Market Thoughts

US stocks closed at fresh all-time highs on Tuesday, led by big gains in financials, after widely followed hedge fund manager David Tepper said he is "definitely bullish" on stocks. The Dow rose for a record 18th consecutive Tuesday. Similarly, European shares pared losses to close at five-year highs.

On the local market, the FBM KLCI added 0.53 points to 1788.43 points. The bullish US market could lead the KLCI to fresh highs. We expect the FBM KLCI to remain positive and could re-test the resistance of 1800 points.

Stocks to watch are: IOI Corp following it proposed to relist its property division by year-end, Gamuda and MMC as the media reported the companies are expected to be the frontrunners for the tunneling works for Klang Valley mass rapid transit 2 (KVMRT 2), Guinness Anchor following it reported higher net profit for its third quarter, Boustead Heavy Industries Corp (BHIC) as it returns to black in the first quarter, and Octagon Consolidated Bhd as it is on track to be lifted from PN17 status.

Malaysia News & Highlights

IOI heading to be one of Malaysia's largest property companies with RM14.67bil assets

The proposed listing and demerger of IOI Properties Bhd from IOI Corp Bhd will create one of the country's largest property companies with a net asset size of RM14.67bil, delivering average operating profits of RM1bil per year over the next three years, driven by its Singapore and China developments. This is on the back of RM3bil worth of launches per year, as opposed to RM1bil currently. The exercise will see IOI Corp selling its property assets to IOI Properties Group Sdn Bhd (ListCo), which is to be listed by year-end. The market capitalisation of IOI Properties Group would likely be at a 25% to 30% discount to its net asset value, implying a value of around RM10bil to RM11bil, said Tan Sri Lee Shin Cheng, the executive chairman and founder of IOI Corp. (Source: The Star)

Gamuda, MMC likely to get RM24.9bil KVMRT 2 tunnelling job

Gamuda Bhd and MMC Corp Bhd are expected to be the frontrunners for the tunnelling works and also be a project delivery partner for the Klang Valley mass rapid transit 2 (KVMRT 2), which is estimated to cost around RM25bil. The development of the KVMRT 2, slightly longer than the KVMRT 1 connecting Sg Buloh, Serdang and Putrajaya, is expected to be formally announced in July. (Source: The Star)

Boustead Heavy returns to black in Q1

Boustead Heavy Industries Corp Bhd (BHIC) has returned to the black with a net profit of RM5.1 million in the first quarter ended March 2013. This reversed a net loss of RM14.5 million in the same period a year ago, helped by a much better performance by its engineering and manufacturing segments. BHIC's revenue increased 14 per cent to RM64.4 million, compared with RM56.5 million in the first quarter of 2012. BHIC deputy chairman and managing director Tan Sri Ahmad Ramli Mohd Nor said the heavy engineering and manufacturing segments performed well ahead of last year. (Source: Business Times)

Axiata’s Sri Lanka unit buys Sky TV

Axiata Group Bhd says its Sri Lankan subsidiary Dialog Broadband Networks Ltd has acquired Sky Television and Radio Network Ltd for US$6.35 million (RM18.89 million). The company said the acquisition is centred on the spectrum assets currently under its possession. Sri Lanka’s Telecommunications Regulatory Commission has assigned a 2.3 Gigahertz spectrum band for the provision of pay television services. (Source: Business Times)

Guinness Anchor Q3 net profit up 19% on CNY sales

Guinness Anchor Bhd's (GAB) net profit for its third quarter ended March 31, rose 19% to RM61.16mil from RM51.53mil in the previous corresponding period, mainly boosted by the timing of Chinese New Year (CNY) sales, which was later this year compared to last year. Revenue during the CNY period increased to RM442.53mil from RM364.71mil previously. For the nine-month period ended March 31, net profit increased to RM184.15mil from RM172.56mil a year earlier, while revenue was flat at RM1.26bil from RM1.28bil in the previous corresponding period. (Source: The Star)

Octagon to exit PN17 status

Octagon Consolidated Bhd is on track to be lifted from Practice Note 17 (PN17) status following the execution of an agreement with shareholders of two oil and gas companies. In a statement, the financially distressed company said it signed an agreement yesterday with OGPC Holdings Sdn Bhd and the shareholders of OGPC Sdn Bhd and OGPC O&G Sdn Bhd. OGPC and OGPC O&G are companies incorporated in Malaysia with principal businesses in the provision of specialised engineering and technical support services. (Source: The Star)

MAS may fly to profit by end-2014

National carrier Malaysian Airline System Bhd (MAS) is on track to be profitable again by end-2014, group chief executive officer (CEO) Ahmad Jauhari Yahya says. He also said the airline is getting strong support from its shareholders for its RM3.1 billion cash call announced last November. MAS expects to be financially-independent by end-2014, allowing it to self-finance its aircraft pur-chases, he said. (Source: Business Times)

Foreign News

S&P 500 Rises on U.S. Optimism While Metals Fall on China

U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record for the eighth time in nine days, amid improving confidence in the world’s largest economy. Industrial metals fell on concern about China’s growth. The S&P 500 added 1 percent to 1,650.34 at 4 p.m. in New York after the Shanghai Composite Index lost 1.1 percent. Copper slid more than 2 percent to lead commodities lower and oil extended its longest slump of the year. The yen dropped 0.4 percent at a four-year low of 102.26 per dollar. Ten-year Treasury yields erased earlier losses and rose five basis points to 1.97 percent, the highest level since March. The Dollar Index, a gauge of the currency against six major peers, added 0.4 percent to the highest level since July.

European Stocks Rise as Earnings Offset German Confidence

European stocks advanced as companies from ICAP Plc to European Aeronautic Defence & Space Co. rallied after reporting earnings, offsetting German investor sentiment that gained less than forecast in May. The Stoxx Europe 600 Index added 0.4 percent to 305.66 at the close of trading, its highest level since June 2008. The equity benchmark has gained 9.3 percent so far this year amid confidence that central banks around the world will continue to add stimulus to support economic growth.

Emerging-Market Stocks Advance as Turkey Jumps to Record

Emerging stocks rose for the first time in four days, led by consumer companies. The Borsa Istanbul National 100 index climbed to a record, while Chinese shares declined the most in three weeks on property concerns. The MSCI Emerging Markets Index rose 0.4 percent to 1,046.18. The gauge rebounded after capping the longest slide in a month yesterday as Chinese output trailed estimates, prompting JPMorgan Chase & Co. to cut its outlook for the nation’s economy. Polish economic growth matched an 11-year low in the first quarter, boosting the case for further rate reductions by the nation’s central bank.

Swan Shuns Europe-Style Austerity in Bet on Australian Jobs

Australian Treasurer Wayne Swan will eschew European-style austerity as a stronger currency slows growth, wagering the government can win a Sept. 14 election fought on jobs and absorb the pain of a broken surplus promise. The underlying cash deficit will be A$18 billion ($17.9 billion) in the 12 months to June 30, 2014, Swan said in Canberra yesterday as he released the federal budget. The A$19.4 billion shortfall this fiscal year is 1.3 percent of gross domestic product, compared with a projected A$1.1 billion surplus released in the government’s mid-year review seven months ago. The Australian dollar dropped to an 11-month low after the release.

(Source: Bloomberg)