Market Thoughts

US stocks ended near session lows Thursday pressured by a handful of weak economic data and as some Fed officials stated their openness to tapering the central bank's bond-buying program in the coming months. Similarly, European shares closed flat-to-lower, pressured by downbeat data from the U.S. that included a jump in jobless claims and a drop in housing starts. On the local market, the FBM KLCI fell 16.31 points to 1766.72 points as investors take profit from the recent historical high. Following the bearish mood in US markets, the FBM KLCI could extend its pullback. For the downside, immediate support level is at 1750 points.

Stocks to watch are: Petronas Gas as the group has committed to a capex of RM8.1b for the next five years for its regasification terminals in Lahad Datu and Pengerang; Deleum following the group bagged RM1.4b worth of oil & gas service contracts; and UMW, the group is venturing into Indonesian automotive market and its announcement of O&G listing in end of this year.

Malaysia News & Highlights

UMW plans to list O&G unit on Main Market

UMW Holdings Bhd has proposed to list its oil and gas (O&G) unit, UMW Oil & Gas Corp Bhd (UMW-OG), on Bursa Malaysia's Main Market. The proposed initial public offering (IPO) is for up to 843.18 million shares of 50 sen each in UMW-OG. A total of 611.8 million shares will be made available to retail and institutional investors. The institutional offering involves the offer of up to 648.6 million shares, representing 30% of the enlarged issued and paid-up share capital of UMW-OG. The price of the institutional offer will be determined by a book-building exercise. Meanwhile, 194.58 million IPO shares will be made available for retail investors at a yet-to-be-determined price, representing 9% of the enlarged issued and paid-up share capital of UMW-OG. (Source: The Star)

UMW M&E Sdn Bhd in automotive tie-up with Bluebird Group in Indonesia

UMW Holdings Bhd is making inroads into the Indonesian automotive sector via a joint venture with the Bluebird Group. The company announced to Bursa Malaysia that its subsidiary, UMW M&E Sdn Bhd, and Bluebird nominee PT Pusaka Sukucadang Indonesia would set up a JV company, with an initial paid-up share capital of US$1mil (RM3.01mil), to provide lubricants, automotive components and service centre operations in Indonesia. UMW M&E will hold 49% of the joint venture, while Bluebird will hold the remaining 51% stake. (Source: The Star)

Nazir: Decision on CIMB acquisition stake in Philippines' Bank of Commerce (BoC) will be known within a month

CIMB Group chief executive Datuk Seri Nazir Razak has dismissed news reports that negotiations on the proposed acquisition of a stake of 60% in Bank of Commerce (BoC) in the Philippines was scrapped. “We are in the final stages of discussion and we will make our decision known in a month, perhaps sooner. “We are obtaining the regulatory approvals,” he told reporters on the sidelines of the 10th Islamic Financial Services Board Summit here yesterday. In May last year, CIMB Group had announced the acquisition of a 60% stake in BoC for 12.2bil pesos (RM892mil). (Source: The Star)

Deleum to bid for RM2b oil and gas jobs

Deleum Bhd, which provides a range of supporting products for the oil and gas industry, is bidding for new jobs worth RM2 billion through all its three business divisions. “The contracts that we are tendering for are all domestic contracts," said its group managing director Nan Yusri Nan Rahimy. Deleum's current contract value stands at about RM1.4 billion, which will keep it busy until 2018. (Source: Business Times)

PetGas RM3b terminal ready

The country’s first regasification terminal in Sg Udang, Melaka, built by Petronas Gas Bhd (PetGas) at a cost of RM3billion, is up and running. However, except for PetGas’s parent Petroliam Nasional Bhd (Petronas), they won’t be any third party importing liquefied natural gas (LNG) yet. (Source: The Edge)

Sime awards RM82mil job to Zecon

Two indirect subsidiaries of Sime Darby Bhd are selling a 12-storey commercial office block in Ara Damansara for RM124.5mil while its property arm has awarded a RM82.4mil job to Zecon Bhd for a 10-storey commercial building in Setapak. In an announcement, the conglomerate said Sime Darby Ara Damansara Development Sdn Bhd (SDAD) and Sime Darby Brunsfield Holding Sdn Bhd (SDBH), signed a sale and purchase agreement with Brunsfield Oasis Tower Sdn Bhd for the sale of Block H, Oasis Square in Ara Damansara, Selangor by SDBH for RM124.5mil. (Source: The Star)

AMMB to decide in 2 weeks about HwangDBS purchase

AMMB Holdings Bhd will decide in a couple of weeks whether to go ahead with its proposed acquisition of investment banking and stock-broking outfit HwangDBS (M) Bhd, said group managing director Ashok Ramamurthy. “We will complete our due diligence soon and then bring it up with the board. The next two weeks are crucial for us,” he told newsmen at AMMB's fourth-quarter results briefing yesterday. Ashok also said it was premature to comment on the bank's plan to sell a controlling stake in its life insurance unit, AmLife Insurance Bhd, as talks were still pending. But AMMB was targeting to conclude negotiations by June, he added. (Source: The Star)

Astro to join MSCI Malaysia Index

Astro Malaysia Holdings Bhd will be included as a component of the 42-stock MSCI Malaysia Index with effect from May 31. MSCI Inc said Astro would replace Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) in the index. (Source: The Star)

Goldis unit gets China concession

Goldis Bhd’s Singaporean unit Crest Spring Pte Ltd has signed a build, operate and transfer (BOT) concession agreement with Yantai Economic and Technical Development Zone City Management and Environmental Protection Bureau to undertake a sewage treatment plant concession in Shandong province, China. In a filing with Bursa, the company said a project company, with a capital of RM15mil, would be established to undertake the upgrading and expansion of the existing sewage treatment plant in Yantai Economic Development Zone, operated by its other subsidiary, Yantai Xin Cheng Wastewater Treatment Co Ltd. (Source: The Star)

Foreign News

U.S. Stocks Fall as Data Disappoints Amid Stimulus Bets

U.S. stocks fell, ending four days of records for the Standard & Poor’s 500 Index, amid disappointing economic data and after a Federal Reserve official said the central bank may slow the pace of stimulus as early as this summer. The S&P 500 fell 0.5 percent to 1,650.47 at 4 p.m. in New York. The Dow Jones Industrial Average dropped 42.47 points, or 0.3 percent, to 15,233.22. More than 6.4 billion shares traded hands on U.S. exchanges today, or 2 percent above the three-month average.

Jobless Claims in U.S. Jump to Highest Level in Six Weeks

More Americans than projected filed claims for jobless benefits last week and manufacturing in the Philadelphia region unexpectedly shrank in May, signs the slowdown in growth is rippling through the U.S. economy. The number of applications for unemployment insurance payments jumped by 32,000 to 360,000 in the week ended May 11, the most since the end of March, Labor Department figures showed today in Washington. The Federal Reserve Bank of Philadelphia’s general economic index fell to minus 5.2 from 1.3 in April.

Japan Becomes Most Favored Nation in Poll Showing Abe Optimism

Investors are more confident in a Japanese leader than any time since at least September 2010, with optimism about Prime Minister Shinzo Abe’s policies exceeding that for counterparts in the U.S., Europe and China. The number of respondents who are more optimistic than pessimistic on the impact of Abe’s plans on Japan’s investment climate rose to 66 percent this month from 54 percent in January, a worldwide poll of investors, analysts and traders who are Bloomberg subscribers showed. Japan offers one of the top two opportunities globally in the next year, according to 33 percent of respondents, up from 21 percent and beating China for the first time in surveys dating back to 2009.

Japanese Stock Futures Fall as Data Signal U.S. Slowdown

Japanese stock futures fell after data showed U.S. jobless claims rose and housing starts slumped, signaling a slowdown in the world’s biggest economy and damping the earnings prospects for exporters. Australian stock futures advanced. American Depositary Receipts of Toyota Motor Corp , the world’s largest carmaker, dropped 0.9 percent from the closing share price in Tokyo. Those of Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, declined 1.3 percent after the stock yesterday slid the most in a month. Newcrest Mining Ltd., Australia’s biggest gold producer, may be active after gold futures capped the longest slump since 2011.

Gold Bears Revived as Rout Resumes After Coin Rush: Commodities

Gold bears are dominant again after prices resumed their slump and billionaire George Soros joined investors selling holdings in exchange-traded products that have retreated to a two-year low. Prices that rallied as much as sevenfold in the past 12 years entered a bear market last month after some investors lost faith in gold as a store of value and equities rallied on mounting confidence the U.S. economy is improving. The slump spurred a surge in demand around the world, with coin purchases from the U.S. Mint rising to a three-year high in April. This month’s sales are on course to be 65 percent lower and global ETP holdings increased on just one day in the past six weeks.

(Source: Bloomberg)