Market Thoughts

US stocks closed out the week with strong gains, with the Dow and S&P 500 hitting fresh highs and all three major averages logging their fourth-straight weekly advance, boosted by a pair of positive economic reports. The S&P 500 closed at 1,667, spiking nearly 150 percent since the financial crisis when the index hit a low of 666.79 on March 6, 2009. Meanwhile, European stocks closed higher after volatile trade on Friday, boosted by a rally in the auto sector. Better-than-expected car registration figures revealed that European car sales were the strongest they have been in 21 months, pushing car manufacturers sharply higher. On the local market, the FBM KLCI rose 2.44 points to 1769.16 points. The index took a breather after the recent spike following the outcome of the general election. We expect the index to consolidate before climbing and re-testing the resistance of 1800 points.

Stocks to watch are: Instacom as media highlighted it has bagged a contract to build the telecommunications network in Sarawak under the Education Ministry’s 1Bestarinet project; George Kent (M) Bhd following the firm said the termination of its water concession in Papua New Guinea has been reversed; PPB Group as it has reported a 32% increase in first quarter net profit.

Malaysia News & Highlights

IJM’s Rimbayu project well received

When IJM Land Bhd launched phase one of Rimbayu, it generated a lot of interest surprisingly because Rimbayu is located after Kota Kemuning, off the Kesas Highway from Subang Jaya. About 18,000 registered, 2,000 came for the balloting, four times the total units available for sale. Its second phase, to be launched in July/August, will also be sold via the balloting process. There are two things to note from this. The first is the strong interest for a township project, far though it may seem. Rimbayu is located about 20km from Summit in USJ, Petaling Jaya. Kota Kemuning is about 15km from Summit. The second thing to note is the huge appetite for landed housing, which seems to be located further out from established areas.Phase one was sold at RM270-RM280 per sq ft with an absolute price of about RM580,000. (Source: The Star)

Allianz M’sia Q1 pre-tax profit rises

Allianz Malaysia Bhd's pre-tax profit rose to RM78.74mil in the first quarter ended March 31, 2013 from RM76.69mil in the same quarter last year. It said the general insurance operations sustained its underwriting margins through prudent risk selection, enhanced operational efficiencies and strengthened distribution capabilities. (Source: The Star)

Leon Fuat steels itself for expansion

After about 40 odd years of being a family-oriented business, steel trading and processing company Leon Fuat Bhd is now ready get out of its comfort zone to be a public-listed company in the name of expansion and diversification of its businesses. The company is en route to a listing on the Main Market of Bursa Malaysia on June 5. Leon Fuat, controlled by the Ooi family, is primarily involved in the trading and processing of steel products specialising in rolled long and flat products. (Source: The Star)

SFSS set to be largest shareholder of Bintulu Port

The State Financial Secretary Sarawak (Incorporation) (SFSS) will emerge as the single largest shareholder of Bintulu Port Holdings Bhd (BPHB) after it subscribes for 60 million new shares under a placement exercise for RM399mil. Its unit, Equisar Assets Sdn Bhd, will take up the block of shares at RM6.65 each. The money from the placement exercise will be used by BPHB to part-finance the Samalaju Port project. SFSS, the Sarawak government’s investment vehicle, will have its stake in BPHB raised to 39.72% from 30.65% upon completion of the exercise. (Source: The Star)

Jala: GST could add up to RM27b to country’s income

Malaysia will be able to rake in an additional income of up to RM27bil if the proposed goods and services tax (GST) is implemented at 7%, similar to Singapore's. Minister in the Prime Minister's Department Datuk Seri Idris Jala said the new taxation mechanism could guarantee additional revenue of RM20bil to RM27bil, at maturity. “At maturity is when every Malaysian starts to contribute towards the GST. It must be implemented as soon as Malaysians are ready to accept the mechanism,” he added. (Source: The Star)

Car prices will be reduced in stages, assures Mustapa

The promise made by the Barisan Nasional in its general election manifesto to reduce car prices in stages would be fulfilled, said International Trade and Industry Minister Datuk Seri Mustapa Mohamed. “We will study the relevant action programmes to reduce car prices,” he assured at a media briefing yesterday. Barisan had made a pledge in its manifesto to reduce car excise duties, which would lead to a gradual decrease in car prices to between 20% and 30%. (Source: The Star)

Instacom wins RM200m job?

ACE market-listed Instacom Group Bhd has secured a contract to build the telecommunications network and infrastructure to facilitate the wiring-up of schools in Sarawak under the Education Ministry's 1Bestarinet project, said sources. The infrastructure project is worth some RM200mil to Instacom.However, it is unclear what kind of profit margins the company would be getting from this, considering it is playing a subcontractor role. 1M Utama Sdn Bhd is the main contractor for the project. (Source: The Star)

Five companies tender for RM400mil job in Samalaju Port

Five companies, including four based in Peninsular Malaysia, have tendered for the Samalaju Port project's breakwater package estimated at more than RM400mil. They are MMC Engineering Bhd, TRC Sdn Bhd, Inai Kiara Sdn Bhd, See Yong & Sons Sdn Bhd and Piasau Concrete Sdn Bhd, according to Bintulu Port Holdings Bhd (BPHB) chief executive officer Datuk Mior Ahmad Baiti. Piasau Concrete, which is linked to Miri-based diversified Shin Yang group, is the sole Sarawak-based firm that had submitted tender.(Source: The Star)

Nestle set for Asian expansion

Nestle(M) Bhd, which has been operating in Malaysia for over a century, is set for expansion within the Asian region via its liquid business by capitalising on product innovation and renovation. “A core focus for Nestle will be its liquid business, and our new plant in Shah Alam will enable us to export these ready-to-drink products within the Asian region,” said managing director Alois Hofbauer. (Source: The Edge)

Bank Muamalat eyes RM1b in new deposits

Bank Muamalat Malaysia Bhd (BBMB) is targeting RM1 billion in new deposits during its on-going "Oh Yeah" savings account campaign, said deputy chief executive officer Musa Abdul Malek. He said the year-long nationwide campaign, which ends in March next year, is expected to attract between 50,000 and 100,000 new customers for the bank, which has a customer base of 700,000 depositors. For the nine-months ended December 31 2012, Bank Muamalat recorded a pre-tax profit of RM172.4 million while total deposits stood at RM16.5 billion. (Source: Business Times)

Foreign News

U.S. Stocks, Dollar Rise as Data Fuel Economic Confidence

U.S. stocks rebounded and the Dollar Index rose to the highest level since July 2010 as better-than-estimated economic data fueled speculation the Federal Reserve will consider scaling back stimulus. Gold extended its longest slump in four years. The Standard & Poor’s 500 Index climbed 1 percent to a record 1,667.47 at 4 p.m. in New York and the Stoxx Europe 600 Index closed 0.2 percent higher. The gauge of the U.S. currency against six major trade partners gained 0.8 percent to 84.28. The rand sank to its weakest level since 2011 and the Aussie slid to the lowest in almost a year. Gold for immediate delivery fell for a seventh day, while 10-year Treasury yields rose seven basis points to 1.95 percent.

EU Leaders to Pledge Tax-Evasion Fight With Savings Pact

European Union leaders in the coming week will pledge to step up efforts to fight tax evasion and conclude work by year end on an updated savings-tax pact that covers how countries share data, according to draft conclusions for their May 22 summit. The EU leaders’ commitment comes after finance ministers failed to reach a deal on the savings pact last week because of reservations voiced by Luxembourg and Austria. The leaders also will endorse efforts to expand tax information-sharing worldwide, as sought by the U.K., France and other nations, according to the draft, dated May 17.

China Home Prices Climb as Buyers Defy Government Curbs

China’s new home prices rose in all but two cities in April, with housing values accelerating in key centers including Beijing and Shanghai as buyers defied the government’s latest round of property measures. Prices climbed in 68 of the 70 cities the government tracked last month from a year earlier, the National Bureau of Statistics said in a statement. The same number of cities posted gains in March, the most since September 2011.

Asian Stocks Rise This Week as Nikkei 225 Breaks 15,000 on Yen

Asian stocks rose, with the regional benchmark index advancing for a second week, as Japan’s Nikkei 225 Stock Average closed above 15,000 for the first time since 2007 after the yen touched a 4 1/2-year low against the dollar. The MSCI Asia Pacific Index gained 0.5 percent to 142.51 this week, its highest weekly close since June 6, 2008. The measure has risen more than 10 percent this year as the Bank of Japan started unprecedented monetary easing and policy makers in the U.S. showed willingness to add stimulus. The MSCI Asia Pacific Index excluding Japan lost 1.1 percent this week.

Abe Vows to Boost Japan’s Investment in Growth Strategy Outline

Japanese Prime Minister Shinzo Abe vowed to increase private investment and infrastructure exports as part of his strategy to overcome deflation and build on an economic expansion fueled by rising consumer spending. “After long years of deflation, I can’t yet say this is more than a sign of a turnaround,” Abe said in a speech in Tokyo. “I will do everything in my power to turn this movement into strong growth.”

N. Korea Test-Fires 3 Missiles as U.S. Sees More Isolation

North Korea fired three short-range missiles as it showcased its military ambitions in defiance of international sanctions and diplomatic efforts to convince the totalitarian state to return to talks. Kim Jong Un’s regime launched two guided missiles in the morning and a third in the afternoon, all headed northeast into waters off the country’s east coast, South Korean Defense Ministry spokesman Kim Min Seok said by phone in Seoul. The reason for the action wasn’t clear, he said. South Korea urged the North to stop provocations, Unification Ministry spokesman Kim Hyung Suk said in a briefing.

(Source: Bloomberg)