Asian markets remained in positive territory at midday

KUALA LUMPUR: Asian markets remained in positive territory at midday following the Federal Reserve’s latest push to bolster the US economic recovery.

Essentially, the US policymakers – while leaving interest rates unchanged – have stated its intention to purchase a further US$600 billion of longer-term Treasury securities by end of second quarter 2011 in a bid to reduce unemployment and avert deflation.

This is slightly higher than market expectations, which then pushed up key equity indices on Wall Street by between 0.2% and 0.4% at the closing bell.

Analysts expect a lift in sentiment across Asia today following the decision.

“Consequently, the benchmark FBM KLCI will probably show a slight positive bias ahead, making its way towards the resistance target of 1,525,” HwangDBS Vickers Research said in a note.

The FBM KLCI rose 3.07 points to 1,510.67 on Thursday midday trade.

Meanwhile Asian markets were up at midday.

Japan’s Nikkei 225 rose 2.04% to 9,347.23 while Shanghai’s A share index added 1.32% to 3,070,97.

Hong Kong’s Hang Seng index added 1.18% to 24,429.71 and Singapore’s Straits Times Index gained 0.13% to 3,229.21.

At Bursa Malaysia, 372 counters were up, 310 were down while 299 remained unchanged. There were 694.9 million shares done at a total value of RM729.6 million.

Among the top gainers Kulim jumped 58 sen to RM11.88, Boustead rose 21 sen to RM5.83 and Pansar added 16 sen to 66 sen.

QSR rose 19 sen to RM5.50, QL Resources added 15 sen to RM5.76 and Integrax gained 13 sen to RM1.46. Meanwhile, the international reserves report as at Oct 29 – to be out this evening – would give an update on the latest fund flows pattern following a sizeable fortnightly increase of US$4.8bil in the second half of September and US$3.9bil in the first half of October.

In terms of corporate development, UEM Land has offered to buy all Sunrise shares at RM2.80 each via the issuance of new UEM Land shares or redeemable convertible preference shares.

Nymex crude oil was 62 cents higher at US$85.31 per barrel.

The ringgit was quoted at 3.0830 to the US dollar.

Source: http://biz.thestar.com.my/news/story.asp?file=/2010/11/4/business/20101104101822&sec=business

Positive market outlook

PETALING JAYA: Liquidity and a strengthening ringgit are the key forces propelling the FBM Kuala Lumpur Composite Index (FBM KLCI) in the last few months. Now, as concerns of a double-dip recede, along with economic reforms by the Government and the possibility of general elections next year, analysts are becoming more positive on the market’s outlook.

OSK Research Sdn Bhd research head Chris Eng said the outlook for 2011 had improved, with corporate earnings continuing to increase.

“We also have the possibility of the general elections to look forward to. Elections are normally held when the economic prospects are a lot more sound,” said Eng.

He added that the Government had implemented various reforms which seemed to be supportive of the economy and the market as a whole.

On a year-to-date basis, the FBM KLCI was up 18.21% to close yesterday at 1507.60. Over the same period, the ringgit has strengthened close to 10% at approximately 3.087 to the dollar.

Standard & Poor’s Malaysia Sdn Bhd director Alexander Chia said the market was partly being driven by liquidity with the strength of the ringgit a function of this liquidity.

In addition, recent concerns for a double-dip recession had receded somewhat, while positive numbers from China had helped to return confidence to investors.

Markets also got a boost from strong manufacturing figures from China and a general increase in risk appetite ahead of the much-anticipated Federal Reserve meeting yesterday.

China’s Project Management Institute for October came in at 54.7, better than the 53.8 that was expected and the 53.8 in September.

JF Apex Securities Bhd deputy managing director Lim Teck Seng said retailers were starting to return to the market.

“Liquidity is not linked to fundamentals. Eventually fundamentals will dictate,” he said.

“But, for now, there are many people holding cash, and bank lending is relatively easy. Hence, people are putting their money to work through equities and property. The market should be relatively safe over the next six months.”

Lim added that foreigners were coming because Malaysia’s interest rates were moving relatively higher than its regional neighbours.

The overnight policy rate was up by 25 basis points respectively in March, May and July to 2.75%.

“We are positive until the first half of 2011. For the second half of 2011, we will have to look at global numbers,” Eng said, adding that he would turn buyer in December, as he was expecting some correction this month.

“With the continued global quantitive easing, and the slower growth in the West, foreigners realised that there is much better growth here,” he said.

Chia, meanwhile, added that he was buying on dips. He expects more upside for the market in the next six to 12 months.

Businesses to pass on savings from stronger ringgit by cutting prices

PETALING JAYA: Consumers can expect prices of goods to drop by the year-end, bringing a bit more cheer during the festive season as a stronger ringgit makes it less costly for businesses to stock up on inventories.

Several trade associations said the savings would be passed through to consumers at the earliest by the end of the year but prices would definitely be lower by Chinese New Year.

The ringgit has been strengthening throughout the year in tandem with other currencies in the region and was at the highest level this year when it settled at 3.08 to the US dollar last Friday.

While it has weakened recently, currency strategists expect the ringgit to trade at between 3.10 and 3.15 to the greenback for the rest of the year.

An economist with a local investment bank pointed out that the ringgit could have strengthened even further if there had been no interventions over the past few months.

Malaysian Retailer-Chains Association president Datuk Tay Sim Kim told StarBiz that with the ringgit’s current strength, consumers could expect prices to drop in two to three months.

“This is assuming that most businesses have an average 60 days’ worth of stock, which will mean that by the end of the year or latest by Chinese New Year, prices will be lower,” he said.

The Association of the Computer and Multimedia Industry president Shaifubahrim Saleh said there could be a price advantage as inventories depleted and businesses stocked up with cheaper imported products.

“We may see over the next few months some lowering in the prices but this will really depend on the market and how aggressive retailers are,” he said, adding that margins in the industry were already low.

Shaifubahrim said the other factor determining whether business could meet consumer expectations of lower prices was in the inventory cycle.

“There may be a disconnect between the strengthening ringgit and when businesses order their stocks, so there may not be any savings passed through so soon,” he said.

More affordable mobile phones for all

PETALING JAYA: The removal of the 10% sales tax on ordinary mobile phones should make the phones more affordable especially to first-time buyers, but don’t expect a huge drop, experts say.

The idea is to streamline the tax treatment for ordinary phones since there is no sales tax for smartphones and those with Internet applications. Hence, there will be no more taxes on mobile phones.

Yesterday Prime Minister Datuk Seri Najib Tun Razak announced that ordinary phones would be exempted from the 10% sales tax.

The mere mention of the abolishment of the 10% sales tax got a lot of people excited and those providers that were selling the iPhone were inundated with enquiries. Some people were eager to book the iPhone for they thought the prices would come down.

This is not what the players have in mind as the prices of smartphones are not likely to come down; only the ordinary mobile phone pricing will come down.

The abolishment allows first-time users to buy a phone and since cellular coverage is being extended to a wider portion of the population, the potential of more people, especially students and those in the rural areas getting connected is there.

It also allowed the players to bundle the phones since there was no sales tax, said an analyst.

“It creates a level playing field for mobile operators. Currently the market for mobile phones is dominated by independent merchants, or what we call small shops. The suspicion is that they do not pay taxes and under declare. That has been cited as a key disadvantage for big mobile phone operators to do bundling. So this development is positive for mobile operators,’’ said the analyst.

Nokia Singapore/Malaysia & Brunei general manager Vlasta Berka said that as ‘‘more mobile devices are able to access the Internet, including the more affordable models, the dividing line between “ordinary” phones and feature phones is getting smaller. “Furthermore, in today’s era of connectivity and with the continued rise in social media, we have always viewed mobile technology as a staple and a must-own, rather than a luxury,’’ he said.

UEM, EPF offer RM23b for PLUS

The deal could be Malaysia's largest merger and acquisition since Sime Darby's RM31.4 billion mega-merger in late 2007.



TWO state-owned companies, UEM Group Bhd and pension fund Employees Provident Fund (EPF), announced a RM23 billion takeover offer for highway operator PLUS Expressways Bhd (5052) late yesterday.

The deal, which works out to RM4.60 a share, could be the country's largest merger and acquisition since Sime Darby Bhd's RM31.4 billion mega-merger in late 2007.

The offer was made for PLUS' asset and liabilities, UEM and the EPF said in a joint statement.

The announcement came after Prime Minister Datuk Seri Najib Razak disclosed in his Budget 2011 speech yesterday that there would be no toll rate hikes on four highways owned by PLUS for the next five years.
The four highways are the NSE, Elite, Linkedua and Butterworth-Kulim Expressway.

Analysts said the offer price is fair and believe that minority shareholders will go for it.

"It's actually quite fair and close to our fair value price of RM4.70. We don't think there'll be any strong objection from minority shareholders," said Wong Chew Hann, an analyst that tracks PLUS' shares at Maybank Investment Bank Research.

PLUS is the concessionaire for most of the highways in the country, including the heavily-used North-South Expressway (NSE) and the North Klang Valley Expressway.

A co-investment vehicle will be set up to take over PLUS' business, with UEM holding a 51 per cent stake in it and EPF, the remaining 49 per cent.

After the buyout, a special dividend will be paid out to minority shareholders and PLUS will be delisted.

PLUS, in a statement to the stock exchange, said its board would appoint relevant advisers and decide on the next course of action.

Other parties that had been vying for PLUS included privately-owned Asas Serba Sdn Bhd. MMC Corp Bhd, owned by tycoon Tan Sri Syed Mokhtar Al-Bukhary, had also put in a proposal for UEM Group.

The deal yesterday is seen to be motivated by the government's need to balance "a reduction in toll subsidies against public dissent on toll rate hikes", said an analyst from ECM Libra Investment Research.

"We believe an exercise to acquire PLUS would involve more manageable toll rates post-takeover," the analyst wrote in a report yesterday.

Under the present concession agreement, toll operators are allowed scheduled rate hikes. If the government decides against a rate hike whenever one is scheduled in a particular year, it has to compensate the toll operator.

UEM and EPF said their takeover offer is subject to a successful restructuring of the concession agreement.

UEM Group managing director Datuk Izzaddin Idris said if the bid is successful, PLUS would continue to be run by the same group of professionals.

Meanwhile, the EPF deputy chief executive officer for investments Shahril Ridza Ridzuan said ownership by EPF and UEM will allow PLUS to improve its financial performance.


Read more: UEM, EPF offer RM23b for PLUS http://www.btimes.com.my/Current_News/BTIMES/articles/eeepf-2/Article/index_html#ixzz12VvcC898

Highlights of Budget 2010/2011 Malaysia

Resource: http://www.theedgemalaysia.com/highlights/175432-highlights-of-budget-20102011.html

* Government will not raise toll rates for PLUS-owned highways for next 5 years with immediate effect.

* To review existing service tax rates and to generate additional tax revenue for national development, the government proposed the rate on all taxable services to be increased from 5% to 6%, effective Jan 1, 2011

* To widen the tax base, then government proposed that service tax of 6% be imposed on paid television broadcasting services. This service tax is charged on the monthly subscription fees on paid TV broadcasting services with effect from Jan 1, 2011.

* The government has proposed to scrap the sales tax of 10% sales tax on all types of mobile phones, effective Oct 15, 2010, including personal digital assistants (PDAs).

* Mass Rapid Transit in Greater KL to be implemented in 2011, estimated private sector investment is RM40 billion and to be completed by 2020. Upon completion, the utilization rate of public transport is expected to increase to at least 40%.

* Proposed stamp duty exemption of 50% be given on instruments of transfer of residential properties, not exceeding RM350,000 from Jan 1, 2011. S&P must be executed between Jan 1, 2011 to Dec 31, 2012. Residential property includes terrace houses, condominiums, apartments or flats.

* Stamp duty exemption of 50% be given on loan agreements for residential property priced not exceeding RM350,000.

* Permodalan Nasional Bhd to undertake integrated development of the Warisan Merdeka which will include a 100-storey tower costing RM5 billion. The tower will be completed in 2015. The project will retain Merdeka Stadium and Stadium Negara.

* The EPF to undertake development of the RM10 billion Sungai Buloh project at the current Malaysian Rubber Board land covering an area of 2,680 acres.

* Government to launch private pension fund in 2011 which will benefit private sector employees and the self employed.

* Government is allocating RM857 million for local companies to invest in high value-added activities, particularly in Penang and the Kulim High-tech Park in Kedah.

* GLICs be allowed to increase their investments overseas. EPF will be allowed to increase the investments from 7% now to 20%.

* Securities Commission to offer 3 new stockbroking licences to eligible local, foreign, or JV companies

* Government to allocate RM146 million to support oil, gas energy sector, expand downstream.

* Proposed private investment of RM6 billion in oilfield services, equipment centre in Johor.

* Petronas plans a RM3 billion regasification project in Malacca, to be operational by 2012.

* Government allocates RM150 million to provide rebates on monthly electricity bills below RM20.

Read more on our coverage of the 2010/2011 Budget:

1 Budget 2010/2011: Comments by banks, Bursa Malaysia

2 Budget 2010/2011: Major infrastructure boost

3 Budget 2010/2011 Muhyiddin: Budget for the people, not election

4 Budget 2010/2011: PR asks what next after appeasing budget

5 Budget 2010/2011: Reactions from the industry

6 Budget 2010/2011: Reaction from CIMB Economic Research, RAM, MDeC

Palm oil stocks grease up FBM KLCI

KUALA LUMPUR: The FTSE Bursa Malaysia KL Composite Index (FBM KLCI) climbed on Wednesday, led by plantation stocks on higher palm oil prices and optimism that the upcoming Budget 2011 to be tabled this Friday may contain additional incentives to lure new investment and boost the economy.

At 9.35am, the benchmark index advanced 5.77 points, or 0.4% to 1,492.34 points. Rising stocks led losers 273 to 88, while 163 counters were unchanged.

“Essentially, amid signs of resilience and with market momentum still on the upside, we reckon the FBM KLCI could be on its way to test the immediate resistance target of 1,495 ahead,’ HwangDBS Vickers said in its morning note.

Palm oil planter Kuala Lumpur-Kepong climbed 14 sen, or 0.8% to RM18.02 - the stock’s highest in more than two years. Rivals IOI Corp rose 9 sen, or 1.6%, while diversified group Sime Darby gained 7 sen, or 0.8% to RM8.83.

Crude palm oil (CPO) futures on Bursa Derivatives settled at RM2,900 a tonne yesterday, a pull back following 6% surged on Tuesday that lifted the benchmark contract to its highest in 26-month high on Tuesday.

Meanwhile, shares in Star Publications was up 24 sen, or 6.4% to RM3.96 after the newspaper publisher announced a special dividend payout of 52.6 sen yesterday.

Overseas, Japan’s Nikkei 225 index surged 1% to 9,486 points, while key indices in Korea, Singapore and Australia were up by 0.6% each.

On Wall Street. the Dow Jones Industrial was up 10 points, or 0.1% to 11,020 points, but the broader S&P 500 Index gained 0.4% to 1,169 points.