Market Thoughts

US stocks extended their losses for a second day Thursday, dragged by health care and techs, after a batch of economic data that missed projections and mixed earnings reports. Meanwhile, European shares closed mixed on after a rally in technology shares was curbed when Nokia released disappointing earnings. Yet more weak U.S. data also weighed on investor sentiment. On the local exchange, the FBM KLCI fell 4.71 points to 1706.26 points. We expect further downside on the index following the decline in the US market. Immediate resistance is seen at 1717 points.

Stocks in trading interest are: Tenaga, YTL Power, Formis Resources following the groups were shortlisted for the RM8-9b coal-fired power plant project; AMMB and DRB Hicom as the media reported that the former intends to acquire the latter’s subsidiary, Bank Muamalat to strengthen its Islamic banking operations.

Malaysia News & Highlights

Up to EPF to decide RHBCap privatisation, says group MD

There is no plan at the moment to privatise RHB Capital Bhd (RHBCap), its top official said. “At the present time, there is no plan. We have not proposed any privatisation. “However, to be fair, this would need to come from the major shareholder,” RHBCap group managing director Kellee Kam said. The major shareholder of the banking group is Employees Provident Fund (EPF), which holds a 41% stake. (Source: The Star)

TNB, Govt plan buffer fund This to absorb volatility in prices

Tenaga Nasional Bhd (TNB), which posted a net profit of RM1.27bil for the second quarter ended Feb 28, is currently in discussions with the regulators on the setting up of a stabilisation fund. Chairman Tan Sri Leo Moggie said the fund would help buffer the impact of any tariff hike on customers. The fund that the Government was mulling was to absorb the volatility in prices and the supply of generation fuels, he said at a briefing to announce the utility giant's latest financial results. (Source: The Star)

Energy Commission shortlists 5 consortia for Project 3B power plant

The Energy Commission (EC) has shortlisted five consortia to tender for the 2,000 MW Project 3B coal-fired power plant to be developed at the respective consortia's proposed site at an estimated cost of RM12bil. The EC said it had received seven request for qualification (RFQ) submissions on March 11 for Project 3B. The 2,000 MW power plant is to be build on a new site in the peninsula and commissioned in stages in October 2018 and April 2019.The five shortlisted consortia are 1Malaysia Development Bhd (1MDB),Formis Resources Bhd, Tenaga Nasional Bhd (TNB), Malakoff Corp Bhd and YTL Power International Bhd. All the contenders have either foreign or local partners. (Source: The Star)

Felda Global Ventures unit to buy biodiesel refinery

Felda Global Ventures Holdings Bhd (FGVH) subsidiary Felda Global Ventures Downstream Sdn Bhd is acquiring a biodiesel refinery and other assets at Kuantan Port for RM35mil. The acquisition follows the signing of an asset purchase agreement with Mission Biotechnologies Sdn Bhd for the acquisition of the refinery and other assets which include a 16,000-tonne tank storage connected with import and export pipelines to a deep water jetty. (Source: The Star)

Hibiscus oil and gas pact expands initial Norway acquisition

Hibiscus Petroleum Bhd’s jointly-controlled indirect entity Lime Petroleum Norway AS has expanded its initial agreement to acquire equity positions in four production licences from North Energy ASA to six with no increase to the purchase consideration. Hibiscus said in a statement that this came after it conducted in-depth technical evaluations primarily using the Rex Virtual Drilling technology. (Source: The Star)

Bursa profit down on salary adjustments

Bursa Malaysia Bhd’s first-quarter net profit fell 6% to RM38.2mil, from RM40.6mil a year earlier, on higher salary adjustments, while revenue was almost flat owing to lower securities trading income. In a statement, Bursa Malaysia said revenue for the quarter ended March 31 stood at RM101.7mil, 1% higher than RM100.5mil a year ago. “As a result of the lacklustre market sentiment, the securities market registered a lower trading revenue for the period under review of RM43.2mil compared with RM50.5mil in the corresponding period last year. (Source: The Star)

PNSB says Dijaya deal for prime development of 474.29ha land signed in a proper manner

Permodalan Negeri Selangor Bhd (PNSB), the state development arm, has clarified that the sale and purchase agreement which it signed with property developer Dijaya Corp Bhd for 474.29ha of prime development land located in Canal City is valid. PNSB chief executive officer Datuk Ahmad Omar said the sale and purchase agreement remained valid despite it being signed after the dissolution of the state assembly. The agreement was signed on April 15 while the state assembly was dissolved on April 5. (Source: The Star)

UMW Toyota issues safety recall

Following Toyota Motor Corp's recent announcement of a special service campaign, UMW Toyota Motor Sdn Bhd is addressing the issue of a possible improperly manufactured passenger side front airbag inflator on certain models. This setback may cause rupture and deploy the airbag abnormally during a crash. UMW Toyota is making a safety recall to replace the front side passenger airbag inflator module. It said there are about 18,700 units of Camry and Corolla Altis manufactured from year 2000 to 2003 that are affected by the recall. "However, there have not been any reported cases in Malaysia," it added. UMW Toyota will contact all customers involved to carry out the corrective measures at no cost. No other models produced before 2000 and after 2003 are affected by this campaign. (Source: The Star)

Foreign News

U.S. Stocks Drop as European Shares Erase Early Gains

U.S. stocks fell for a second day amid disappointing earnings reports and data on leading economic indicators and Philadelphia-area manufacturing that trailed estimates. European shares erased earlier gains while gold rose and oil rebounded from a four-month low. The Standard & Poor’s 500 Index lost 0.7 percent to 1,541.61 at 4 p.m. in New York, its lowest closing level since March 6. The Stoxx Europe 600 Index reversed a 0.7 percent rally to close unchanged. The euro strengthened 0.1 percent to $1.3049. Gold for immediate delivery rebounded for a third day from its worst drop in three decades, climbing 0.8 percent to $1,388.02 an ounce. Oil rallied amid a weaker dollar, while 10- year U.S. Treasury yields fell one basis point to 1.69 percent.

European Stocks Close Unchanged; Debenhams Gains

European stocks closed unchanged from yesterday’s level, erasing intraday gains, as companies from Debenhams Plc to Syngenta AG and Nokia Oyj reported financial results. Debenhams rallied the most in more than five months after the U.K.’s second-biggest department-store chain gained market share in the first half. Syngenta advanced 3 percent as the chemical company’s Brazilian operations boosted revenue. Nokia tumbled 8.3 percent after the mobile-phone maker posted results that disappointed investors. The Stoxx Europe 600 Index closed at 283.73, erasing an earlier advance of as much as 0.7 percent. The equity gauge has lost 3 percent so far this week as reports from U.S. manufacturing and retail sales to Chinese economic growth fell short of forecasts.

Germany Backs Cyprus Aid as Schaeuble Cites Default Risk

German lawmakers approved a rescue for Cyprus as Finance Minister Wolfgang Schaeuble warned that refusing aid to a fifth crisis-ravaged state risked triggering a sovereign default and contagion to other euro nations. The lower house, or Bundestag, backed German participation in the 10 billion-euro ($13 billion) financial lifeline by 487 votes to 101 with 13 abstentions in Berlin today, almost three years after the euro-area debt crisis first required lawmakers to act in May 2010. Lawmakers also approved extending aid terms for Ireland and Portugal. “We must avoid turning the problems in Cyprus into new problems for other euro countries,” Schaeuble told lawmakers in a speech before the vote. “Cyprus is in a dramatic situation. If we don’t help Cyprus, then Cyprus inevitably faces sovereign default.”

China’s Yi Says Conditions Ripe to Open Capital Account

China will push ahead with opening its capital account because current economic conditions are favorable, said Yi Gang, deputy governor of the nation’s central bank. “I see lot of favorable conditions that are suitable for further liberalization in capital account,” Yi said during International Monetary Fund meetings in Washington yesterday. “In running an open economy you really need the capital account to be pretty much convertible.” Yi said on April 17 that China will widen the trading band for the yuan “in the near future,” as the world’s second- largest economy looks to reform its foreign-exchange regime. The nation, which has the world’s largest foreign-currency reserves, is seeking to shift its growth model away from one reliant on exports by allowing more flexibility in the exchange-rate and the convertibility of its currency.

Yen Declines Ahead of G-20 on Expectations for More BOJ Stimulus

The yen declined against all its 16 most-traded counterparts before the Bank of Japan meets next week amid expectations Governor Haruhiko Kuroda will push ahead with expanding stimulus. The yen extended a loss against the euro as Kuroda said he doesn’t expect the Group of 20 meetings under way in Washington to discuss BOJ easing as devaluation. That underscores prospects Japan will escape censure over policies that have weakened the yen 19 percent against the dollar in six months. The greenback remained lower against Europe’s shared currency after weaker than expected U.S. manufacturing data boosted chances the Federal Reserve will keep easing measures in place longer.

G-20 Draft Affirms Vow to Avoid Competitive Devaluations

Group of 20 nations will affirm a commitment to avoid weakening their currencies to gain a trade advantage, according to a draft statement prepared for a meeting this week in Washington, Bloomberg BNA reported. The statement, seen by a Bloomberg BNA reporter, maintains a February pledge to “move more rapidly toward more market- determined exchange rate systems and exchange-rate flexibility” and to refrain from competitive devaluations. Meetings of finance ministers and central bankers start today. The initial language suggests G-20 members will withhold direct criticism of Japan’s efforts to rally its economy from 15 years of deflation even after the yen’s 19 percent slide against the dollar in the past six months.

(Source: Bloomberg)