Market Thoughts

US stocks closed lower for a third session, as markets remain worried the Federal Reserve may start withdrawing stimulus by curtailing bond purchases later this year. Similarly, European shares closed lower on Friday, as investors remained cautious following a volatile session in Asia, and a weak start to U.S. trade. On the local market, the FBM KLCI lost 10.82 points to 1773.06 points on Thursday. Following the volatile conditions in global markets, we expect the local benchmark index remains consolidate today after closing on Friday for Wesak Day holiday. Immediate support level is seen at 1750 points.

Stocks in action today are: a) MISC after the group returned to the back in its first quarter result from a loss a year ago; b) Perdana Petroleum following the group secured a RM700m job to lease six offshore vessels to its major shareholder Dayang Enterprise; c) SapuraKencana as the media reported that the group closes to secure RM1.5b hook up, construction and commissioning job in Pan Malaysia project; and d) Tebrau Teguh, the press highlighted that several large property developers are eyeing prime parcels of land in Johor that are owned by the company.

Malaysia News & Highlights

UMW Rig Asset acquires new jack-up drilling rig

UMW Holdings Bhd announced that its indirect subsidiary UMW Rig Asset (L) Ltd has agreed to acquire the entire equity interest in Offshore Driller 4 Ltd from S.D. Standard Drilling Plc for US$223mil (RM676mil). UMW Rig Asset is a unit of UMW Oil & Gas Corp Bhd, which in turn is a unit of UMW. “The acquisition of this new jack-up drilling rig (via the Offshore Driller 4 deal) is part of UMW Oil & Gas' plans to further develop its offshore drilling operations,” UMW Holdings said in a statement to Bursa Malaysia. (Source: The Star)

KUB in JV with Singapore firm on multi-billion ringgit Petronas Rapid Tank Project

KUB Malaysia Bhd has partnered with Singapore's Hiap Seng Engineering to undertake the multi-billion ringgit Petronas Rapid Tank Project in Pengerang, Johor. The company told Bursa Malaysia its unit KUB Builders Sdn Bhd and Hiap Seng had inked a memorandum of understanding to submit a proposal to Petroliam Nasional for the project. “KUB Builders and Hiap Seng Engineering shall combine their resources and expertise to explore, apply and/or propose to the relevant authorities and to undertake the Petronas Rapid Tank Project,” it said. (Source: The Star)

JobStreet plans 75pc dividend policy

JobStreet Corp Bhd, Southeast Asia’s largest online employment company, plans to distribute 75 per cent of its net profit annually beginning financial year ending December 31 2013. Last year, owners of the jobseeker database paid out 35 per cent of its net earnings to shareholders. For the first quarter ended March 31 2013, Job-Street’s net profit surged 48 per cent to RM15.35 million from RM10.36 million a year ago while revenue rose to RM43.17 million from RM37.86 million previously. (Source: Business Times)

RM705mil vessel job for Perdana Petroleum

Dayang Enterprise Holdings Bhd, which recently secured a RM2bil contract from Sabah and Sarawak Shell, has awarded a RM705mil job to Perdana Petroleum Bhd to suppy several barges for its operations. Perdana Petroleum told Bursa Malaysia that it had accepted the letter of award from Dayang for the five-year charter of five work barges and one workboat. The contract starts in July. “The vessels charter relates to the contract for the provision of hook-up, commissioning and topside maintenance services awarded by Sarawak Shell Bhd/Sabah Shell Petroleum Co Ltd to Dayang Enterprise. The estimated contract value for the charter is RM705mil,” it said. (Source: The Star)

MISC turns around in Q1

MISC Bhd posted a net profit of RM300.4mil for the first quarter ended March 31 against a net loss of RM469.8mil a year ago due to lower operating costs. Group revenue for the quarter under review also saw an increase of 7.7% to RM2.4bil compared with RM2.2bil in the previous corresponding period. “The increase in group revenue was mainly due to higher revenue in heavy engineering from a higher number of projects, combined with the lease commencement of two floating storage units of a liquefied natural gas (LNG) regasification project in August 2012. (Source: The Star)

IHH first-quarter profit improves on higher revenue

IHH Healthcare Bhd recorded a higher net profit of RM127.27mil for the first quarter ended March 31, 2013, up 3.7% from RM122.71 in the same quarter last year. The healthcare services provider said in its Bursa Malaysia announcement yesterday that revenue was higher almost 30% year-on-year to RM1.62bil in the first quarter. “We are quite happy with our financial performance,” said its executive director of corporate services Ahmad Shahizam Mohd Shariff over a conference call with journalists yesterday.. (Source: The Star)

ECM Libra aims to exit PN17 soon

ECM Libra Financial Group Bhd plans to exit its Practice Note 17 (PN17) status by year-end on completion of its self-regularisation exercise. This will involve the beefing up of its existing businesses and the proposed setting up of a corporate finance advisory unit to ensure sustainable profitability. The group slipped into PN17 territory when it divested its core revenue contributor, ECM Investment Bank Bhd, to K&N Kenanga Holdings Bhd last December. (Source: The Star)

Developers set sights on Tebrau’s land

Several large property developers are eyeing prime parcels of land in Johor that are owned by Tebrau Teguh Bhd, say industry executives. The developers are in the preliminary stage of discussions with the company and the deals will take a few more months to be concluded, they add. (Source: The Edge)

KNM bullish on prospects

KNM Group Bhd is set for stronger prospects ahead, led by its investment in German-based Borsig AG and the United Kingdom’s Petersborough Green Energy Project, said its managing director Lee Swee Eng. Borsig, a cash cow for KNM, is a leader in process heat exchangers in Europe.KNM bought Borsig in 2008 for RM1.67 billion. UOB Bank Ltd values Borsig at between RM1.8 billion and RM1.9 billion currently. Borsig has been one of the main contributors to KNM’s earnings with an estimated net profit of RM112 million to RM142 million per year over a period of three years. (Source: Business Times)

Foreign News

Most U.S. Stocks Fall as Investors Weigh Data, Stimulus

Most U.S. stocks fell after paring early losses for a second day, as investors weighed prospects of economic growth with concern the Federal Reserve will reduce stimulus efforts. The Standard & Poor’s 500 Index (SPX) fell 0.1 percent to 1,649.60 at 4 p.m. in New York, after sinking as much as 0.8 percent earlier. The Dow Jones Industrial Average added 8.60 points, or 0.1 percent, to 15,303.10, recovering from a 95-point loss. About 10 stocks fell for every 9 that rose and 5.2 billion shares changed hands on U.S. exchanges, 16 percent below the three-month average. U.S. markets will be closed May 27 for the Memorial Day holiday.

European Stocks Post Weekly Drop Amid Fed Stimulus Signs

European Stocks posted their first weekly loss in more than a month as investors debated when the Federal Reserve will scale back momentary stimulus and Chinese manufacturing unexpectedly shrank. The Stoxx Europe 600 Index fell 1.7 percent to 303.35 this week past, including the worst drop in 10 months on May 23 after Fed Chairman Ben S. Bernanke said the central bank will consider paring its stimulus measures if the U.S. economy improves. The gauge had climbed to the highest level since June 2008 before the selloff, bolstered by monetary policy and better-than-estimated U.S. economic data.

China Leaders Signal Slowdown Tolerance as Policy Shift Planned

China’s President Xi Jinping signaled a tolerance for slower expansion to avoid environmental degradation as policy makers outlined plans for the private sector to take a bigger role in boosting growth. The country won’t sacrifice the environment to ensure short-term growth, Xi said during a study session of the Communist Party’s top leadership on May 24. His comments follow a statement issued on the same day that the State Council, which is chaired by Premier Li Keqiang, approved measures including tax reform to revamp the economy. Xi and Li, who took over respectively as president and premier in March, are laying the groundwork to cut the government’s role in the economy, open state-dominated industries to private investment and revamp the household registration system that’s hampering urbanization. Some changes are already being trialed while others will be decided at a meeting of the Communist Party’s leadership later this year.

Japan Stock Futures Drop as Yen Gains on China Growth Concern

Japanese, Australian and Hong Kong stock futures fell, indicating the MSCI Asia Pacific Index may extend its biggest weekly drop since July, as China’s President Xi Jinping signaled a tolerance for slower economic growth. The yen rose. Futures on Japan’s Nikkei 225 Stock Average lost 2.1 percent through the close in Chicago on May 24. Hong Kong’s Hang Seng Index futures retreated 0.7 percent and contracts on Australia’s S&P/ASX 200 Index declined 0.1 percent. The yen climbed 0.1 percent against the dollar. Standard & Poor’s 500 Index futures rose 0.1 percent. Markets in the U.S. and the U.K. are closed for holidays.

Kuroda Backs Japan Bulls After Share Slump Jolts Abenomics

Bank of Japan Governor Haruhiko Kuroda backed “bullish” views on asset markets and said the nation could cope with rising interest rates after a one-day slump in the stock market last week and volatility in bonds. There are no signs investors have “excessively bullish expectations,” the 68-year-old Kuroda said in Tokyo yesterday. He cited an April BOJ report indicating rates could rise by between one and three percentage points in an improving economy without causing instability. Ten-year government yields touched 1 percent last week, more than triple a record low on April 5.

(Source: Bloomberg)