Market Thoughts

US stocks closed sharply lower across the board Wednesday, with all key S&P sectors in the red, following a batch of weaker-than-expected earnings and as commodities resumed their selloff amid ongoing worries over global growth. Similarly, European shares closed lower on worries about slowing growth and rumors of a credit downgrade for Germany curbing investor sentiment.

On the local market, the FBM KLCI surged 10.44 points to 1710.97 points. Following the decline in US and European markets, we expect the FBM KLCI to react negatively and stay below its resistance of 1717 points. Market direction will still be determined by the corporate reporting season in the US.

Stocks to watch are: KPJ Healthcare as its unit has entered into a sale and purchase agreement to acquire the entire equity interest in Rawang Specialist Hospital Sdn Bhd for RM50.6 mil cash; rubber gloves counters as the price of key raw material (latex) has slumped to 4-month low and the escalation of H7N9 avian influenza in China; CIMB Group as it maybe listed in Thailand by the forth quarter this year; and AirAsia following AirAsia Indonesia plans for an IPO in forth quarter of this year in Indonesian Stock Exchange.

Malaysia News & Highlights

CIMB hopeful of Thai listing this year

Leading financial services provider CIMB Group Holdings Bhd may be listed in Thailand by the fourth quarter of this year, if all goes smoothly as planned, according to its group chief executive officer Datuk Seri Nazir Razak. “We are still keen on the dual listing. We have always been in discussions with the regulators there,” he told reporters after the group's 56th AGM. (Source: The Star)

AirAsia Indonesia plans IPO in fourth quarter

AirAsia Indonesia plans to go public in the fourth quarter of this year, its president director, Dharmadi, said. “The company is now processing administrative requirements for the initial public offering (IPO),” Indonesia’s Antara quoted Dharmadi as saying after revealing the company’s plan to open new direct routes from Medan, the capital of North Sumatra, to various cities in the country and abroad. (Source: The Star)

BAT benefits from reduced illicit trade, says CEO

British American Tobacco (M) Bhd (BAT) is benefitting from the gradual deflation in the illicit trade of cigarettes locally due to the improved regulatory environment. Managing director Datuk William Toh said the illegal buying and selling of cigarettes had declined last year by 1.6% compared to 2011. “We saw a slight reduction in illicit trade to 34.5% of (overall) volume last year. “Due to this, we are seeing a 0.24% growth in legal volume, which is the first time in many years where we have enjoyed volume growth,” Toh said at a briefing after the company's AGM. (Source: The Star)

CPI up on increase in food and non-alcoholic beverages index

Prices for March as measured by the consumer price index (CPI) rose 1.6% to 106.2 compared with a year ago mainly due to a 3.3% increase in the food and non-alcoholic beverages index. For the January to March period, the index was up 1.5% to 106.1 on year-on-year basis while compared with February, the index increased by 0.1%. “The index for food and non-alcoholic beverages and non-food for the month of March 2013 showed increases of 3.3% and 1% respectively as compared to the same month in 2012. “For the period January to March 2013, the index for food and non-alcoholic beverages and non-food increased by 2.9% and 1% respectively,” the Statistics Department said in a statement. (Source: The Star)

March vehicle sales up on strong consumer sentiment

Total vehicle sales in March rose by 4,039 units or 7.5% to 57,622 units from the 53,583 units registered in the same month last year, according to the Malaysian Automotive Association (MAA). In a statement, MAA said the passenger car segment recorded sales of 50,562 units compared with 47,106 last year while sales of commercial vehicles rose to 7,060 units from 6,477. The association said the improved performance was because March was a longer working month (compared with February), adding that consumer sentiment continued to be strong, buoyed by new model launches. (Source: The Star)

East coast rail line may cost RM60b

The 620km East Coast Rail Route (ECRR) linking Greater Kuala Lumpur and three east coast states in Peninsular Malaysia is expected to cost around RM60 billion, sources say. Most of the potential line’s required investment will be sourced from the private sector, they added. The East Coast Economic Region Development Council (ECERDC) has proposed the ECRR to the federal government and its viability is being studied by the Land Public Transport Commission (SPAD). (Source: Business Times)

KPJ plans to buy Rawang hospital

KPJ Healthcare Bhd plans to acquire the entire equity interest in Rawang Specialist Hospital Sdn Bhd (RSHSB) for RM50.6mil cash. The company said in a filing with the stock exchange that it had entered into a sale and purchase agreement with RSHSB shareholders. (Source: The Star)

Foreign News

U.S. Stocks Decline as Earnings Miss Analyst Estimates

U.S. stocks fell, erasing the biggest rally in three months for the Standard & Poor’s 500 Index, amid disappointing results by companies from Bank of America Corp. to Textron Inc. All 10 groups in the S&P 500 declined as technology, energy and financial shares dropped the most. Apple Inc. tumbled 5.5 percent, briefly falling below $400 for the first time since 2011 as one of its suppliers reported an inventory glut. Bank of America sank 4.7 percent after profit missed analysts’ projections. Textron slumped 13 percent after lowering its forecast for business-jet sales. Caterpillar Inc. slid 1.4 percent amid an analyst downgrade.

European Stocks Decline for Fourth Day; Tesco, BHP Slide

European stocks declined for a fourth day, with the benchmark Stoxx Europe 600 Index falling to its lowest level this year, as commodity producers and automakers slid. BHP Billiton Ltd. retreated to a seven-month low after the world’s largest mining company said third-quarter iron ore production rose less than expected. Volkswagen AG and Bayerische Motoren Werke AG fell at least 2.8 percent as data showed European car sales fell 10 percent in March. Tesco Plc lost 3.9 percent after reporting the first annual profit drop in almost 20 years and saying it will exit the U.S. The Stoxx Europe 600 Index fell 1.5 percent to 283.73 at the close of trading, its lowest level since Dec. 31. The gauge earlier slid amid speculation Germany’s credit rating could be downgraded, before recovering some of the losses within 15 minutes. The measure has still gained 1.5 percent this year as U.S. lawmakers agreed on a compromise budget and central banks maintained stimulus measures.

Emerging Stocks Fall on Commodity Plunge as Brazil Slumps

Emerging stocks fell to a four- month low, led by energy companies, as declining commodities prices dragged down equities from Brazil to Russia. The MSCI Emerging Markets Index (dropped 0.8 percent to 1,001.10 in New York. Copper plunged the most in 16 months as the International Monetary Fund cut its forecast for China’gross domestic product growth yesterday, while crude oil tumbled to a four-month low.

Italian Political Impasse Tested as Presidential Voting Begins

Italian lawmakers get a chance to begin breaking an eight-week political deadlock today as they consider nominations for the next head of state. The first ballot at 10 a.m. in Rome’s Chamber of Deputies will indicate whether tensions between Pier Luigi Bersani’s Democratic Party and forces loyal to former Prime Minister Silvio Berlusconi have eased. Broad agreement on a successor to President Giorgio Napolitano could revive moribund talks on forming a new government, which have yielded only acrimony since inconclusive elections Feb. 24 and Feb. 25.

Yen Remains Lower Amid Bets Japan Will Escape G-20 Criticism

The yen remained lower following a two-day decline amid bets Japan will escape censure for weakening its currency at a Group of 20 meeting starting today. Demand for the yen was also limited before Japanese government data today that may show the world’s third-largest economy ran a trade deficit for a ninth month. The Dollar Index jumped yesterday as global stocks fell, boosting the allure of the greenback as a haven. The yen was little changed at 98.14 per dollar as of 8:10 a.m. in Tokyo after losing 1.4 percent in the previous two days. The dollar traded at $1.3035 per euro following a 1.1 percent gain to $1.3032 yesterday. Europe’s common currency bought 127.92 yen from 127.87.

(Source: Bloomberg)