.30am
6. SINORA INDUSTRIES BHD [] EGM at Promenade Hotel, Sabah at 11am
7. Talisman Malaysia to hold a Scholarship Award presentation at Mandarin Oriental Hotel, KL at 3pm
8. Launch of Dell's CULV Z series at Banyan Function Room, Sime Darby Convention Centre, KL at 3pm
9. Iskandar Investment signs with Marlborough College to develop Marlborough College Malaysia at Putra Perdana Ballroom, Shangri-La Hotel, Putrajaya at 4.30pm
10. Kancil Awards Night at Sime Darby Convention Centre, KL at 7pm
11. PIKOM ICT Leadership Awards to be officiated by Datuk Seri Dr Maximus Ongkili at Grand Lagoon Ballroom, Sunway Resort Hotel & Spa, Selangor at 8.30pm
Thursday, 29 October 2009 18:02
1. Deputy Finance Minister to tee-off at NAMLIFA-LIAM charity golf tournament at The Mines Resort & Golf Club, KL at 8am
2. Re-quotation of shares on Bursa Malaysia Securities for LITYAN HOLDINGS BHD [] at Banquet hall, 26th Flr, Bangunan AmBank Group, Jln Raja Chulan, KL at 8.15am
3. Securities Commission organises special presentation entitled Going forward: What will it mean for Regulation in Emerging Economies? by Datuk Seri Panglima Andrew Sheng at SC, KL at 9am
4. Official launch of TA Global's prospectus at Idaman Residences, Multipurpose Hall, No.8 Jln Law Yew Swee, Off Jln P Ramlee, KL at 9.30am
5. 1Malaysia F1 Team to announce CEO by Datuk Seri Tony Fernandes at Perdana Suite, Sepang International Circuit, Sepang at 10.30am
6. SINORA INDUSTRIES BHD [] EGM at Promenade Hotel, Sabah at 11am
7. Talisman Malaysia to hold a Scholarship Award presentation at Mandarin Oriental Hotel, KL at 3pm
8. Launch of Dell's CULV Z series at Banyan Function Room, Sime Darby Convention Centre, KL at 3pm
9. Iskandar Investment signs with Marlborough College to develop Marlborough College Malaysia at Putra Perdana Ballroom, Shangri-La Hotel, Putrajaya at 4.30pm
10. Kancil Awards Night at Sime Darby Convention Centre, KL at 7pm
11. PIKOM ICT Leadership Awards to be officiated by Datuk Seri Dr Maximus Ongkili at Grand Lagoon Ballroom, Sunway Resort Hotel & Spa, Selangor at 8.30pm
Banks, plantations drag FBM KLCI into red
Written by Joseph Chin
Thursday, 29 October 2009 13:26
KUALA LUMPUR: All key Asian markets were in the red at the midday break on Thursday, Oct 29 as investors were spooked by the losses on Wall Street following the latest set of weak economic data.
At 12.30pm, the FBM KLCI was down 10.35 points or 0.83% to 1,238.7. Turnover was 459.21 million shares valued at RM596.91 million. Decliners beat advancers 448 to 131 while 207 stocks were unchanged.
Hong Kong's Hang Seng Index fell 2.4% to 21,235.88; Japan's Nikkei 225 skidded 1.98% to 9,875.24, Shanghai's Composite Index 2.10% to 2,967.52 while Singapore's Straits Times Index gave up 0.7% to 2,630.12.
Light crude oil gave up 26 cents to US$77.20 while crude palm oil futures fell RM11 to RM2,141. US spot gold rose US$3.20 or 0.31% to US$1,031.3.
Banks fell the most with HLFG skidding 18 sen to RM6.02, HL Bank 15c to RM7.44 while CIMB shed 14c to RM12.30 and Maybank 12 sen to RM6.63.
Among PLANTATION []s, KL Kepong lost 22 sen to RM14.90, UMCCA 18 sen to RM7.95 while Sime Darby shed 10c to RM8.89and IOI Corp also 10c to RM5.33.
KNM was the most active, down two sen to 77.5 sen with 25.7 million shares done.
Smaller auto parts manufacturers saw active trade after the revised national automotive policy was announced.
New Hoong Fatt added 11 sen to RM1.98, Tracoma 8.5 sen higher to 37.5 sen but Ingress shed five sen to 78 sen and EPMB two sen lower to 54 sen.
DiGi was the top gainer, adding 26 sen to RM21.76. Hai-O and CN Asia, both of which are involved in direct selling of consumer goods, rose. Hai-O gained 23 sen to RM7.57 and CN Asia 11.5 sen to 63.5 sen.
Thursday, 29 October 2009 13:26
KUALA LUMPUR: All key Asian markets were in the red at the midday break on Thursday, Oct 29 as investors were spooked by the losses on Wall Street following the latest set of weak economic data.
At 12.30pm, the FBM KLCI was down 10.35 points or 0.83% to 1,238.7. Turnover was 459.21 million shares valued at RM596.91 million. Decliners beat advancers 448 to 131 while 207 stocks were unchanged.
Hong Kong's Hang Seng Index fell 2.4% to 21,235.88; Japan's Nikkei 225 skidded 1.98% to 9,875.24, Shanghai's Composite Index 2.10% to 2,967.52 while Singapore's Straits Times Index gave up 0.7% to 2,630.12.
Light crude oil gave up 26 cents to US$77.20 while crude palm oil futures fell RM11 to RM2,141. US spot gold rose US$3.20 or 0.31% to US$1,031.3.
Banks fell the most with HLFG skidding 18 sen to RM6.02, HL Bank 15c to RM7.44 while CIMB shed 14c to RM12.30 and Maybank 12 sen to RM6.63.
Among PLANTATION []s, KL Kepong lost 22 sen to RM14.90, UMCCA 18 sen to RM7.95 while Sime Darby shed 10c to RM8.89and IOI Corp also 10c to RM5.33.
KNM was the most active, down two sen to 77.5 sen with 25.7 million shares done.
Smaller auto parts manufacturers saw active trade after the revised national automotive policy was announced.
New Hoong Fatt added 11 sen to RM1.98, Tracoma 8.5 sen higher to 37.5 sen but Ingress shed five sen to 78 sen and EPMB two sen lower to 54 sen.
DiGi was the top gainer, adding 26 sen to RM21.76. Hai-O and CN Asia, both of which are involved in direct selling of consumer goods, rose. Hai-O gained 23 sen to RM7.57 and CN Asia 11.5 sen to 63.5 sen.
October 29, 2009
YHS risks RM9m losses from potential Indonesian recall
KUALA LUMPUR: Yeo Hiap Seng (Malaysia) Bhd (YHS) may lose RM6 million in revenue and another RM3 million in expenses as its Indonesian subsidiary may have to recall its products after 15 out of 31 registration numbers (ML numbers) for foreign food were cancelled by that country’s food and medicine authority (BPOM).
In a statement yesterday, YHS said the authority had in its letters dated Aug 24, 2009 cancelled the 15 ML numbers issued to its subsidiary PT YHS Indonesia for the marketing and sales of Yeo’s products in Indonesia.
BPOM gave YHS Indonesia two months’ grace period, until Oct 24 to clear its stock in the market affected by the cancellation. ML number means approved product code for import, marketing and sale of food/beverage products in Indonesia.
YHS said the cancellation was as a consequence of the Jakarta Supreme Court decision on a case between PT Kharisma Inti Persada (KIP) against BPOM. KIP alleged that they were the distributor of Yeo’s products in Indonesia and the ML numbers issued by BPOM to YHS Indonesia were not valid and requested that the ML numbers be cancelled. The Jakarta Supreme Court ruled in favour of KIP on May 5, 2008.
YHS claimed that the BPOM letters were mistakenly sent to a wrong address and YHS Indonesia came to know of the cancellation only on Oct 14, 2009.
It said YHS Indonesia had applied to BPOM to extend the deadline by six months, until April 13, 2010, for clearing its stock. YHS Indonesia has yet to receive a response from BPOM.
“If BPOM does not extend the deadline, the affected products need to be recalled. It is estimated that for the financial year ending Dec 31, 2009, the group’s revenue will be affected by RM6 million and the cost of carrying out the recall is estimated to be RM3 million,” it said.
For FY08, the group’s revenue was RM568 million and pre-tax profit was RM4.6 million — out of which Indonesia contributed revenue of RM37.3 million and suffered a net loss of RM0.6 million. YHS said YHS Indonesia would continue to sell the products with unaffected ML numbers and was in the process of applying for new ML numbers.
Meanwhile, YHS announced it posted a net loss of RM2.96 million in its third quarter ended Sept 30, 2009 versus a profit of RM1.02 million a year earlier, due to impairment charges of RM5.3 million.
Revenue fell 8.2% to RM137.7 million from RM149.7 million due to a drop in sales from the food and canned beverages sector attributed to a temporary packing and raw materials supply issue. For the nine months to Sept 30, the group incurred a net loss of RM9.56 million versus a profit of RM2.32 million, while revenue fell 5% to RM408.8 million from RM430.48 million.
In a statement yesterday, YHS said the authority had in its letters dated Aug 24, 2009 cancelled the 15 ML numbers issued to its subsidiary PT YHS Indonesia for the marketing and sales of Yeo’s products in Indonesia.
BPOM gave YHS Indonesia two months’ grace period, until Oct 24 to clear its stock in the market affected by the cancellation. ML number means approved product code for import, marketing and sale of food/beverage products in Indonesia.
YHS said the cancellation was as a consequence of the Jakarta Supreme Court decision on a case between PT Kharisma Inti Persada (KIP) against BPOM. KIP alleged that they were the distributor of Yeo’s products in Indonesia and the ML numbers issued by BPOM to YHS Indonesia were not valid and requested that the ML numbers be cancelled. The Jakarta Supreme Court ruled in favour of KIP on May 5, 2008.
YHS claimed that the BPOM letters were mistakenly sent to a wrong address and YHS Indonesia came to know of the cancellation only on Oct 14, 2009.
It said YHS Indonesia had applied to BPOM to extend the deadline by six months, until April 13, 2010, for clearing its stock. YHS Indonesia has yet to receive a response from BPOM.
“If BPOM does not extend the deadline, the affected products need to be recalled. It is estimated that for the financial year ending Dec 31, 2009, the group’s revenue will be affected by RM6 million and the cost of carrying out the recall is estimated to be RM3 million,” it said.
For FY08, the group’s revenue was RM568 million and pre-tax profit was RM4.6 million — out of which Indonesia contributed revenue of RM37.3 million and suffered a net loss of RM0.6 million. YHS said YHS Indonesia would continue to sell the products with unaffected ML numbers and was in the process of applying for new ML numbers.
Meanwhile, YHS announced it posted a net loss of RM2.96 million in its third quarter ended Sept 30, 2009 versus a profit of RM1.02 million a year earlier, due to impairment charges of RM5.3 million.
Revenue fell 8.2% to RM137.7 million from RM149.7 million due to a drop in sales from the food and canned beverages sector attributed to a temporary packing and raw materials supply issue. For the nine months to Sept 30, the group incurred a net loss of RM9.56 million versus a profit of RM2.32 million, while revenue fell 5% to RM408.8 million from RM430.48 million.
FTSE, Bursa Malaysia move to semi-annual liquidity review of index series
KUALA LUMPUR: The FTSE Bursa Malaysia Index Advisory Committee has decided on a semi-annual liquidity review of the FTSE Bursa Malaysia Index Series from an annual basis to better reflect the liquidity of the investable market.
According to their joint statement by BURSA MALAYSIA BHD [] and FTSE Group yesterday, the increase in frequency of liquidity review in response to Malaysia’s market initiatives is to enhance its capital market and liquidity.The liquidity review will be conducted semi-annually in June and December starting from June 2010 based on turnover in the 12 months prior to the review. Constituents of the FTSE Bursa Malaysia Small Cap Index and FTSE Bursa Malaysia Fledgling Index will also be reviewed semi-annually starting from the June 2010 review.
The said indices played an increasingly important role in today’s markets as a tool in stimulating domestic investment and attracting global capital flows and the move would provide more robust indices that were in tune with the market liquidity.
Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff said liquidity was a key area of focus for Bursa Malaysia and the increase in frequency of the market review would enable market participants to track the index in a broader and more comprehensive manner.
“This will also allow investors to have a closer assessment on the performance of public-listed companies to create a more efficient market,” he said. FTSE Group Asia Pacific’s Paul Hoff said: “As an index provider, it is important to work with the investment community and local index partners such as Bursa Malaysia to understand the needs of both domestic and international investors, ensuring these needs are addressed through a robust index methodology.
“We have found that more frequent reviews aid investment professionals who track the indices by improving the replicability of the index.”
According to their joint statement by BURSA MALAYSIA BHD [] and FTSE Group yesterday, the increase in frequency of liquidity review in response to Malaysia’s market initiatives is to enhance its capital market and liquidity.The liquidity review will be conducted semi-annually in June and December starting from June 2010 based on turnover in the 12 months prior to the review. Constituents of the FTSE Bursa Malaysia Small Cap Index and FTSE Bursa Malaysia Fledgling Index will also be reviewed semi-annually starting from the June 2010 review.
The said indices played an increasingly important role in today’s markets as a tool in stimulating domestic investment and attracting global capital flows and the move would provide more robust indices that were in tune with the market liquidity.
Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff said liquidity was a key area of focus for Bursa Malaysia and the increase in frequency of the market review would enable market participants to track the index in a broader and more comprehensive manner.
“This will also allow investors to have a closer assessment on the performance of public-listed companies to create a more efficient market,” he said. FTSE Group Asia Pacific’s Paul Hoff said: “As an index provider, it is important to work with the investment community and local index partners such as Bursa Malaysia to understand the needs of both domestic and international investors, ensuring these needs are addressed through a robust index methodology.
“We have found that more frequent reviews aid investment professionals who track the indices by improving the replicability of the index.”
ING, two banks launch structured income product
KUALA LUMPUR: Two banks, PUBLIC BANK BHD [] and AmBank (M) Bhd, and investment manager ING Funds Bhd have launched a structured income product that aims to provide a minimum regular income of 3.3% per annum with an enhanced upside potential of up to 7.3% per annum.
The ING Structured Income Fund invests in Tier-2 medium-term notes issued by Public Bank and AmBank and an option for additional variable returns.
With an approved fund size of 500 million units, it will be distributed at RM1 per unit from yesterday until Nov 26. The minimum initial investment is RM25,000 and the subsequent minimum additional investment is RM5,000.
ING Funds chief executive officer and chief investment officer Datuk Steve Ong said the fund was designed to give investors annual coupons in ringgit, potential additional variable returns and return of their invested capital.
He said the fund aimed to pay a coupon of 3.3% per annum for the first five years and 5.3% per annum thereafter until its termination or maturity.
Ong says the fund aims to pay a minimum 3.3% pa. Photo by Chu Juck Seng
“The fund is structured to provide additional returns based on the performance of a selected basket of (Asian and commodities) indices,” Ong said in a statement, in conjunction with fund’s launch here yesterday.
The indices are Hang Seng China Enterprises Index, Taiwan TAIEX Index, MSCI Singapore Cash Index, S&P GSCI Crude Oil Index, S&P GSCI Industrial Metals Index and S&P GSCI Precious Metals Index.
Public Bank managing director Tan Sri Tay Ah Lek said given the current low interest rates and recent run-up in the equity market, the fund was ideal for retail customers seeking fixed annual income, potential additional returns and return of invested capital. He said it was suitable for investors with moderate risk tolerance and a mid-term investment horizon.
AmBank group managing director Cheah Tek Kuang said this was the first product in the country that was conceived on the back of the combined credit and market strength of two Malaysian banks. “This is a timely proposition as the financial sector will be at the forefront of the Malaysian economic recovery,” he said.
The ING Structured Income Fund invests in Tier-2 medium-term notes issued by Public Bank and AmBank and an option for additional variable returns.
With an approved fund size of 500 million units, it will be distributed at RM1 per unit from yesterday until Nov 26. The minimum initial investment is RM25,000 and the subsequent minimum additional investment is RM5,000.
ING Funds chief executive officer and chief investment officer Datuk Steve Ong said the fund was designed to give investors annual coupons in ringgit, potential additional variable returns and return of their invested capital.
He said the fund aimed to pay a coupon of 3.3% per annum for the first five years and 5.3% per annum thereafter until its termination or maturity.
Ong says the fund aims to pay a minimum 3.3% pa. Photo by Chu Juck Seng
“The fund is structured to provide additional returns based on the performance of a selected basket of (Asian and commodities) indices,” Ong said in a statement, in conjunction with fund’s launch here yesterday.
The indices are Hang Seng China Enterprises Index, Taiwan TAIEX Index, MSCI Singapore Cash Index, S&P GSCI Crude Oil Index, S&P GSCI Industrial Metals Index and S&P GSCI Precious Metals Index.
Public Bank managing director Tan Sri Tay Ah Lek said given the current low interest rates and recent run-up in the equity market, the fund was ideal for retail customers seeking fixed annual income, potential additional returns and return of invested capital. He said it was suitable for investors with moderate risk tolerance and a mid-term investment horizon.
AmBank group managing director Cheah Tek Kuang said this was the first product in the country that was conceived on the back of the combined credit and market strength of two Malaysian banks. “This is a timely proposition as the financial sector will be at the forefront of the Malaysian economic recovery,” he said.
CIMB Niaga 9-month net profit climbs 19%
KUALA LUMPUR: PT Bank CIMB Niaga Tbk’s (CIMB Niaga) net profit for the nine months ended Sept 30, 2009 rose 19% to 1.2 trillion rupiah (RM425.76 million) from 966.6 billion rupiah a year ago mainly due to an increase in operating income and improvement in cost efficiency.
The increase in income was due to an improved net interest income and a gain in marketable securities investments of 127.9 billion rupiah last month as compared to a loss of 218.8 billion rupiah in the same period last year, CIMB Niaga said in a statement yesterday.
“Moreover, the bank enhanced its cost efficiency as shown in the improvement of its cost-to-income ratio of 49.9% in September 2009, compared to 61.9% in the previous year,” it pointed out. CIMB Niaga is a 78.3% subsidiary of CIMB Group Holdings Bhd.
According to CIMB Niaga, total loans increased by 3% to 74.1 trillion rupiah in September 2009 as compared to last year’s position, adding that the growth reflected the stability and the diversified nature of its corporate relationships despite the challenging business environment.
The bank also said figures from the first nine months showed there were 642,000 cards outstanding compared to 581,000 previously while auto loans grew by 23% year-on-year to reach 7.9 trillion rupiah.
As a result of its loan growth, CIMB Niaga noted that its loan deposit ratio reached 90.2% in September 2009 as compared to 88.2% in the same period last year, stressing that 20.7% of total loans were disbursed outside Jawa.
It added that non-performing loan (NPL) ratio (gross) stood at 2.8% for the first nine months and the figure was well below the industry average of 4%.
CIMB Niaga president director Arwin Rasyid said the bank’s financial performance showed consistent growth during the first nine months of this year, adding that the bank would continue to strive for product innovation and improved customer service experience.
The increase in income was due to an improved net interest income and a gain in marketable securities investments of 127.9 billion rupiah last month as compared to a loss of 218.8 billion rupiah in the same period last year, CIMB Niaga said in a statement yesterday.
“Moreover, the bank enhanced its cost efficiency as shown in the improvement of its cost-to-income ratio of 49.9% in September 2009, compared to 61.9% in the previous year,” it pointed out. CIMB Niaga is a 78.3% subsidiary of CIMB Group Holdings Bhd.
According to CIMB Niaga, total loans increased by 3% to 74.1 trillion rupiah in September 2009 as compared to last year’s position, adding that the growth reflected the stability and the diversified nature of its corporate relationships despite the challenging business environment.
The bank also said figures from the first nine months showed there were 642,000 cards outstanding compared to 581,000 previously while auto loans grew by 23% year-on-year to reach 7.9 trillion rupiah.
As a result of its loan growth, CIMB Niaga noted that its loan deposit ratio reached 90.2% in September 2009 as compared to 88.2% in the same period last year, stressing that 20.7% of total loans were disbursed outside Jawa.
It added that non-performing loan (NPL) ratio (gross) stood at 2.8% for the first nine months and the figure was well below the industry average of 4%.
CIMB Niaga president director Arwin Rasyid said the bank’s financial performance showed consistent growth during the first nine months of this year, adding that the bank would continue to strive for product innovation and improved customer service experience.
CIMB smells sweet success in Cocoaland
CIMB Research has initiated coverage on COCOALAND HOLDINGS BHD [] with an outperform call and a target price of RM2.04.
“The stock offers juicy upside of 49% to our target price. It also boasts the highest dividend yield and lowest price-to-earnings (PE) and price-to-book value (PBV) in our food and beverage universe.
It said Cocoaland was one of the country’s leading producers of confectionery such as fruit gummy, snacks and chocolates, as well as drinks. It is also the largest producer of fruit gummies in Southeast Asia.
CIMB Research added the company planned to launch its own tea and fruit/vegetable juice next year. “The drinks division could surprise on the upside if its own-brand beverage takes off in a big way. The company is also setting up a new polyethylene terephthalate (PET) plant capable of producing 120 million bottles annually that can take hot fillings.
“It is expected to start operations at the end of the year and will supply on an OEM basis to MNCs (multi-national corporations) as well as for Cocoaland’s own-brand drinks,” it said.
It also said the company’s balance sheet was strong, with RM24.6 million net cash, or 20 sen a share, as at end-June. Even after funding RM20 million capital expenditure for its new factory in Rawang, its net cash should be around RM10 million by year-end.
Meanwhile, the research house said although it had been cautious on initiating coverage on small-to-mid cap stocks this past year, as their liquidity could dry up fast when the market started falling, it believed some small-to-mid cap stocks still offered value.
“Cocoaland is one of them. The company is involved in the defensive F&B industry and trades at a still-attractive CY11 PE of 5.9 times, even after its share price upswing over the past few months. Liquidity is decent with an average three-month daily volume of 1.6 million shares,” it said.
As for its operations, CIMB Research said 80% of Cocoaland’s sales were from its own brand, with OEM sales to MNCs making up between 15%-20% of its revenue, and more than 30% of its revenue derived from direct export sales. The company exports to more than 40 countries around Asia and the Middle East.
It has three Malaysian plants, including its main plant in Rawang, and one in Fujian, China, with a group production capacity for all its products at 22,500 tonnes annually, the research house said. The company is also building a new plant on a recently-acquired 2.43ha land near Rawang, expected to be completed by year-end.
According to CIMB, Cocoaland’s export sales were expected to be its main growth market over the next few years, having risen annually since 2004, except in 2008, although sales volume held steady at the time.
The company’s net earnings were expected to grow more than double this year, due to major cost savings from improved production efficiency, lower factory overheads and a better product mix.
“In the first half ended June 30, 2009, net profit shot up 236% year-on-year to RM11.1 million,” it said. “However, earnings are expected to plateau in 2010, largely due to start-up losses for its PET bottle operations and high advertising and promotions expenses for the launch of its own drinks brand,” it said.
The research house added, however, FY2011 could turn out to be a “major surprise” for the company if its drinks business took off in a big way.
Cocoaland closed at RM1.40 yesterday, up three sen
“The stock offers juicy upside of 49% to our target price. It also boasts the highest dividend yield and lowest price-to-earnings (PE) and price-to-book value (PBV) in our food and beverage universe.
It said Cocoaland was one of the country’s leading producers of confectionery such as fruit gummy, snacks and chocolates, as well as drinks. It is also the largest producer of fruit gummies in Southeast Asia.
CIMB Research added the company planned to launch its own tea and fruit/vegetable juice next year. “The drinks division could surprise on the upside if its own-brand beverage takes off in a big way. The company is also setting up a new polyethylene terephthalate (PET) plant capable of producing 120 million bottles annually that can take hot fillings.
“It is expected to start operations at the end of the year and will supply on an OEM basis to MNCs (multi-national corporations) as well as for Cocoaland’s own-brand drinks,” it said.
It also said the company’s balance sheet was strong, with RM24.6 million net cash, or 20 sen a share, as at end-June. Even after funding RM20 million capital expenditure for its new factory in Rawang, its net cash should be around RM10 million by year-end.
Meanwhile, the research house said although it had been cautious on initiating coverage on small-to-mid cap stocks this past year, as their liquidity could dry up fast when the market started falling, it believed some small-to-mid cap stocks still offered value.
“Cocoaland is one of them. The company is involved in the defensive F&B industry and trades at a still-attractive CY11 PE of 5.9 times, even after its share price upswing over the past few months. Liquidity is decent with an average three-month daily volume of 1.6 million shares,” it said.
As for its operations, CIMB Research said 80% of Cocoaland’s sales were from its own brand, with OEM sales to MNCs making up between 15%-20% of its revenue, and more than 30% of its revenue derived from direct export sales. The company exports to more than 40 countries around Asia and the Middle East.
It has three Malaysian plants, including its main plant in Rawang, and one in Fujian, China, with a group production capacity for all its products at 22,500 tonnes annually, the research house said. The company is also building a new plant on a recently-acquired 2.43ha land near Rawang, expected to be completed by year-end.
According to CIMB, Cocoaland’s export sales were expected to be its main growth market over the next few years, having risen annually since 2004, except in 2008, although sales volume held steady at the time.
The company’s net earnings were expected to grow more than double this year, due to major cost savings from improved production efficiency, lower factory overheads and a better product mix.
“In the first half ended June 30, 2009, net profit shot up 236% year-on-year to RM11.1 million,” it said. “However, earnings are expected to plateau in 2010, largely due to start-up losses for its PET bottle operations and high advertising and promotions expenses for the launch of its own drinks brand,” it said.
The research house added, however, FY2011 could turn out to be a “major surprise” for the company if its drinks business took off in a big way.
Cocoaland closed at RM1.40 yesterday, up three sen
Banks lead decliners, FBM KLCI down 11pts
KUALA LUMPUR: Banks fell the most in early trade on Thursday, Oct 29 as investors took profit after the sharp overnight fall on Wall Street and declines in key regional markets reduced their risk appetites for equities.
At 9.24am, the FBM KLCI fell 11.64 points to 1,237.41. Turnover was 94.53 million shares valued at RM90.13 million.
Light crude oil fell three cents to US$77.43 as US stockpiles rose and supplies also increased. US spot gold recovered, adding US$3.85 to US$1,031.95.
HL Bank fell the most, sliding 19 sen to RM7.40, CIMB 18 sen to RM12.26, Hong Leong Finance 12 sen to RM6.08 and Maybank nine sen lower to RM6.66.
Among heavyweight PLANTATION []s, Sime fell the most, shedding 14 sen to RM8.85, KLK and IOI Corp 10 sen each to RM15.80 and RM5.33.
At 9.24am, the FBM KLCI fell 11.64 points to 1,237.41. Turnover was 94.53 million shares valued at RM90.13 million.
Light crude oil fell three cents to US$77.43 as US stockpiles rose and supplies also increased. US spot gold recovered, adding US$3.85 to US$1,031.95.
HL Bank fell the most, sliding 19 sen to RM7.40, CIMB 18 sen to RM12.26, Hong Leong Finance 12 sen to RM6.08 and Maybank nine sen lower to RM6.66.
Among heavyweight PLANTATION []s, Sime fell the most, shedding 14 sen to RM8.85, KLK and IOI Corp 10 sen each to RM15.80 and RM5.33.
KAF records RM6.6m in net profit
KUALA LUMPUR: KAF-SEAGROATT & CAMPBELL BHD [] returned to profitability with a net profit of RM6.55 million in its first quarter (1Q) ended Aug 31, 2009, from a loss of RM4.71 million a year earlier.
The brokerage and investment holding company posted a revenue of RM10.1 million, up 87.7% from RM5.38 million a year earlier, while earnings per unit stood at 5.46 sen per share from a loss of 3.93 sen a year earlier.
Profit before tax for the current quarter stood at RM8.23 million, 39.3% lower compared to the profit-before tax of RM13.57 million in the preceding quarter. This is mainly due to the higher writeback in allowance for the diminution in the value of equity investment made in the preceding quarter coupled with lower interest income for the current interim period, according to notes accompanying the result announced yesterday
The brokerage and investment holding company posted a revenue of RM10.1 million, up 87.7% from RM5.38 million a year earlier, while earnings per unit stood at 5.46 sen per share from a loss of 3.93 sen a year earlier.
Profit before tax for the current quarter stood at RM8.23 million, 39.3% lower compared to the profit-before tax of RM13.57 million in the preceding quarter. This is mainly due to the higher writeback in allowance for the diminution in the value of equity investment made in the preceding quarter coupled with lower interest income for the current interim period, according to notes accompanying the result announced yesterday
October 28, 2009
FBM KLCI falls nearly 9pts at midday
KUALA LUMPUR: All key Asian markets fell at the midday break on Wednesday, Oct 28 as sentiment was dented by the decline in US consumer confidence, which revived worries about the strength of the economic recovery.
At 12.30pm, the FBM KLCI fell 8.70 points or 0.69% to 1,251.6. Turnover was 469.66 million shares valued at RM484.52 million. There were 166 gainers, 383 losers and 224 stocks unchanged.
Japan's Nikkei 225 fell 1.45% to 10,064.36; Hong Kong's Hang Seng Index fell 1.66% to 21,8--.95, while Shanghai's Composite Index fell 1.23% to 2,984.26 and Singapore's Straits Times Index slide 0.9% to 2,670.31.
Oil fell 27 cents to US$79.28. According to Reuters, industry data showed a surprise large drawdown in U.S. crude inventories that blunted the impact of a strengthening dollar and weak Asian equities.
The American Petroleum Institute data showed after the contract's settlement on Tuesday that U.S. crude stocks fell by 3.5 million barrels last week, compared with a forecast for a 1.8 million barrel build in a Reuters poll.
Crude palm oil futures fell RM8 to RM2,162 while US spot gold fell US$1.19 to US$1,038.86.
Tanjong and CIMB fell 32 sen each to RM15.16 and RM12.46, HL Ban 16 sen to RM7.62, Bursa 15 sen to RM8.23 while Genting gave up 10 sen to RM7.39.
MBL was the most active with 49.25 million shares done, adding nine sen to 74 sen.
Green packet-WA added six sen to 68 sen, Green Packet two sen to RM1.10 while RedTone and MoBif were unchanged at 28.5 sen and eight sen each.
IJM-WC rose the most, adding 34 sen to RM1.27 with 5.77 million units done while smaller PLANTATION [] players including Riverview rose 14 sen to RM2.30 and UMCCA 13 sen to RM8.13.
At 12.30pm, the FBM KLCI fell 8.70 points or 0.69% to 1,251.6. Turnover was 469.66 million shares valued at RM484.52 million. There were 166 gainers, 383 losers and 224 stocks unchanged.
Japan's Nikkei 225 fell 1.45% to 10,064.36; Hong Kong's Hang Seng Index fell 1.66% to 21,8--.95, while Shanghai's Composite Index fell 1.23% to 2,984.26 and Singapore's Straits Times Index slide 0.9% to 2,670.31.
Oil fell 27 cents to US$79.28. According to Reuters, industry data showed a surprise large drawdown in U.S. crude inventories that blunted the impact of a strengthening dollar and weak Asian equities.
The American Petroleum Institute data showed after the contract's settlement on Tuesday that U.S. crude stocks fell by 3.5 million barrels last week, compared with a forecast for a 1.8 million barrel build in a Reuters poll.
Crude palm oil futures fell RM8 to RM2,162 while US spot gold fell US$1.19 to US$1,038.86.
Tanjong and CIMB fell 32 sen each to RM15.16 and RM12.46, HL Ban 16 sen to RM7.62, Bursa 15 sen to RM8.23 while Genting gave up 10 sen to RM7.39.
MBL was the most active with 49.25 million shares done, adding nine sen to 74 sen.
Green packet-WA added six sen to 68 sen, Green Packet two sen to RM1.10 while RedTone and MoBif were unchanged at 28.5 sen and eight sen each.
IJM-WC rose the most, adding 34 sen to RM1.27 with 5.77 million units done while smaller PLANTATION [] players including Riverview rose 14 sen to RM2.30 and UMCCA 13 sen to RM8.13.
HK stocks drop 1.9% on home price concern
TOKYO/HONG KONG: Hong Kong’s benchmark stock index fell the most in three weeks, led by developers, on concern the city’s tightening of downpayment requirements for luxury homes will damp demand.
Sino Land Co plunged 5.4% and Henderson Land Development Co dipped 4.3%, leading declines among property stocks. CNOOC Ltd, China’s biggest offshore oil producer, dropped 3.4% after crude oil prices fell on Monday in New York.
“We’re a bit cautious because there are uncertainties as to what the government is going to do next, whether they will increase land supply or not to ensure appropriate adjustments in property prices,” said John Koh, regional investment director at MEAG Hong Kong Ltd, which manages US$1.1 billion (RM3.74 billion). “A correction is inevitable in both property prices and developers’ share prices.”
The Hang Seng Index (HSI) slid 1.9% to close at 22,169.59, its biggest drop since Oct 2. The Hang Seng China Enterprises Index, which tracks so-called H-shares, slipped 1.3% to 13,145.59.
The HSI has surged 95% from a low for the year on March 9 as stimulus measures revived economies around the world. Shares on the gauge are priced at an average 17.8 times estimated profit, up from 10.6 times at the start of 2009, according to data compiled by Bloomberg.
Henderson Land, controlled by billionaire Lee Shau-kee, slid 4.3% to HK$52.90 (RM23.22). Sino Land, this year’s best performer on the Hang Seng Property Index, fell 5.4% to HK$15.52. Sun Hung Kai PROPERTIES [] Ltd, Hong Kong’s No 1 property developer by market value, dropped 3.4% to HK$118.20. Cheung Kong (Holdings) Ltd, the second biggest, slipped 3% to HK$102.30.
The Hang Seng Property Index’s 3.6% decline was the sharpest among the four industry groups in the Hang Seng Index.
The Hong Kong Monetary Authority (HKMA) tightened down-payment requirements for luxury homes on Oct 23 for the first time since 1991 to curtail property speculation after record-low interest rates fuelled a surge in prices this year. Down payments for homes priced above HK$20 million will be raised to 40% from 30%, HKMA chief executive Norman Chan said.
John Tsang, the city’s financial secretary, will meet developers later yesterday to discuss issues such as land supply, the South China Morning Post reported yesterday, without citing anyone. Patrick Wong, a spokesman at Tsang’s office, declined to comment when contacted yesterday. The group will include Cheung Kong deputy chairman Victor Li and Sun Hung Kai vice-chairman Thomas Kwok, according to the Hong Kong Economic Journal (HKEJ).
Cnooc declined 3.4% to HK$12.46. PetroChina Co, the nation’s largest oil producer, fell 2.1% to HK$10.26.
Crude oil futures dropped 2.3% to US$78.68 a barrel in New York on Monday, the biggest decline since Sept 24. The contract was recently at US$78.81 in after-hours trading.
All but five stocks on the 42-member Hang Seng Index dropped. October futures slipped 1.8% to 22,191.
Anta Sports Products Ltd retreated 5.4% to HK$10.14. The athletic shoes maker said on Monday chairman Ding Shizhong and other controlling stockholders hired Morgan Stanley to place 80 million existing shares at HK$10 each, and will use the money to set up a charitable fund.-- Bloomberg
Sino Land Co plunged 5.4% and Henderson Land Development Co dipped 4.3%, leading declines among property stocks. CNOOC Ltd, China’s biggest offshore oil producer, dropped 3.4% after crude oil prices fell on Monday in New York.
“We’re a bit cautious because there are uncertainties as to what the government is going to do next, whether they will increase land supply or not to ensure appropriate adjustments in property prices,” said John Koh, regional investment director at MEAG Hong Kong Ltd, which manages US$1.1 billion (RM3.74 billion). “A correction is inevitable in both property prices and developers’ share prices.”
The Hang Seng Index (HSI) slid 1.9% to close at 22,169.59, its biggest drop since Oct 2. The Hang Seng China Enterprises Index, which tracks so-called H-shares, slipped 1.3% to 13,145.59.
The HSI has surged 95% from a low for the year on March 9 as stimulus measures revived economies around the world. Shares on the gauge are priced at an average 17.8 times estimated profit, up from 10.6 times at the start of 2009, according to data compiled by Bloomberg.
Henderson Land, controlled by billionaire Lee Shau-kee, slid 4.3% to HK$52.90 (RM23.22). Sino Land, this year’s best performer on the Hang Seng Property Index, fell 5.4% to HK$15.52. Sun Hung Kai PROPERTIES [] Ltd, Hong Kong’s No 1 property developer by market value, dropped 3.4% to HK$118.20. Cheung Kong (Holdings) Ltd, the second biggest, slipped 3% to HK$102.30.
The Hang Seng Property Index’s 3.6% decline was the sharpest among the four industry groups in the Hang Seng Index.
The Hong Kong Monetary Authority (HKMA) tightened down-payment requirements for luxury homes on Oct 23 for the first time since 1991 to curtail property speculation after record-low interest rates fuelled a surge in prices this year. Down payments for homes priced above HK$20 million will be raised to 40% from 30%, HKMA chief executive Norman Chan said.
John Tsang, the city’s financial secretary, will meet developers later yesterday to discuss issues such as land supply, the South China Morning Post reported yesterday, without citing anyone. Patrick Wong, a spokesman at Tsang’s office, declined to comment when contacted yesterday. The group will include Cheung Kong deputy chairman Victor Li and Sun Hung Kai vice-chairman Thomas Kwok, according to the Hong Kong Economic Journal (HKEJ).
Cnooc declined 3.4% to HK$12.46. PetroChina Co, the nation’s largest oil producer, fell 2.1% to HK$10.26.
Crude oil futures dropped 2.3% to US$78.68 a barrel in New York on Monday, the biggest decline since Sept 24. The contract was recently at US$78.81 in after-hours trading.
All but five stocks on the 42-member Hang Seng Index dropped. October futures slipped 1.8% to 22,191.
Anta Sports Products Ltd retreated 5.4% to HK$10.14. The athletic shoes maker said on Monday chairman Ding Shizhong and other controlling stockholders hired Morgan Stanley to place 80 million existing shares at HK$10 each, and will use the money to set up a charitable fund.-- Bloomberg
FBM KLCI falls nearly 9pts at midday
KUALA LUMPUR: All key Asian markets fell at the midday break on Wednesday, Oct 28 as sentiment was dented by the decline in US consumer confidence, which revived worries about the strength of the economic recovery.
At 12.30pm, the FBM KLCI fell 8.70 points or 0.69% to 1,251.6. Turnover was 469.66 million shares valued at RM484.52 million. There were 166 gainers, 383 losers and 224 stocks unchanged.
Japan's Nikkei 225 fell 1.45% to 10,064.36; Hong Kong's Hang Seng Index fell 1.66% to 21,8--.95, while Shanghai's Composite Index fell 1.23% to 2,984.26 and Singapore's Straits Times Index slide 0.9% to 2,670.31.
Oil fell 27 cents to US$79.28. According to Reuters, industry data showed a surprise large drawdown in U.S. crude inventories that blunted the impact of a strengthening dollar and weak Asian equities.
The American Petroleum Institute data showed after the contract's settlement on Tuesday that U.S. crude stocks fell by 3.5 million barrels last week, compared with a forecast for a 1.8 million barrel build in a Reuters poll.
Crude palm oil futures fell RM8 to RM2,162 while US spot gold fell US$1.19 to US$1,038.86.
Tanjong and CIMB fell 32 sen each to RM15.16 and RM12.46, HL Ban 16 sen to RM7.62, Bursa 15 sen to RM8.23 while Genting gave up 10 sen to RM7.39.
MBL was the most active with 49.25 million shares done, adding nine sen to 74 sen.
Green packet-WA added six sen to 68 sen, Green Packet two sen to RM1.10 while RedTone and MoBif were unchanged at 28.5 sen and eight sen each.
IJM-WC rose the most, adding 34 sen to RM1.27 with 5.77 million units done while smaller PLANTATION [] players including Riverview rose 14 sen to RM2.30 and UMCCA 13 sen to RM8.13.
At 12.30pm, the FBM KLCI fell 8.70 points or 0.69% to 1,251.6. Turnover was 469.66 million shares valued at RM484.52 million. There were 166 gainers, 383 losers and 224 stocks unchanged.
Japan's Nikkei 225 fell 1.45% to 10,064.36; Hong Kong's Hang Seng Index fell 1.66% to 21,8--.95, while Shanghai's Composite Index fell 1.23% to 2,984.26 and Singapore's Straits Times Index slide 0.9% to 2,670.31.
Oil fell 27 cents to US$79.28. According to Reuters, industry data showed a surprise large drawdown in U.S. crude inventories that blunted the impact of a strengthening dollar and weak Asian equities.
The American Petroleum Institute data showed after the contract's settlement on Tuesday that U.S. crude stocks fell by 3.5 million barrels last week, compared with a forecast for a 1.8 million barrel build in a Reuters poll.
Crude palm oil futures fell RM8 to RM2,162 while US spot gold fell US$1.19 to US$1,038.86.
Tanjong and CIMB fell 32 sen each to RM15.16 and RM12.46, HL Ban 16 sen to RM7.62, Bursa 15 sen to RM8.23 while Genting gave up 10 sen to RM7.39.
MBL was the most active with 49.25 million shares done, adding nine sen to 74 sen.
Green packet-WA added six sen to 68 sen, Green Packet two sen to RM1.10 while RedTone and MoBif were unchanged at 28.5 sen and eight sen each.
IJM-WC rose the most, adding 34 sen to RM1.27 with 5.77 million units done while smaller PLANTATION [] players including Riverview rose 14 sen to RM2.30 and UMCCA 13 sen to RM8.13.
EPU aims for 5.5% annual growth in 10MP
KUALA LUMPUR: The Economic Planning Unit (EPU) is aiming to achieve an annual growth rate of 5.5% of gross domestic product (GDP) during the duration of the 10th Malaysia Plan (10MP) from 2011-2015, said EPU’s director-general Datuk Noriyah Ahmad.
Noriyah said the growth rate was “doable” as compared to the rate the country had experienced previously, stating that the private sector would play the lead role as the driver to achieve the growth rate.
“The government’s role is to facilitate,” she told reporters after delivering her presentation entitled A New Approach to the 10th MP at the National Asset & Facility Management Convention (NAFAM) yesterday.
Noriyah expects the private sector to contribute more than 50% to the overall economic growth of the country. And to ensure the private sector was involved, Noriyah said the government was working on providing a better business environment in the country such as the liberalisation of various rules and processes.
However, she said many foreign investors were still staying on the sidelines as they were not aware of Malaysia’s recent liberalisation mesures.
“It takes time, we need to publicise (the liberalisation),” she said.
Seeing the potential of the private sector in the country’s future growth, the government will be undertaking a second phase of privatisation process for business, enterprise agency or public service from the public sector to be made private through the 10MP.
The first phase was undertaken back in the 1990s, which Noriyah said had produced good results with only some minor glitches.
Asked if a list of the companies that would be privatised would be made available to the public, Noriyah said there were no current plans to do so, reminiscing that when the list was produced for the first phase, it had created chaos.
She also said operating expenses of all ministries would see a 15% cut to ensure that the government was able to meet its target deficit of 5.2% next year.
On the 10MP that is to be presented to the cabinet by June next year, Noriyah said during her presentation that the economic unit under the Prime Minister’s Department was undertaking a more integrated outcome-based approach to ensure a more suitable development.
“Through integrated outcome-based approach, there must be a systematic linkage between national development planning with the budgeting systems and personnel performance with monitoring and evaluation as the support management tool,” she said.
She mentioned that there was a lack of an integrated planning scheme between government ministries, as they tended to plan independently.
“We thought it will fall into place somehow, but now we have to make sure,” she said.
Citing the example of the plans to build a RM700 million national cancer institution, which would take two to three years to complete, she said the Public Services Department (PSD) would only start looking for the needed human resources for the institution after the building was 60% completed.
“When decisions are made, everything should be looked at wholly, the opex, capex and human resource. It may turn out not to be worthwhile,” she quipped.
Noriyah said the growth rate was “doable” as compared to the rate the country had experienced previously, stating that the private sector would play the lead role as the driver to achieve the growth rate.
“The government’s role is to facilitate,” she told reporters after delivering her presentation entitled A New Approach to the 10th MP at the National Asset & Facility Management Convention (NAFAM) yesterday.
Noriyah expects the private sector to contribute more than 50% to the overall economic growth of the country. And to ensure the private sector was involved, Noriyah said the government was working on providing a better business environment in the country such as the liberalisation of various rules and processes.
However, she said many foreign investors were still staying on the sidelines as they were not aware of Malaysia’s recent liberalisation mesures.
“It takes time, we need to publicise (the liberalisation),” she said.
Seeing the potential of the private sector in the country’s future growth, the government will be undertaking a second phase of privatisation process for business, enterprise agency or public service from the public sector to be made private through the 10MP.
The first phase was undertaken back in the 1990s, which Noriyah said had produced good results with only some minor glitches.
Asked if a list of the companies that would be privatised would be made available to the public, Noriyah said there were no current plans to do so, reminiscing that when the list was produced for the first phase, it had created chaos.
She also said operating expenses of all ministries would see a 15% cut to ensure that the government was able to meet its target deficit of 5.2% next year.
On the 10MP that is to be presented to the cabinet by June next year, Noriyah said during her presentation that the economic unit under the Prime Minister’s Department was undertaking a more integrated outcome-based approach to ensure a more suitable development.
“Through integrated outcome-based approach, there must be a systematic linkage between national development planning with the budgeting systems and personnel performance with monitoring and evaluation as the support management tool,” she said.
She mentioned that there was a lack of an integrated planning scheme between government ministries, as they tended to plan independently.
“We thought it will fall into place somehow, but now we have to make sure,” she said.
Citing the example of the plans to build a RM700 million national cancer institution, which would take two to three years to complete, she said the Public Services Department (PSD) would only start looking for the needed human resources for the institution after the building was 60% completed.
“When decisions are made, everything should be looked at wholly, the opex, capex and human resource. It may turn out not to be worthwhile,” she quipped.
Kelington poised for further growth after listing
SHAH ALAM: ACE Market-bound provider of ultra high purity (UHP) gas and chemical delivery systems Kelington Group Bhd anticipates more and better growth opportunities after its listing exercise, which is tentatively set for late November.
Kelington’s chief executive officer Raymond Gan said the company was pursuing the listing exercise now towards garnering a higher international profile and acceptance.
Speaking to The Edge Financial Daily recently, Gan said despite its strong track record, Kelington had been denied some jobs because of its unlisted status.
“All our competitors are listed. That’s why the management studied the initial public offering (IPO),” the group’s president and chief operating officer Steven Ong added.
As it is, its impressive clientele list already includes TSMC, Promos, Winbond and Texas Instruments in the wafer fabrication sector, Hannstar Display and IVO in flat panel display as well as Suntech and Motech in the solar cells sector.
The company will be the 10th to be listed this year on Bursa Malaysia Securities Bhd, and also the first to list on the ACE Market since its name change from the Mesdaq Market last August. Kenanga Investment Bank is the adviser, underwriter and placement agent for the IPO.
According to a draft prospectus posted on the Securities Commission’s website, Kelington is offering a total of 9.71 million new shares of 10 sen each at 53 sen apiece under its IPO. There is also an offer for sale of nine million Kelington shares to selected investors at the same price.
Of the 9.71 million shares under the public issue, 960,000 shares will be offered for application by the public, 5.94 million will be placed to selected investors and 2.81 million reserved for employees and business associates.
Ong said the IPO proceeds would be used mainly for purchasing equipment and machines, working capital, and research and development (R&D).
“The industry is evolving and the need for UHP purity levels will be more stringent. We need to catch up with the industry or else we will be left behind,” he said, adding that it spent RM80,000 on R&D last year.
Operating in a very niche business area with very few players, the group’s UHP gas and chemical delivery systems are deployed in highly specialised industries such as the flat panel display and wafer fabrication sectors and emerging industries such as the solar energy, pharmaceutical, light emitting diode (LED) and bioscience sectors.
Kelington designs the gas cabinets and piping systems for the supply of UHP gas to the “clean room” in factories where high-end semiconductors and other related devices are manufactured.
UHP gas is needed as these sensitive electronics must be handled in a dust-free environment as any contamination of a single particle will cause defects.
In a presentation slide shown to The Edge Financial Daily, “the estimated loss when a wafer foundry shuts down is about RM1 million per day”.
Kelington posted a net profit of RM6.6 million on the back of RM60 million revenue for its financial year ended Dec 31, 2008. It has consistently seen a 30% growth annually, even during times of financial crisis.
“We are not just serving one industry, but many such as semiconductors, wafer fab and solar cells. The recent crisis may have affected the semiconductor industry but the demand for solar energy is seeing growth. Every item has a different cycle, and that gives Kelington consistent growth,” Ong said.
He said the company was looking to Asia for future growth and aimed to strengthen its presence in the region as many chip manufacturing companies were located in Asia.
Gan added that the company was currently operating in four markets — Malaysia, Singapore, China and Taiwan. He added that the different markets had been registering different growth rates since the global economic crisis.
“China is now stronger than Malaysia, and this gives us a platform (to grow),” he said.
Before setting up Kelington, Gan worked as an engineer at a blue-chip company in Singapore which was involved in wafer fabrication. After gaining much exposure, Gan decided to return to Malaysia to start up his own company.
Kelington group was established in 2000 with just RM10,000 in initial investment outlay and by 2002, the company had ventured outside Malaysia, to China. By 2004, Kelington had made its presence felt in China and Taiwan.
Kelington’s chief executive officer Raymond Gan said the company was pursuing the listing exercise now towards garnering a higher international profile and acceptance.
Speaking to The Edge Financial Daily recently, Gan said despite its strong track record, Kelington had been denied some jobs because of its unlisted status.
“All our competitors are listed. That’s why the management studied the initial public offering (IPO),” the group’s president and chief operating officer Steven Ong added.
As it is, its impressive clientele list already includes TSMC, Promos, Winbond and Texas Instruments in the wafer fabrication sector, Hannstar Display and IVO in flat panel display as well as Suntech and Motech in the solar cells sector.
The company will be the 10th to be listed this year on Bursa Malaysia Securities Bhd, and also the first to list on the ACE Market since its name change from the Mesdaq Market last August. Kenanga Investment Bank is the adviser, underwriter and placement agent for the IPO.
According to a draft prospectus posted on the Securities Commission’s website, Kelington is offering a total of 9.71 million new shares of 10 sen each at 53 sen apiece under its IPO. There is also an offer for sale of nine million Kelington shares to selected investors at the same price.
Of the 9.71 million shares under the public issue, 960,000 shares will be offered for application by the public, 5.94 million will be placed to selected investors and 2.81 million reserved for employees and business associates.
Ong said the IPO proceeds would be used mainly for purchasing equipment and machines, working capital, and research and development (R&D).
“The industry is evolving and the need for UHP purity levels will be more stringent. We need to catch up with the industry or else we will be left behind,” he said, adding that it spent RM80,000 on R&D last year.
Operating in a very niche business area with very few players, the group’s UHP gas and chemical delivery systems are deployed in highly specialised industries such as the flat panel display and wafer fabrication sectors and emerging industries such as the solar energy, pharmaceutical, light emitting diode (LED) and bioscience sectors.
Kelington designs the gas cabinets and piping systems for the supply of UHP gas to the “clean room” in factories where high-end semiconductors and other related devices are manufactured.
UHP gas is needed as these sensitive electronics must be handled in a dust-free environment as any contamination of a single particle will cause defects.
In a presentation slide shown to The Edge Financial Daily, “the estimated loss when a wafer foundry shuts down is about RM1 million per day”.
Kelington posted a net profit of RM6.6 million on the back of RM60 million revenue for its financial year ended Dec 31, 2008. It has consistently seen a 30% growth annually, even during times of financial crisis.
“We are not just serving one industry, but many such as semiconductors, wafer fab and solar cells. The recent crisis may have affected the semiconductor industry but the demand for solar energy is seeing growth. Every item has a different cycle, and that gives Kelington consistent growth,” Ong said.
He said the company was looking to Asia for future growth and aimed to strengthen its presence in the region as many chip manufacturing companies were located in Asia.
Gan added that the company was currently operating in four markets — Malaysia, Singapore, China and Taiwan. He added that the different markets had been registering different growth rates since the global economic crisis.
“China is now stronger than Malaysia, and this gives us a platform (to grow),” he said.
Before setting up Kelington, Gan worked as an engineer at a blue-chip company in Singapore which was involved in wafer fabrication. After gaining much exposure, Gan decided to return to Malaysia to start up his own company.
Kelington group was established in 2000 with just RM10,000 in initial investment outlay and by 2002, the company had ventured outside Malaysia, to China. By 2004, Kelington had made its presence felt in China and Taiwan.
Potential upside for S P Setia shares
At current prices, S P Setia Bhd shares offer accumulation opportunities for capital gains in anticipation that the stock will be re-rated upwards against the backdrop of more positive updates from the property developer.
In a note, Kenanga Research said S P Setia shares could benefit from the implementation and progress of the company’s overseas and local real estate initiatives.
“The current price weakness provides investors with good accumulation opportunities, especially when we expect share price to re-rate upwards in the near future from more positive news flow (such as finalisation of the China project, more Vietnam projects and improved sales, commencement of Abdullah Hukum project),” said Kenanga which reiterated its trading buy call at RM3.81 with an unchanged target price of RM4.25.
Kenanga whose note was issued following the announcement of S P Setia’s latest US$250 milion (RM850 million) mixed development in Vietnam, said the finalisation of the job on 10.7ha in Lai Thieu Town, Thuan An District, Binh Duong province, would add at least 14 sen to the research house’s fair value for S P Setia shares.
The project, to be completed within six years, is expected to comprise some 1,700 units consisting of shop, terrace and semi-detached houses, apartments, besides commercial centres and a club house.
RHB Research said it liked S P Setia’s latest Vietnam project because the land cost would be paid progressively over the next three years and part of the payment would be financed by the project.
By virtue of the project’s proximity to the Vietnam Singapore Industrial Park and Ho Chi Minh City, RHB said S P Setia’s real estate initiative would appeal to a range of market segments including young couples with growing families and businessmen.
RHB upgraded its recommendation for S P Setia shares to outperform from market perform with an unchanged fair value of RM4.64.
ECM Libra Investment Bank, however, said S P Setia shares were overvalued, prompting the research firm to maintain its sell call for the stock with a target price of RM3.36.
“We believe S P Setia’s strong sales momentum YTD (year to date) has already been priced in and as such, maintain our sell call,” ECM Libra wrote.
Kenanga, RHB, and ECM Libra have maintained their estimates for S P Setia’s financials, following the announcement of the developer’s latest Vietnam project.
Yesterday, S P Setia closed flat at RM3.81.
In a note, Kenanga Research said S P Setia shares could benefit from the implementation and progress of the company’s overseas and local real estate initiatives.
“The current price weakness provides investors with good accumulation opportunities, especially when we expect share price to re-rate upwards in the near future from more positive news flow (such as finalisation of the China project, more Vietnam projects and improved sales, commencement of Abdullah Hukum project),” said Kenanga which reiterated its trading buy call at RM3.81 with an unchanged target price of RM4.25.
Kenanga whose note was issued following the announcement of S P Setia’s latest US$250 milion (RM850 million) mixed development in Vietnam, said the finalisation of the job on 10.7ha in Lai Thieu Town, Thuan An District, Binh Duong province, would add at least 14 sen to the research house’s fair value for S P Setia shares.
The project, to be completed within six years, is expected to comprise some 1,700 units consisting of shop, terrace and semi-detached houses, apartments, besides commercial centres and a club house.
RHB Research said it liked S P Setia’s latest Vietnam project because the land cost would be paid progressively over the next three years and part of the payment would be financed by the project.
By virtue of the project’s proximity to the Vietnam Singapore Industrial Park and Ho Chi Minh City, RHB said S P Setia’s real estate initiative would appeal to a range of market segments including young couples with growing families and businessmen.
RHB upgraded its recommendation for S P Setia shares to outperform from market perform with an unchanged fair value of RM4.64.
ECM Libra Investment Bank, however, said S P Setia shares were overvalued, prompting the research firm to maintain its sell call for the stock with a target price of RM3.36.
“We believe S P Setia’s strong sales momentum YTD (year to date) has already been priced in and as such, maintain our sell call,” ECM Libra wrote.
Kenanga, RHB, and ECM Libra have maintained their estimates for S P Setia’s financials, following the announcement of the developer’s latest Vietnam project.
Yesterday, S P Setia closed flat at RM3.81.
CIMB still neutral on Axiata, cites lack of catalyst
CIMB Research yesterday retained a neutral stance on regional telecommunications player Axiata Group Bhd after the latter’s Indian associate earnings came in flat quarter-on-quarter (q-o-q).
“We make no adjustments to our earnings forecasts or sum-of-parts based target price of RM3.47 for Axiata pending the release of its 3Q results. Although its recent de-rating has taken valuations to more attractive levels, we continue to rate it a neutral as it lacks catalysts,” the research house said in a note yesterday.
CIMB recommended that clients switch to its top picks in the region namely, Thailand’s AIS (outperform, 130 baht target price), Thailand’s DTAC (outperform, 48 baht target price) and Telkom Indonesia (outperform, 9,600 rupiah target price).
Axiata is scheduled to release its 3Q09 results by end-November.
The research house noted that Axiata’s 14.99%-owned Indian investment, Idea Cellular Ltd, saw 2Q09 revenue fall 0.1% q-o-q despite being up 29.1% year-on-year. It also pointed out that Idea’s top line in its more established service areas has declined 2.5% q-o-q, although the declines were offset by revenue gains in new service areas as well as contributions from Spice Communications Ltd’s circles (operating areas).
“Average revenue per minute (ARPM) continued to exhibit downward momentum, falling 3.4% on a q-o-q basis to 0.56 rupees. We attribute this to the effects of stiff competition and unbelievably low pricing,” CIMB said.
Ebitda (earnings before interest, tax, depreciation and amortisation) also took a beating, falling 1.7 percentage points to 27.2% due to higher personnel cost, network operating expenditure, subscriber acquisition as well as advertising and promotion costs.
CIMB added that segmental breakdown showed margins were weak across the board in Idea’s more established 11 circles, the newer circles and the Spice circles. The Indus circle was the only one that bucked the trend.
“We are concerned about competition in India which has developed into a full-blown price war. Unlike its more established incumbents, Idea will be under greater pressure as it does not have the economies of scale that its larger rivals possess,” CIMB said.
Axiata added three sen to close at RM2.95 yesterday with 15.18 million shares done.
“We make no adjustments to our earnings forecasts or sum-of-parts based target price of RM3.47 for Axiata pending the release of its 3Q results. Although its recent de-rating has taken valuations to more attractive levels, we continue to rate it a neutral as it lacks catalysts,” the research house said in a note yesterday.
CIMB recommended that clients switch to its top picks in the region namely, Thailand’s AIS (outperform, 130 baht target price), Thailand’s DTAC (outperform, 48 baht target price) and Telkom Indonesia (outperform, 9,600 rupiah target price).
Axiata is scheduled to release its 3Q09 results by end-November.
The research house noted that Axiata’s 14.99%-owned Indian investment, Idea Cellular Ltd, saw 2Q09 revenue fall 0.1% q-o-q despite being up 29.1% year-on-year. It also pointed out that Idea’s top line in its more established service areas has declined 2.5% q-o-q, although the declines were offset by revenue gains in new service areas as well as contributions from Spice Communications Ltd’s circles (operating areas).
“Average revenue per minute (ARPM) continued to exhibit downward momentum, falling 3.4% on a q-o-q basis to 0.56 rupees. We attribute this to the effects of stiff competition and unbelievably low pricing,” CIMB said.
Ebitda (earnings before interest, tax, depreciation and amortisation) also took a beating, falling 1.7 percentage points to 27.2% due to higher personnel cost, network operating expenditure, subscriber acquisition as well as advertising and promotion costs.
CIMB added that segmental breakdown showed margins were weak across the board in Idea’s more established 11 circles, the newer circles and the Spice circles. The Indus circle was the only one that bucked the trend.
“We are concerned about competition in India which has developed into a full-blown price war. Unlike its more established incumbents, Idea will be under greater pressure as it does not have the economies of scale that its larger rivals possess,” CIMB said.
Axiata added three sen to close at RM2.95 yesterday with 15.18 million shares done.
RHB ups Hai-O earnings forecasts, target price
RHB Research yesterday raised its fair value for HAI-O ENTERPRISE BHD [] to RM8.80 from RM6.80 after revising upwards its earnings forecasts to take into account the recent stronger-than-expected membership growth at the latter’s multi-level marketing (MLM) division.
“Since June 2009, Hai-O’s MLM division recruitment of new members has increased to an average of 4,000 to 5,000 a month (versus 3,000 to 4,000 in 1HCY09), representing an average increase of 29%,” RHB said in a note.
RHB, which has an outperform call on Hai-O, revised its FY2010-2012 forecasts for the company by between 4% and 26% after increasing projections for new members per month.
The increase in new members was mainly attributed to the success of Hai-O’s advertising activities such as celebrity endorsement and TV commercials for its water filter product (BioAura).
The research house also applied a higher price-earnings ratio (PER) multiple of nine times CY10 earnings (from eight times CY10 earnings previously), “to reflect increased investor participation in mid-cap stocks, lower risk premium and improved market sentiment”.
The PER multiple is still at a 38% discount to its target market capitalisation of 14.5 times PER for the consumer sector, to account for Hai-O’s smaller market capitalisation as well as lower liquidity, RHB added.
It also noted that sales from Hai-O’s recently launched health supplements and anti-aging skincare range have picked up despite initial mediocre sales performance.
“Nevertheless, Hai-O’s star product remains its water filter, which is still gaining popularity especially amongst the bumiputera community. While no figures were provided, management guided that average revenue/distributor continues to grow year-on-year. We forecast average revenue/distributor to increase by an unchanged 5%, 3% and 1% for FY2010-2012,” RHB said.
RHB has yet to input any contributions from Indonesia, where Hai-O had begun initial recruitment activities, having obtained a licence from the Association of MLM in Indonesia in August 2009.
“Recall that Hai-O only invested a total of US$480,000 (RM1.7 million) for its Indonesia venture, which is a minimal amount for the vast potential growth in the Indonesian market.
Management targets a conservative 5,000 to 10,000 new members in FY2010, and projects a minimum one year to break even,” RHB added.
Risks to RHB’s recommendation include the termination of supply agreements from its suppliers in China, stronger-than-expected strengthening of the greenback as well as weaker-than-expected increase in consumer spending.
Hai-O rose 12 sen to close at its intra-day high of RM7.20 yesterday on a volume of 121,400 shares.
“Since June 2009, Hai-O’s MLM division recruitment of new members has increased to an average of 4,000 to 5,000 a month (versus 3,000 to 4,000 in 1HCY09), representing an average increase of 29%,” RHB said in a note.
RHB, which has an outperform call on Hai-O, revised its FY2010-2012 forecasts for the company by between 4% and 26% after increasing projections for new members per month.
The increase in new members was mainly attributed to the success of Hai-O’s advertising activities such as celebrity endorsement and TV commercials for its water filter product (BioAura).
The research house also applied a higher price-earnings ratio (PER) multiple of nine times CY10 earnings (from eight times CY10 earnings previously), “to reflect increased investor participation in mid-cap stocks, lower risk premium and improved market sentiment”.
The PER multiple is still at a 38% discount to its target market capitalisation of 14.5 times PER for the consumer sector, to account for Hai-O’s smaller market capitalisation as well as lower liquidity, RHB added.
It also noted that sales from Hai-O’s recently launched health supplements and anti-aging skincare range have picked up despite initial mediocre sales performance.
“Nevertheless, Hai-O’s star product remains its water filter, which is still gaining popularity especially amongst the bumiputera community. While no figures were provided, management guided that average revenue/distributor continues to grow year-on-year. We forecast average revenue/distributor to increase by an unchanged 5%, 3% and 1% for FY2010-2012,” RHB said.
RHB has yet to input any contributions from Indonesia, where Hai-O had begun initial recruitment activities, having obtained a licence from the Association of MLM in Indonesia in August 2009.
“Recall that Hai-O only invested a total of US$480,000 (RM1.7 million) for its Indonesia venture, which is a minimal amount for the vast potential growth in the Indonesian market.
Management targets a conservative 5,000 to 10,000 new members in FY2010, and projects a minimum one year to break even,” RHB added.
Risks to RHB’s recommendation include the termination of supply agreements from its suppliers in China, stronger-than-expected strengthening of the greenback as well as weaker-than-expected increase in consumer spending.
Hai-O rose 12 sen to close at its intra-day high of RM7.20 yesterday on a volume of 121,400 shares.
CIMB, Tanjong, Bursa fall in early trade
KUALA LUMPUR: All key Asian markets fell in the early morning session on Wednesday, Oct 28 as investors' risk appetite for equities was curbed by the weak closing on Wall Street while at Bursa, CIMB, Tanjong and Bursa were the major losers.
At 10.12am, the FBM KLCI was down 4.95 points to 1,255.35. Turnover was 242.53 million shares valued at RM189 million.
The Nikkei 225 fell 0.66% to 10,144.55; Hong Kong's Hang Seng Index slipped 0.48% to 22,062.95 and Singapore's Straits Times lost 0.29% to 2,686.59 but Shanghai's Composite Index rose 0.14% to 3,033.97.
Light crude oil rose 19 cents to US$79.74 while US spot gold price rose US$1.55 to US$1,041.60.
CIMB fell the most, down 26 sen to RM12.50, Tanjong 22 sen to RM15.26 while BAT gave up eight sen to RM44.90 and Bursa eight sen also to RM8.30.
MBL was the most active with 40.5 million shares done, adding 9.5 sen to 74.5 sen. Green Packet added two sen to RM1.10 and the warrants four sen to 66 sen. Berjaya Corp added two sen to RM1.13 and the loan stocks two sen higher to 57.5 sen.
IJM-WC jumped 29 sen to RM1.22 with four million units done while Tanjung Offshore advanced 15 sen to RM1.30 and the warrants, WB 13.5 sen to 60 sen.
At 10.12am, the FBM KLCI was down 4.95 points to 1,255.35. Turnover was 242.53 million shares valued at RM189 million.
The Nikkei 225 fell 0.66% to 10,144.55; Hong Kong's Hang Seng Index slipped 0.48% to 22,062.95 and Singapore's Straits Times lost 0.29% to 2,686.59 but Shanghai's Composite Index rose 0.14% to 3,033.97.
Light crude oil rose 19 cents to US$79.74 while US spot gold price rose US$1.55 to US$1,041.60.
CIMB fell the most, down 26 sen to RM12.50, Tanjong 22 sen to RM15.26 while BAT gave up eight sen to RM44.90 and Bursa eight sen also to RM8.30.
MBL was the most active with 40.5 million shares done, adding 9.5 sen to 74.5 sen. Green Packet added two sen to RM1.10 and the warrants four sen to 66 sen. Berjaya Corp added two sen to RM1.13 and the loan stocks two sen higher to 57.5 sen.
IJM-WC jumped 29 sen to RM1.22 with four million units done while Tanjung Offshore advanced 15 sen to RM1.30 and the warrants, WB 13.5 sen to 60 sen.
Maxis retail offering at RM5.20 per share
KUALA LUMPUR: Maxis Bhd's retail offering of 212.29 million existing shares under its initial public offer (IPO) is tentatively fixed at RM5.20 per share.
In its prospectus issued on Wednesday, Oct 28, it said the offer price was subject to a refund if the final IPO price is less than the IPO price.
It added the final IPO price will equal the lower of the IPO price of RM5.20 and 95% of the institutional price to be determined by bookbuilding.
Under the listing exercise of 2.25 billion existing shares of 10 sen each, it is offering 2.037 billion shares to Malaysian and foreign institutional and selected investors and Bumiputera investors.
Application for the offer shares under the retail offering will open at 10am today until 5pm, Nov 5.
Of the 212.295 million shares offered to the retail investors, or 2.83% it is offering 21.175 million shares (0.28%) to eligible customers, 35 million shares (0.47%) to the eligible employees, directors while 75 million shares (1%) will be offered to Bumiputera members of the public and another 75 million shares (1%) to non-Bumiputeras.
Of the 2.037 billion shares or 27.17% offered to institutions, 862.5 million shares (11.5%) are offered to approved Bumiputera investors and 1.175 billion shares (15.67%) to other investors.
Maxis also said is not issuing any new shares under the IPO and it will not receive any proceeds from the IPO.
In its prospectus issued on Wednesday, Oct 28, it said the offer price was subject to a refund if the final IPO price is less than the IPO price.
It added the final IPO price will equal the lower of the IPO price of RM5.20 and 95% of the institutional price to be determined by bookbuilding.
Under the listing exercise of 2.25 billion existing shares of 10 sen each, it is offering 2.037 billion shares to Malaysian and foreign institutional and selected investors and Bumiputera investors.
Application for the offer shares under the retail offering will open at 10am today until 5pm, Nov 5.
Of the 212.295 million shares offered to the retail investors, or 2.83% it is offering 21.175 million shares (0.28%) to eligible customers, 35 million shares (0.47%) to the eligible employees, directors while 75 million shares (1%) will be offered to Bumiputera members of the public and another 75 million shares (1%) to non-Bumiputeras.
Of the 2.037 billion shares or 27.17% offered to institutions, 862.5 million shares (11.5%) are offered to approved Bumiputera investors and 1.175 billion shares (15.67%) to other investors.
Maxis also said is not issuing any new shares under the IPO and it will not receive any proceeds from the IPO.
Khazanah sells 9.4m PLUS shares
KUALA LUMPUR: Khazanah Nasional Bhd disposed of 9.408 million shares in PLUS EXPRESSWAYS BHD [] on Oct 22 as part of its programme to reduce stakes in government-linked companies (GLCs).
A filing with Bursa Malaysia showed that Khazanah's total stake in the tolled road operator was reduced to 3.018 billion shares or 60.36% after the disposal.
On Oct 5, Khazanah disposed of 3.61 million shares in PLUS. CIMB, Tanjong, Bursa fall in early trade< Prev Next >US job market rut deepens consumer gloom
A filing with Bursa Malaysia showed that Khazanah's total stake in the tolled road operator was reduced to 3.018 billion shares or 60.36% after the disposal.
On Oct 5, Khazanah disposed of 3.61 million shares in PLUS. CIMB, Tanjong, Bursa fall in early trade< Prev Next >US job market rut deepens consumer gloom
KPMG: Budget 2010 - Government's reaction in difficult times
The Minister of Finance Datuk Seri Najib Razak, who is also the Prime Minister, announced on Oct 23 the National Budget for 2010 entitled "1Malaysia, Together We Prosper".
The Budget is set against the back drop of a difficult economic climate and concerns for the need to contain and reduce the national fiscal deficit.
The Government's reaction to these issues has been positive. Instead of merely trying to contain and survive the effects of the global economic meltdown, the Government's aims are long term in nature and its intentions are to transform the Malaysian economy into a high income economy. As with anything else of this nature, the process of transformation will undoubtedly take time.
To achieve this transformation, the private sector has been thrust into the role of being the primary driver. The need to develop highly skilled human capital to propel the private sector has been recognized and measures have been proposed to achieve this.
The public sector's efficiencies will be enhanced to support the transformation of the Malaysian economy. The 2010 Budget also lays the foundation for the formulation of the 10th Malaysia Plan.
The Government's goal to transform the Malaysian economy is intended to be achieved by way of innovation, creativity and undertaking high value added activities. It is expected that the implementation of these measures will more than double the income of the rakyat in the next decade.
This article seeks to evaluate some of the key proposals to enable the Government to achieve its goal.
Attracting Foreign Direct Investment (FDI)
Competition both regionally and globally to attract FDI is stiff. To increase Malaysia's competitiveness in this area, the Government's aim is to remove potential barriers and ease the entry path of foreign companies to undertake economic activities in Malaysia. In this respect, previously, foreign participation in 27 services sub-sectors has been liberalized.
The Foreign Investment Committee's (FIC) guidelines on equity participation have been abolished (except where Bumiputera interests are diluted). It was announced in the 2010 Budget that Khazanah Nasional Bhd (Khazanah) and Permodalan Nasional Bhd (PNB) will enhance their collaboration with foreign investors in the areas of education, tourism and infrastructure.
It appears that foreign investors will be allowed equity ownership in companies and to participate in joint ventures in local projects in conjunction with Khazanah and PNB where this was not previously permissible.
This may have the dual impact of attracting FDI and reducing the costs of undertaking these projects to Malaysia. There is an additional benefit in that foreign investors may bring intellectual capital which will enhance development in these selected areas. One will have to wait and see the extent to which foreign participation will be allowed in other areas through joint ventures with Khazanah and PNB.
Research and Development (R&D) activities
Proposals in the 2010 Budget relating to R&D activities and the commercialization of the same could also serve to attract FDI and simultaneously encourage the undertaking of high value added activities in Malaysia. For this purpose, a four prong strategy has been proposed :
* Rationalizing all research funds and grants in order to be more effective to achieve set targets;
* Establishing a National Innovation Centre supported by a network of innovation excellence centres under the Ministry of Science, TECHNOLOGY [] and Innovation in collaboration with the Ministry of Higher Education;
* Integrating R&D activities with patent, copyright and trademark registration to ensure that the R&D and the commercialization of R&D is implemented more effectively. The cooperation between patent and research agencies will expedite the commercialization of research findings; and
* Providing small and medium enterprises with tax deductions for expenses incurred in the registration of patents and trademarks in the country. In the tax context, "small and medium enterprises" generally refer to companies with a paid up ordinary share capital of RM2.5 million or less.
While the tax deduction proposed may encourage investments in R&D activity, it is limited to small and medium enterprises only. Among other factors, balancing the need to limit legal liabilities to the extent of the paid up share capital of the company and encouraging investment in this sector should perhaps be the purview of the businessman. The tax incentive currently proposed could be broadened to attract wider participation in this sector by removing the limitation based on share capital.
The above fiscal measures could complement the existing incentives already provided to R&D activities. These existing incentives include double deductions for qualifying R&D expenditure incurred and awarding Pioneer Status to companies that conduct qualifying R&D activities.
In the area of education
In order to transform the Malaysian economy into a high income economy and, among other things, attract FDI, it is recognized that there is a need to develop high quality human capital. For this purpose, measures have been proposed to enhance the Malaysian education system. An allocation of RM30 billion for primary and secondary education has been proposed. These measures are expected to benefit 5.5 million students in Malaysia.
Measures relating to the care of the welfare of students have also been proposed to enhance the education system. These include proposals on the awards of scholarships, discounts on train fares and encouraging the use of information technology by students.
To accelerate the achievement of the Government's goals in relation to the development of high quality human capital, the Government may consider encouraging the private sector to participate in the education sector. Fiscal incentives could include granting double deductions on relevant expenses.
In the area of Islamic finance
Malaysia has already achieved the status of being the world's largest issuer of sukuks with approximately 62%, or USD94.7 billion, of outstanding global sukuks in 2008. To ensure the rapid development of Islamic financial services, the following tax measures are proposed :
* An extension to 31 December 2015, of the remission of 20% of the stamp duty payable on the principal or primary instrument of financing made according to the principles of Syariah.
* The extension of the incentive to allow a tax deduction on the costs incurred to issue Islamic securities under specified Syariah principles approved by the Securities Commission (SC) until the Year of Assessment (YA) 2015. In addition, it is also proposed that the above incentive is to be extended to the cost of issuing Islamic securities approved by the Labuan Offshore Financial Services Authority (LOFSA) with effect from YA 2010 to YA 2015.
* The extension of the incentive to allow a double deduction on qualifying expenses incurred to promote Malaysia as an International Islamic Financial Centre until YA 2015.
* The extension of the incentive to allow a tax deduction on the costs incurred to establish companies undertaking licensed Islamic stock broking businesses incorporated under the Companies Act 1965 for applications received by the SC until 31 December 2015.
* The extension of the tax exemption on profits paid or credited to any person in respect of Islamic securities (except convertible loan stock) originating from Malaysia issued in any currency other than Ringgit and approved by the SC, to include profits paid or credited in respect of Islamic securities approved by LOFSA.
The above measures should have the effect of encouraging further growth of the Islamic financial markets in Malaysia. These proposals could also reduce the cost of raising capital through the Islamic capital markets.
Overall, the measures proposed in the 2010 Budget should have the effect of moving Malaysia along the path to transformation. It is noteworthy that the Minister of Finance announced during the 2010 Budget speech that the Government is in the final stage of completing its study on the implementation of a Goods and Services Tax (GST) system. The issue of whether or not GST will be introduced is the tax question that should now be on people's minds.
The Budget is set against the back drop of a difficult economic climate and concerns for the need to contain and reduce the national fiscal deficit.
The Government's reaction to these issues has been positive. Instead of merely trying to contain and survive the effects of the global economic meltdown, the Government's aims are long term in nature and its intentions are to transform the Malaysian economy into a high income economy. As with anything else of this nature, the process of transformation will undoubtedly take time.
To achieve this transformation, the private sector has been thrust into the role of being the primary driver. The need to develop highly skilled human capital to propel the private sector has been recognized and measures have been proposed to achieve this.
The public sector's efficiencies will be enhanced to support the transformation of the Malaysian economy. The 2010 Budget also lays the foundation for the formulation of the 10th Malaysia Plan.
The Government's goal to transform the Malaysian economy is intended to be achieved by way of innovation, creativity and undertaking high value added activities. It is expected that the implementation of these measures will more than double the income of the rakyat in the next decade.
This article seeks to evaluate some of the key proposals to enable the Government to achieve its goal.
Attracting Foreign Direct Investment (FDI)
Competition both regionally and globally to attract FDI is stiff. To increase Malaysia's competitiveness in this area, the Government's aim is to remove potential barriers and ease the entry path of foreign companies to undertake economic activities in Malaysia. In this respect, previously, foreign participation in 27 services sub-sectors has been liberalized.
The Foreign Investment Committee's (FIC) guidelines on equity participation have been abolished (except where Bumiputera interests are diluted). It was announced in the 2010 Budget that Khazanah Nasional Bhd (Khazanah) and Permodalan Nasional Bhd (PNB) will enhance their collaboration with foreign investors in the areas of education, tourism and infrastructure.
It appears that foreign investors will be allowed equity ownership in companies and to participate in joint ventures in local projects in conjunction with Khazanah and PNB where this was not previously permissible.
This may have the dual impact of attracting FDI and reducing the costs of undertaking these projects to Malaysia. There is an additional benefit in that foreign investors may bring intellectual capital which will enhance development in these selected areas. One will have to wait and see the extent to which foreign participation will be allowed in other areas through joint ventures with Khazanah and PNB.
Research and Development (R&D) activities
Proposals in the 2010 Budget relating to R&D activities and the commercialization of the same could also serve to attract FDI and simultaneously encourage the undertaking of high value added activities in Malaysia. For this purpose, a four prong strategy has been proposed :
* Rationalizing all research funds and grants in order to be more effective to achieve set targets;
* Establishing a National Innovation Centre supported by a network of innovation excellence centres under the Ministry of Science, TECHNOLOGY [] and Innovation in collaboration with the Ministry of Higher Education;
* Integrating R&D activities with patent, copyright and trademark registration to ensure that the R&D and the commercialization of R&D is implemented more effectively. The cooperation between patent and research agencies will expedite the commercialization of research findings; and
* Providing small and medium enterprises with tax deductions for expenses incurred in the registration of patents and trademarks in the country. In the tax context, "small and medium enterprises" generally refer to companies with a paid up ordinary share capital of RM2.5 million or less.
While the tax deduction proposed may encourage investments in R&D activity, it is limited to small and medium enterprises only. Among other factors, balancing the need to limit legal liabilities to the extent of the paid up share capital of the company and encouraging investment in this sector should perhaps be the purview of the businessman. The tax incentive currently proposed could be broadened to attract wider participation in this sector by removing the limitation based on share capital.
The above fiscal measures could complement the existing incentives already provided to R&D activities. These existing incentives include double deductions for qualifying R&D expenditure incurred and awarding Pioneer Status to companies that conduct qualifying R&D activities.
In the area of education
In order to transform the Malaysian economy into a high income economy and, among other things, attract FDI, it is recognized that there is a need to develop high quality human capital. For this purpose, measures have been proposed to enhance the Malaysian education system. An allocation of RM30 billion for primary and secondary education has been proposed. These measures are expected to benefit 5.5 million students in Malaysia.
Measures relating to the care of the welfare of students have also been proposed to enhance the education system. These include proposals on the awards of scholarships, discounts on train fares and encouraging the use of information technology by students.
To accelerate the achievement of the Government's goals in relation to the development of high quality human capital, the Government may consider encouraging the private sector to participate in the education sector. Fiscal incentives could include granting double deductions on relevant expenses.
In the area of Islamic finance
Malaysia has already achieved the status of being the world's largest issuer of sukuks with approximately 62%, or USD94.7 billion, of outstanding global sukuks in 2008. To ensure the rapid development of Islamic financial services, the following tax measures are proposed :
* An extension to 31 December 2015, of the remission of 20% of the stamp duty payable on the principal or primary instrument of financing made according to the principles of Syariah.
* The extension of the incentive to allow a tax deduction on the costs incurred to issue Islamic securities under specified Syariah principles approved by the Securities Commission (SC) until the Year of Assessment (YA) 2015. In addition, it is also proposed that the above incentive is to be extended to the cost of issuing Islamic securities approved by the Labuan Offshore Financial Services Authority (LOFSA) with effect from YA 2010 to YA 2015.
* The extension of the incentive to allow a double deduction on qualifying expenses incurred to promote Malaysia as an International Islamic Financial Centre until YA 2015.
* The extension of the incentive to allow a tax deduction on the costs incurred to establish companies undertaking licensed Islamic stock broking businesses incorporated under the Companies Act 1965 for applications received by the SC until 31 December 2015.
* The extension of the tax exemption on profits paid or credited to any person in respect of Islamic securities (except convertible loan stock) originating from Malaysia issued in any currency other than Ringgit and approved by the SC, to include profits paid or credited in respect of Islamic securities approved by LOFSA.
The above measures should have the effect of encouraging further growth of the Islamic financial markets in Malaysia. These proposals could also reduce the cost of raising capital through the Islamic capital markets.
Overall, the measures proposed in the 2010 Budget should have the effect of moving Malaysia along the path to transformation. It is noteworthy that the Minister of Finance announced during the 2010 Budget speech that the Government is in the final stage of completing its study on the implementation of a Goods and Services Tax (GST) system. The issue of whether or not GST will be introduced is the tax question that should now be on people's minds.
MyEG to roll out new services
MyEG Services (45.5 sen) recently held an analysts' briefing to outline its expansion plans. The company is Malaysia's dominant e-services provider, providing a wide range of government-to-citizen (G2C) services — particularly with the Road Transport Department (JPJ).
To recap, MyEG reported good growth in revenue and profitability in FY09 despite the recession, heavy capital expenditure (capex) and advertising spending. This was due to increased volume for its road tax renewal service and insurance premiums, which helped to offset lower JPJ driving tests earnings. Revenue for FY09 increased 19.8% to RM52.5 million, pre-tax profit increased 16.8% to RM17.3 million and net profit rose 16.4% to RM17.2 million.
Expansion plans
MyEG's future growth will be anchored by several factors:
1) The road tax renewal service and ancillary motor insurance premiums, which are rapidly gaining market share
2) Increasing network coverage, with its expanding number of e-service centres and e-service kiosks, particularly in Sabah and Sarawak
3) New products and services in the pipeline. The most important of these will be the proposed customs sales and service tax initiative
Road tax renewal service
Launched in April 2008, the road tax renewal service is the main driver of MyEG's growth over the near term. The company has two main business models for the new service — an online and a kiosk-based one. Both services have been very well received.
For the kiosk-based service, MyEG has signed up a number of financial institutions and placed a kiosk in selected branches of the financial institutions. These kiosks provide MyEG with an additional network and customer base, and enable financial institutions to offer a value-added service.
MyEG is also increasing the kiosk reach via its own e-service centres, which offers customers the option to print the road tax discs directly.
The online service currently attracts well over 2,000 transactions per day, and the number of ancillary motor insurance premiums sold daily has also increased to over 100 daily.
According to the company, it now has a market share of about 15% of total road tax transactions for passenger cars issued daily, and is also the single biggest independent insurance agent, by the number of policies issued. This service contributed 10% to revenue in FY09.
Expanding market presence
MyEG's physical network — comprising e-service centres and e-service kiosks — has grown very rapidly, from expansion as well as the acquisition of MySpeed in 2007. The company is increasing it further — particularly in Sabah and Sarawak.
The e-service centres cater largely for the JPJ driving licence theory tests, which are conducted online at the e-service sites. The e-service centres also hold a number of e-service kiosks, for online transactional services and now, the specialised kiosks for the road tax renewal services.
From 19 e-service centres in FY04, the number grew to 26 centres in FY05, 27 centres in FY06-07, 54 centres in FY08 (after including MySpeed) and 65 centres at end-FY09.
Another 33 centres are under CONSTRUCTION []. This will bring its network to 98 e-service centres by next year. Each service centre requires two kiosks, one for printing driving licences and the other for the road tax service. The company estimates capex for FY10 at RM12-RM15 million, excluding those for new services.
Pipeline of new services
Apart from broadening its market reach, MyEG has been widening its product range. From four service suppliers in FY04, it now has seven. The number of services offered has also increased from six in FY04 to 19 in FY09.
The company plans to roll out a number of new services in the next few years. These include the tax monitoring system for the Customs Department and online application for MyKad replacement in 2009. In 2010, it plans to roll out services such as e-application of vehicle registration numbers, vehicle ownership transfer and online renewal of foreign workers' permits with immigration.
Customs tax monitoring
The customs tax monitoring service will be the most significant of the new services proposed in the near term. This involves linking up point-of-sales (POS) terminals of businesses that are subject to customs' sales and service tax (such as restaurants and entertainment outlets) to minimise under-declaration of taxes and customs administrative paper work.
The service will be undertaken via a special-purpose vehicle (SPV), in which MyEG will hold a 40% share. The SPV will undertake the program and install a software at each POS terminal for the link up — at the SPV's cost.
We understand the cost of the software is around RM1,000 per POS terminal. In return, the SPV will receive a share of the additional service and sales taxes collected, after adjusting for GDP growth.
Earnings visibility for the new service is uncertain at this juncture, as it depends on how much sales and service taxes were "under-declared" in the past, which cannot be ascertained. The revenue-sharing ratios between the government and the SPV are also not disclosed.
The potential market, nonetheless, is large. In 2008, the government collected RM3.3 billion in service tax and RM8.3 billion in sales tax. The SPV plans to start off with entertainment outlets and restaurants, which we understand accounts for about RM500 million in such taxes annually.
Equally though, the investment on the SPV's part is also very sizeable, with initial capex estimated at RM100 million. This suggests RM40 million in initial paid-up on MyEG's part, which will likely be funded from borrowings as its net cash stood at RM9.4 million in June 2009.
We are maintaining our forecasts for MyEG. The customs tax monitoring business could have a significant impact on earnings going forward but it is too preliminary to assess for now.
Nonetheless, the venture also increases its risk profile, given the large amount of capex required.
Based on our existing forecasts, we expect net profit to rise by 45% to RM24.9 million in FY10 and 28% to RM31.9 million in FY11. Price-to-earnings (P/E) valuations are inexpensive at 11 and 8.6 times for FY10-11 earnings, especially relative to its growth potential.
To recap, MyEG reported good growth in revenue and profitability in FY09 despite the recession, heavy capital expenditure (capex) and advertising spending. This was due to increased volume for its road tax renewal service and insurance premiums, which helped to offset lower JPJ driving tests earnings. Revenue for FY09 increased 19.8% to RM52.5 million, pre-tax profit increased 16.8% to RM17.3 million and net profit rose 16.4% to RM17.2 million.
Expansion plans
MyEG's future growth will be anchored by several factors:
1) The road tax renewal service and ancillary motor insurance premiums, which are rapidly gaining market share
2) Increasing network coverage, with its expanding number of e-service centres and e-service kiosks, particularly in Sabah and Sarawak
3) New products and services in the pipeline. The most important of these will be the proposed customs sales and service tax initiative
Road tax renewal service
Launched in April 2008, the road tax renewal service is the main driver of MyEG's growth over the near term. The company has two main business models for the new service — an online and a kiosk-based one. Both services have been very well received.
For the kiosk-based service, MyEG has signed up a number of financial institutions and placed a kiosk in selected branches of the financial institutions. These kiosks provide MyEG with an additional network and customer base, and enable financial institutions to offer a value-added service.
MyEG is also increasing the kiosk reach via its own e-service centres, which offers customers the option to print the road tax discs directly.
The online service currently attracts well over 2,000 transactions per day, and the number of ancillary motor insurance premiums sold daily has also increased to over 100 daily.
According to the company, it now has a market share of about 15% of total road tax transactions for passenger cars issued daily, and is also the single biggest independent insurance agent, by the number of policies issued. This service contributed 10% to revenue in FY09.
Expanding market presence
MyEG's physical network — comprising e-service centres and e-service kiosks — has grown very rapidly, from expansion as well as the acquisition of MySpeed in 2007. The company is increasing it further — particularly in Sabah and Sarawak.
The e-service centres cater largely for the JPJ driving licence theory tests, which are conducted online at the e-service sites. The e-service centres also hold a number of e-service kiosks, for online transactional services and now, the specialised kiosks for the road tax renewal services.
From 19 e-service centres in FY04, the number grew to 26 centres in FY05, 27 centres in FY06-07, 54 centres in FY08 (after including MySpeed) and 65 centres at end-FY09.
Another 33 centres are under CONSTRUCTION []. This will bring its network to 98 e-service centres by next year. Each service centre requires two kiosks, one for printing driving licences and the other for the road tax service. The company estimates capex for FY10 at RM12-RM15 million, excluding those for new services.
Pipeline of new services
Apart from broadening its market reach, MyEG has been widening its product range. From four service suppliers in FY04, it now has seven. The number of services offered has also increased from six in FY04 to 19 in FY09.
The company plans to roll out a number of new services in the next few years. These include the tax monitoring system for the Customs Department and online application for MyKad replacement in 2009. In 2010, it plans to roll out services such as e-application of vehicle registration numbers, vehicle ownership transfer and online renewal of foreign workers' permits with immigration.
Customs tax monitoring
The customs tax monitoring service will be the most significant of the new services proposed in the near term. This involves linking up point-of-sales (POS) terminals of businesses that are subject to customs' sales and service tax (such as restaurants and entertainment outlets) to minimise under-declaration of taxes and customs administrative paper work.
The service will be undertaken via a special-purpose vehicle (SPV), in which MyEG will hold a 40% share. The SPV will undertake the program and install a software at each POS terminal for the link up — at the SPV's cost.
We understand the cost of the software is around RM1,000 per POS terminal. In return, the SPV will receive a share of the additional service and sales taxes collected, after adjusting for GDP growth.
Earnings visibility for the new service is uncertain at this juncture, as it depends on how much sales and service taxes were "under-declared" in the past, which cannot be ascertained. The revenue-sharing ratios between the government and the SPV are also not disclosed.
The potential market, nonetheless, is large. In 2008, the government collected RM3.3 billion in service tax and RM8.3 billion in sales tax. The SPV plans to start off with entertainment outlets and restaurants, which we understand accounts for about RM500 million in such taxes annually.
Equally though, the investment on the SPV's part is also very sizeable, with initial capex estimated at RM100 million. This suggests RM40 million in initial paid-up on MyEG's part, which will likely be funded from borrowings as its net cash stood at RM9.4 million in June 2009.
We are maintaining our forecasts for MyEG. The customs tax monitoring business could have a significant impact on earnings going forward but it is too preliminary to assess for now.
Nonetheless, the venture also increases its risk profile, given the large amount of capex required.
Based on our existing forecasts, we expect net profit to rise by 45% to RM24.9 million in FY10 and 28% to RM31.9 million in FY11. Price-to-earnings (P/E) valuations are inexpensive at 11 and 8.6 times for FY10-11 earnings, especially relative to its growth potential.
October 27, 2009
Europe Roundup: Stocks lose ground
Published: 2009/10/27
PARIS: European stocks lost ground in late trade yesterday, down 0.8 per cent, as heavyweight energy shares surrendered early gains following a drop in oil prices while the dollar rebounded.
At 1546 GMT, the FTSEurofirst 300 index of top European shares was down 0.8 per cent at 1,000.41 points.
Elsewhere, Britain's FTSE 100 closed down 1 per cent to 5,191.74, Germany's DAX fell 1.7 per cent to 5,642.16 and France's CAC 40 lost 1.7 per cent to 3,744.45. - Reuters
PARIS: European stocks lost ground in late trade yesterday, down 0.8 per cent, as heavyweight energy shares surrendered early gains following a drop in oil prices while the dollar rebounded.
At 1546 GMT, the FTSEurofirst 300 index of top European shares was down 0.8 per cent at 1,000.41 points.
Elsewhere, Britain's FTSE 100 closed down 1 per cent to 5,191.74, Germany's DAX fell 1.7 per cent to 5,642.16 and France's CAC 40 lost 1.7 per cent to 3,744.45. - Reuters
Asia Roundup: Investors shrug off weak US lead
Published: 2009/10/27
HONG KONG: Asian markets were mostly higher yesterday as optimism about the upcoming third quarter reporting season helped investors brush off a weak lead from Wall Street at the end of last week.
Hong Kong was closed for a public holiday.
TOKYO: Up 0.77 per cent. The Nikkei-225 rose 79.63 points to 10,362.62.
"Earnings will likely provide the market with more trading cues," Tsuyoshi Segawa, equity strategist at Mizuho Securities, told Dow Jones Newswires.
SYDNEY: Down 0.60 per cent. The SP/ASX200 fell 29.1 points to 4,830.3.
IG Markets research analyst Ben Potter said the Australian market held up well given the weak lead from the US.
SHANGHAI: Flat. The composite index was up 1.72 points or 0.06 per cent to 3,109.57.
"Corporate earnings will be the main focus this week - the earnings reports that have already been released look quite good and this is keeping sentiment buoyant," Huatai Securities analyst Chen Huiqin said.
SEOUL: Up 1.03 per cent. The Kospi ended up 16.94 points at 1,657.11.
"Local shares have moved sideways below the 1,700-mark for about a month because investors feared that earlier stock rallies outpaced the economic recovery," said Park Seung-Jin, an analyst at Samsung Securities.
TAIPEI: Up 0.25 per cent. The weighted index rose 19.12 points to 7,668.40.
"Many stocks have appeared expensive after recent significant gains. It was nothing unusual that any upside led to immediate profit-taking," Capital Securities analyst Chen Yu-yu said.
BANGKOK: Up 0.43 per cent. The composite index rose 3.07 points to close at 711.83, and the blue-chip index was up 2.24 points to 505.64
Therdsak Thaweetheeratham, an analyst from Asia Plus Securities, said the market moved narrowly because investors were cautious due to the fall in oil prices and because of growing tensions in domestic politics.
JAKARTA: Flat. The composite index edged down 0.24 points or 0.01 per cent to 2,467.71.
"The market consolidated after Friday's 1.4 per cent gain," a trader told Dow Jones Newswires.
MANILA: Up 0.29 per cent. The composite index added 8.54 points to 2,941.53 while the all-share index gained 4.51 points or 0.24 per cent to 1,852.54.
Dealers said further consolidation was expected in the near term.
MUMBAI: Down 0.42 per cent. The Sensex fell 70.31 points to 16,740.5. - AFP
HONG KONG: Asian markets were mostly higher yesterday as optimism about the upcoming third quarter reporting season helped investors brush off a weak lead from Wall Street at the end of last week.
Hong Kong was closed for a public holiday.
TOKYO: Up 0.77 per cent. The Nikkei-225 rose 79.63 points to 10,362.62.
"Earnings will likely provide the market with more trading cues," Tsuyoshi Segawa, equity strategist at Mizuho Securities, told Dow Jones Newswires.
SYDNEY: Down 0.60 per cent. The SP/ASX200 fell 29.1 points to 4,830.3.
IG Markets research analyst Ben Potter said the Australian market held up well given the weak lead from the US.
SHANGHAI: Flat. The composite index was up 1.72 points or 0.06 per cent to 3,109.57.
"Corporate earnings will be the main focus this week - the earnings reports that have already been released look quite good and this is keeping sentiment buoyant," Huatai Securities analyst Chen Huiqin said.
SEOUL: Up 1.03 per cent. The Kospi ended up 16.94 points at 1,657.11.
"Local shares have moved sideways below the 1,700-mark for about a month because investors feared that earlier stock rallies outpaced the economic recovery," said Park Seung-Jin, an analyst at Samsung Securities.
TAIPEI: Up 0.25 per cent. The weighted index rose 19.12 points to 7,668.40.
"Many stocks have appeared expensive after recent significant gains. It was nothing unusual that any upside led to immediate profit-taking," Capital Securities analyst Chen Yu-yu said.
BANGKOK: Up 0.43 per cent. The composite index rose 3.07 points to close at 711.83, and the blue-chip index was up 2.24 points to 505.64
Therdsak Thaweetheeratham, an analyst from Asia Plus Securities, said the market moved narrowly because investors were cautious due to the fall in oil prices and because of growing tensions in domestic politics.
JAKARTA: Flat. The composite index edged down 0.24 points or 0.01 per cent to 2,467.71.
"The market consolidated after Friday's 1.4 per cent gain," a trader told Dow Jones Newswires.
MANILA: Up 0.29 per cent. The composite index added 8.54 points to 2,941.53 while the all-share index gained 4.51 points or 0.24 per cent to 1,852.54.
Dealers said further consolidation was expected in the near term.
MUMBAI: Down 0.42 per cent. The Sensex fell 70.31 points to 16,740.5. - AFP
Move to protect 'sophisticated' individual investors
By Adeline Paul RajPublished: 2009/10/27
THE Securities Commission (SC), which is studying various regulatory reforms for the capital market, plans to expand its definition of "sophisticated" individual investors.
The move is meant to ensure greater protection for investors, even as enhancements are made to the sales practices of investment products in the market, chairman Tan Sri Zarinah Anwar said.
Regulation on this will be introduced soon, she added.
Investment banks would then have to check against this new definition whether complex investment products can be sold to a certain investor.
"The SC will introduce eligibility criteria that will ensure that sophisticated individual investors have the financial means and fully understand the risks that are associated with investing in complex investment products," Zarinah said in her keynote address at the Emerging Markets Programme in Kuala Lumpur yesterday.
Currently, individuals who invest at least RM250,000 in a single transaction, or have a net worth of at least RM3 million, can be considered as sophisticated investors.
"There's all this quantitative criteria currently, but as we've seen, there are so-called sophisticated investors who qualify (to be sold complex investment products) but they may not be very informed. Therefore, we need to see what other criteria should be incorporated in the definition," she told a press conference later.
Zarinah said there would be stronger oversight by the SC and enhanced requirements for market intermediaries to follow at various stages of the sale of investment products.
"We need to look at simplifying some of the information circulars and prospectus in the issue of complex products," she remarked.
Meanwhile, Greg Tanzer, secretary-general of the International Organisation of Securities Commissions, said that at the international level, regulators are giving a lot of emphasis to parts of the market that are either unregulated or lightly regulated.
"In pursuing market reform regulation, we need very much to balance objectives of systemic stability, market flexibility and responsiveness and investor protection," he said.
THE Securities Commission (SC), which is studying various regulatory reforms for the capital market, plans to expand its definition of "sophisticated" individual investors.
The move is meant to ensure greater protection for investors, even as enhancements are made to the sales practices of investment products in the market, chairman Tan Sri Zarinah Anwar said.
Regulation on this will be introduced soon, she added.
Investment banks would then have to check against this new definition whether complex investment products can be sold to a certain investor.
"The SC will introduce eligibility criteria that will ensure that sophisticated individual investors have the financial means and fully understand the risks that are associated with investing in complex investment products," Zarinah said in her keynote address at the Emerging Markets Programme in Kuala Lumpur yesterday.
Currently, individuals who invest at least RM250,000 in a single transaction, or have a net worth of at least RM3 million, can be considered as sophisticated investors.
"There's all this quantitative criteria currently, but as we've seen, there are so-called sophisticated investors who qualify (to be sold complex investment products) but they may not be very informed. Therefore, we need to see what other criteria should be incorporated in the definition," she told a press conference later.
Zarinah said there would be stronger oversight by the SC and enhanced requirements for market intermediaries to follow at various stages of the sale of investment products.
"We need to look at simplifying some of the information circulars and prospectus in the issue of complex products," she remarked.
Meanwhile, Greg Tanzer, secretary-general of the International Organisation of Securities Commissions, said that at the international level, regulators are giving a lot of emphasis to parts of the market that are either unregulated or lightly regulated.
"In pursuing market reform regulation, we need very much to balance objectives of systemic stability, market flexibility and responsiveness and investor protection," he said.
TNB posts RM164m net profit in Q4
By Jeeva ArulampalamPublished: 2009/10/27
National utility Tenaga Nasional Bhd (TNB) (5347) turned in a fourth-quarter net profit of RM164.3 million, after sustaining a loss of RM282.9 million a year ago.
The better results was attributed to earlier tariff adjustments and lower foreign exchange (forex) losses.
For the three-month period ended August 31 2009, TNB's revenue grew 12 per cent to RM7.5 billion from a year ago.
The group recorded an unrealised forex loss of RM244.3 million as the ringgit weakened against the Japanese yen and the US dollar, to which the group has exposure to.
TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh expects earnings for the current financial year to be better, due to growth in electricity demand, stabilising coal prices and lower forex losses.
"From June 2009 till now, demand for electricity has been above the 2008 figures. Our forecast for demand growth next year will be in the region of three per cent," Che Khalib told a media and analyst briefing in Kuala Lumpur yesterday.
The rolling average of coal prices will also be lower during this current financial year. For its full year ended August 31 2009, the average coal prices incurred was US$90.2 (RM305) per tonne.
TNB's net profit dropped 64.6 per cent to RM917.9 million in the financial year just ended, due to slower demand growth, increased operating expenses due to higher fuel costs and payments to independent power producers.
The group was also impacted with a forex loss of RM1.18 billion, of which 74 per cent was due to its exposure to Japanese yen loans.
TNB, however, recorded a 16.3 per cent growth in revenue to RM28.79 billion due to tariff adjustments in July 2008 and March this year.
TNB has proposed a dividend of 10 sen per share and tax-exempt dividend of 2.3 sen per share.
Meanwhile, Che Khalib clarified that the RM5 billion to be spent by TNB announced under the 2010 Budget, was part of its yearly capital expenditure (capex).
"It's the usual RM4 billion to RM5 billion capex that we spend on an annual basis. Last year, we spent about RM4.4 billion group-wide," he said.
The capex will be used to implement electricity generation, transmission and distribution projects in 2010 as well as for works on the hydroelectric projects in Hulu Terengganu and Ulu Jelai, Pahang.
Che Khalib said that the tender for Hulu Terengganu has been closed and results would be released by the first quarter of 2010.
On a possible tariff hike, he said the outcome is dependent on the government's next review due in December, which could lead to an implementation in January next year.
National utility Tenaga Nasional Bhd (TNB) (5347) turned in a fourth-quarter net profit of RM164.3 million, after sustaining a loss of RM282.9 million a year ago.
The better results was attributed to earlier tariff adjustments and lower foreign exchange (forex) losses.
For the three-month period ended August 31 2009, TNB's revenue grew 12 per cent to RM7.5 billion from a year ago.
The group recorded an unrealised forex loss of RM244.3 million as the ringgit weakened against the Japanese yen and the US dollar, to which the group has exposure to.
TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh expects earnings for the current financial year to be better, due to growth in electricity demand, stabilising coal prices and lower forex losses.
"From June 2009 till now, demand for electricity has been above the 2008 figures. Our forecast for demand growth next year will be in the region of three per cent," Che Khalib told a media and analyst briefing in Kuala Lumpur yesterday.
The rolling average of coal prices will also be lower during this current financial year. For its full year ended August 31 2009, the average coal prices incurred was US$90.2 (RM305) per tonne.
TNB's net profit dropped 64.6 per cent to RM917.9 million in the financial year just ended, due to slower demand growth, increased operating expenses due to higher fuel costs and payments to independent power producers.
The group was also impacted with a forex loss of RM1.18 billion, of which 74 per cent was due to its exposure to Japanese yen loans.
TNB, however, recorded a 16.3 per cent growth in revenue to RM28.79 billion due to tariff adjustments in July 2008 and March this year.
TNB has proposed a dividend of 10 sen per share and tax-exempt dividend of 2.3 sen per share.
Meanwhile, Che Khalib clarified that the RM5 billion to be spent by TNB announced under the 2010 Budget, was part of its yearly capital expenditure (capex).
"It's the usual RM4 billion to RM5 billion capex that we spend on an annual basis. Last year, we spent about RM4.4 billion group-wide," he said.
The capex will be used to implement electricity generation, transmission and distribution projects in 2010 as well as for works on the hydroelectric projects in Hulu Terengganu and Ulu Jelai, Pahang.
Che Khalib said that the tender for Hulu Terengganu has been closed and results would be released by the first quarter of 2010.
On a possible tariff hike, he said the outcome is dependent on the government's next review due in December, which could lead to an implementation in January next year.
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About Me
- Nuang
- Ibrahim bin Ramli@Nuang started his career with CIMB Wealth Advisors Berhad as Agency Manager in April, 2008.Previously he was an Internal Auditors and Accounts Executive with Perodua Sales Sdn Bhd since 17 August, 1994. His background:- 1.Certified of Achievement for Master Sales Leadership from Dr Lawrence Walter Ng of President of The Art Of Learning and International Of Learning Without Learning 2.Certified for eXtra Ordinary Performance of Lawrence Walter Award Certificate for One Million Ringgit Club 2007 3. Certified Life & General insurances 4. Conferred with Diploma in Business Studiess & Bachelor of Business Admin(Hons)Finance from UiTM, Terengganu Branch & Shah Alam respectively;
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