Market Thoughts

US stocks closed down nearly 1 percent in a volatile session after the minutes from the last Fed policy setting meeting suggested the central bank is divided on when it may start to pull back on its monetary stimulus. Meanwhile, European shares closed higher on Wednesday, mirroring gains in the U.S. after Federal Reserve Chairman Ben Bernanke reiterated his commitment to maintaining loose monetary policy. Both European and U.S. shares pared some gains after Bernanke's more hawkish comments in the Q&A session.

On the local market, the FBM KLCI fell 3.50 points to 1783.88 points to erase earlier gains. Following the decline in US markets, we expect the FBM KLCI to be negative today. The index could enter consolidation in the near term before attempting to break the 1800 points later.

Stocks to watch for today are: Green Packet as the group plans to sell its 61% stake in P1; Axiata following the media reported that the group is keen to bid for PT Axis Telekom Indonesia; and Scomi as its CEO raised his stake in the company.

Malaysia News & Highlights

Decision on P1 stake sale next month

GREEN Packet Bhd, the world's third largest vendor of WiMAX devices, will discuss the possibility of selling its stake in Packet One Networks (M) Sdn Bhd (P1) at a board meeting next month. According to a key shareholder of the company, YTL Corp's Yes mobile and U Mobile, a company linked to Tan Sri Vincent Tan, and Telekom Malaysia Bhd are among "a slew of companies" said to be interested in the P1 stake. Speaking on condition of anonymity, the shareholder told Business Times that a decision will also be made next month. Green Packet has a 61 per cent stake in P1, while South Korea's SK Telecom Co owns some 28.2 per cent stake in the mobile broadband company. (Source: Business Times)

AirAsia X sets RM1.45 per share for IPO

Long-haul carrier AirAsia X has set an indicative price of RM1.45 per share for an initial public offering (IPO) here worth more than US$300 million (RM906 million), according to sources with knowledge of the deal. The company and its shareholders are offering 790.1 million shares with 75 per cent of the offering coming from new shares, according to the terms seen earlier. The deal is slated to be priced on June 24, with its debut set for July 10. CIMB, Credit Suisse, Maybank and Morgan Stanley were hired as joint global coordinators for the IPO. (Source: Business Times)

No cornerstone investors for AirAsia X: Clear sign of confidence by retail investors

AirAsia X Bhd, banking on retail participation to boost the take-up of its impending IPO, will not have cornerstone investors. Bankers familiar with the listing said this will be one of the few large offerings without cornerstone investors. Besides offering what is to be the largest retail proposal allowed by the Securities Commissions(SC) to date, AirAsia X Bhd, is set to create another milestone in the history of the country’s IPOs as it does away with conventional cornerstone investors. Due to overwhelming response from retial investors, a senior executive familiar with the process said the long-haul budget airline is not looking for cornerstone investors for its IPO on July 10. (Source: The Edge)

Genetec wins new orders worth RM31m

Genetec Technology Bhd has won new orders worth RM31.1 million from the existing clients in hard disk drive, automotive and other industries. The company said the tenure of the contracts normally ranges from three to nine months, depending on the size of order and scope of work. In a statement to Bursa Malaysia, Genetic said the contracts, which are on project basis, are expected to contribute positively to its earnings for the financial year ending March 31 2014. (Source: Business Times)

Aeon director: GST won’t affect group

The implementation of the goods and services tax (GST) in Malaysia is not expected to have any impact on retail group Aeon Co (M) Bhd’s earnings. Executive director Poh Ying Loo said, as a result, there could be some cyclical effect on the consumption patterns of consumers “for a while.” “But we expect it to normalise soon after,” he said after a shareholders’ meeting. It had been reported recently that Malaysia should be able to rake in up to RM27bil in income if the GST was implemented at 7%, a rate similar to that of Singapore. However, the Government has yet to decide on when to introduce the new tax. (Source: The Star)

No plans for MBO, says Vincent Lee

Star Publications (M) Bhd executive deputy chairman Datuk Vincent Lee has reiterated that there are “no plans at all” for a management buyout (MBO) of the company. “An MBO would be difficult as the MCA is governed by the central committee. Such a move would also have to go through an EGM and obtain the approval of the majority of members,” he told reporters after the company AGM yesterday. Star Publications chairman Tan Sri Dr Fong Chan Onn had issued a statement last Wednesday denying talk that the MCA, which owns 42.5% of the group, was considering an MBO. (Source: The Star)

Axiata weighing bid for PT Axis Indonesia

Axiata Group Bhd, Malaysia's largest mobile-phone operator, is evaluating a bid for PT Axis Telekom Indonesia, three people with knowledge of the matter said. Any offer for Axis would be made by Axiata's Indonesian unit, XL Axiata, the sources said. Axis, majority owned by Saudi Telecom Co, is valued at about US$1 billion (RM3 billion) including debt, according to an estimate from Saudi Fransi Capital. Malaysia's Maxis Communications Bhd also holds a stake in the company. (Source: Business Times)

AEON to invest RM240m in new mall in Kulaijaya

Retailer AEON Co(M) Bhd, which operates 30 stores in Malaysia, will invest RM240 million this year, in a spanking new shopping mall-cum-retail store in Kulaijaya. "With a 430,000 sq ft floor space, the store is slated for completion in December. "With the opening of the new store, the company will have 31 stores nationwide," said chairman Datuk Abdullah Mohd Yusof. Plans are afoot to open new stores and locations have been identified. Meanwhile, AEON managing director Nur Qamarina Chew said the company has allocated RM350 million for capital expenditure (capex). (Source: The Star)

PetChem to spend big on Sabah fertiliser plant; RM3B CAPEX: Huge portion will be invested in Samur project

PETRONAS Chemicals Group Bhd (PetChem) plans to use a huge portion of the RM3 billion capital expenditure (capex) set aside this year for its fertiliser plant in Sabah. Chairman Datuk Wan Zulkiflee Wan Ariffin said the Sabah Ammonia-Urea (Samur) project is currently 30 per cent completed. Speaking at a news conference after the company's annual general meeting here yesterday, he said the Samur project, expected to be completed in August 2015, will boost PetChem's annual fertiliser production to 2.6 million tonnes from 1.4 million tonnes. This will in turn increase its methanol and fertiliser business' contribution, currently stands at 25 per cent, to the company's total revenue. (Source: Business Times)

Petronas starts Canada project

Petroliam Nasional Bhd (Petronas) has started early engineering work for a massive British Columbia (BC) natural gas export project in Canada with the award of contracts to three consortia. On Tuesday, Petronas, via Pacific NorthWest LNG Ltd, said it has awarded the front-end engineering and design (Feed) contracts for its liquefied natural gas (LNG) facility in British Columbia to the three contractors - Bechtel, the KBR-JGC joint venture and the Technip-Samsung Engineering-China Huanqiu joint venture. Pacific NorthWest LNG is Petronas' subsidiary handling its LNG project in British Columbia. (Source: Business Times)

Cahaya Mata Sarawak to invest in grinding plant

Cahya Mata Sarawak Bhd (CMS) is investing RM150mil in a new grinding plant to boost its cement production to meet growing demand. Group managing director Datuk Richard Curtis said the tender for the proposed new plant to be sited next to the group's clinker plant in Mambong near here would be called soon. “Fast track construction of the plant is expected to start end of the year and it will commence production in late 2015. “The plant will give us an additional one million tonnes per annum,” he told StarBiz after the company AGM yesterday. (Source: The Star)

BToto buys RM20m REDtone shares

Berjaya Sports Toto Bhd (BToto) has purchased securities totalling RM20.15mil in REDtone International Bhd via its 88.26%-owned Philippines-listed unit Berjaya Philippines Inc. A filing with Bursa Malaysia showed the company bought 11.4 million shares, representing a 2.39% stake. It also bought 81.25 million units of 2.75% 10-year irredeemable convertible unsecured loan stocks, along with 560,000 units of warrants. It said the acquisition represented an opportunity for the company to invest in REDtone with its internally-generated surplus funds. (Source: The Star)

Ingress gets notice from joint-offerors

Ingress Corp Bhd has received a notice from the joint-offerors intending to take it private to extend the closing date and time for the acceptance of the offer to June 11 from May 28. Major shareholders Ramdawi Sdn Bhd, Datuk Rameli Musa and Datuk Abdul Wahab Ismail are looking to buy the 59.2 million shares, or 70.19% of the automotive parts manufacturer and car distributor they do not own, at RM1.85 per share or RM109mil. “Save for the revised closing date, all the other details, terms and conditions of the offer remain unchanged,” said Maybank Investment Bank on behalf of the joint-offerors yesterday. (Source: The Star)

Foreign News

U.S. Stocks Fall on Concern Fed Will Scale Back Stimulus

U.S. stocks fell, with benchmark indexes retreating from record highs, as concern grew that the Federal Reserve will scale back its stimulus efforts if the labor market continues to improve. The S&P 500 fell 0.8 percent to 1,655.35 at 4 p.m. in New York, after rallying as much as 1.1 percent earlier. The Dow Jones Industrial Average lost 80.41 points, or 0.5 percent, to 15,307.17. About 8.3 billion shares changed hands today, 32 percent above the three-month average.

Bernanke Says Premature Tightening Would Endanger Recover

Federal Reserve Chairman Ben S. Bernanke said the U.S. economy remains hampered by high unemployment and government spending cuts, and that raising interest rates or reducing asset purchases too soon would endanger the recovery. “A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further,” Bernanke said today in testimony prepared for a hearing at the Joint Economic Committee of Congress in Washington. Monetary policy is providing “significant benefits,” he said.

Sales of Previously Owned U.S. Homes Rise to Three-Year High

Sales of previously owned U.S. homes rose in April to the highest level in more than three years as housing continued to gain momentum. Purchases of existing houses increased 0.6 percent to an annual rate of 4.97 million, the most since November 2009, the National Association of Realtors reported in Washington. The median forecast of 79 economists surveyed by Bloomberg called for a pickup to a 4.99 million pace.

Vietnam Signals Rate Pause as Banking Revamp Approaches

Vietnam will find it “difficult” to cut interest rates further this year, central bank Deputy Governor Nguyen Dong Tien said, as the nation moves to create an asset company that would clean up bad debt and revive growth. “The pressure on inflation still remains and there are still some factors that will cause inflation to quicken toward the end of the year,” Tien said in an interview in Hanoi. “A further rate cut by the central bank is difficult. There’s a small chance.”

Taiwan Said to Curb Bullish Currency Bets as Yen Hits 2008 Low

Taiwan tightened limits on banks’ bullish bets on the local dollar, boosting efforts to rein in the exchange rate and defend export competitiveness after the yen tumbled to the lowest since 2008. The Central Bank of the Republic of China (Taiwan) cut a daily cap on the net U.S. dollar short position that can be held by each bank to $5 million from $10 million, according to two traders at lenders that were informed of the change by the monetary authority. The new rule comes into effect tomorrow, they said. A short position in the greenback is a call that it will weaken against the local currency.

(Source: Bloomberg)