CIMB Group (BUY '')

Small Group Meeting ' 17% FY11 ROE Intact

'''' FY11 ROE KPI of 17% is intact as 2H earnings > 1H while'' 2Q already enjoyed improved capital markets while interest rate and forex markets continue to be strong.

'''' Dividend payout KPI of 40-60% also intact.

'''' Despite lower loans growth KPI and NIM compression, net interest income would still be on rising trajectory.''

'''' Cost rationalization - CIR to peak in 1H. FY11 overheads and CIR < FY10.''

'''' FY11 Credit charge slightly higher than KPI of 40bps due to CA which was affected by its high PD and LGD.'' No issue with IA.

'''' Indonesia banks foreign ownership still under deliberation and uncertain on grandfathering.

'''' Trying to strengthen its share of trade flows.

'''' Maintain Buy and target price of RM9.58 (Gordon Growth with ROE of 18.4% and WACC of 9.7%).

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Gross Exports Pick Up In June

'''' Gross export growth picked up to 8.6% yoy in June (May: +5.4% yoy) while gross imports also increased to 6.3% yoy (May +5.6% yoy), yielding a lower trade surplus of RM7.6bn (May: RM8.5bn).

'''' Exports of E&E was still the main drag, declining by 7.6% yoy in June (May: -5.0% yoy). Excluding E&E, gross export growth would have been higher at 19.5% yoy, with boost coming from shipments of refined petroleum (+49.0% yoy), palm oil (+46.1% yoy) and rubber products (+19.7% yoy).

'''' The modest growth in intermediate imports (+2.0% yoy) suggested subdued IPI and export growth in the coming months. Double-digit growth of 14.1% yoy in imports of consumption goods pointed to robust consumer spending.

'''' Heightened external risks may prompt BNM to remain cautious in the September MPC meeting. As we do not expect GDP growth to pick up significantly until 4Q, the most probable timing of the rate hike is in November, when the ETP implementation is more pronounced.

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FBM KLCI - Critical support at 1530 & 1500 amid Dow's overnight 4.3% carnage

'''' In the absence of positive domestic catalysts and the 4.3% plunge on Dow overnight, near term FBM KLCI outlook has turned bearish. In anticipation of panic selling, the immediate 200-d SMA (1530) support is likely to be tested, followed by the crucial 1500 psychological level. Failing to defend the 1500 will drive the KLCI to retest 2011's low around 1470 pts. ''

Dow Jones - All eyes on nonfarm payrolls data tonight

'''' Immediate support is the 11000 psychological mark. If the crucial job report tonight is below consensus, Dow may test 10860 (61.8% FR) before a meaningful rebound is in the cards amid extremely oversold positions. Relief rally targets are 11500-12000 levels.