Market Thoughts

US stocks ended the month of May with big losses, with the Dow and S&P 500 posting their worst one-day drops since mid-April, but major averages still logged monthly gains. Similarly, European shares closed lower after disappointing German and Italian data was released. In addition, markets continued to see selling on fears that the U.S. Federal Reserve could begin to taper its asset-purchasing program. On the local market, the FBM KLCI closed 5.7 points lower at 1769.22 points after wiping out earlier gains. Following the bearish sentiment, we expect the local market to be negative today. For the downside, the support level is seen at 1750 points.

Stocks in action are: a) Developers having high-end property projects in Iskandar Malaysia as the state government intends to impose new property tax rate on foreign buyers; b) Scope Industries as the shareholders of Matang Holdings rejected for injection of Matang’s business into Scope; c) Malaysia Steel Works after the group received a letter from Ministry of Transport to confirm its agreement to the rail project in Iskandar, Johor; d) IJM following the group disposed its Kemanan Port with disposal gain of RM123m; and e) Naim Holdings as the media reported that the Sarawak based company is expected to win the Pan-Borneo Highway that cost more than RM10b.

Malaysia News & Highlights

Johor to impose new property tax rate on foreign ownership

The Johor government will impose a new tax rate on about 130,000 foreign ownership of property in the state, which varies from the rate imposed on local ownership. Menteri Besar Datuk Seri Mohamed Khaled Nordin said the move was to boost earnings for the local authorities while enhancing services to residents. "The time has come for the state government to look at foreign ownership in the state because our people in other countries are also imposed a different tax rate. "So, we are initially starting with the property tax rate," he told reporters after visiting the Permas zone here today. (Source: Bernama)

BAT announces 3% hike in cigarettes prices effective June 3

British American Tobacco Malaysia (BAT) has announced a three percent increase in the prices of all its cigarette brands effective June 3, 2013. Commenting on the price increase, Datuk Willian Toh, Managing Director, BAT said, “As with all other companies, BAT Malaysia is faced with inflationary pressures, labour and input costs, resulting in rising operating costs over time. (Source: Bernama)

DRB-Hicom to sign CTRM deal in June

DRB-Hicom Bhd expects to sign in June, the main agreement with the Finance Ministry (MOF) for its acquisition of the latter's 96.87% stake in Composites Technology Research Malaysia Sdn Bhd (CTRM), group managing director Datuk Seri Mohd Khamil Jamil said. “We have signed a preliminary agreement with the ministry and are now fine tuning its terms and conditions,” he told reporters after Pos Laju's “Send and Win” prize presentation ceremony and launch of the Kota Damansara PosLaju Centre here yesterday. (Source: The Star)

CIMB gets SC nod on dual Thai listing

CIMB Group Holdings Bhd’s proposed dual listing of ordinary shares of RM1 each in CIMB on the Thailand Stock Exchange (SET) has been approved by the Securities Commission in a letter dated May 30 2013. The group had initially proposed a dual listing in Thailand in 2009 and had subsequently received approval from the SC to extend the period for the completion of the listing. (Source: Business Times)

klia2 delay not our fault, say key contractors

Three main contractors for the klia2 project said yesterday they are not to be blamed for the delay in the completion of the new low-cost airline terminal. Checks by Business Times showed that KUB Malaysia Bhd, WCT Bhd and UEM Group Bhd are the three contractors yet to complete their portions of the construction work. “Do not worry about our performance. The job is 80 per cent completed and on track,” KUB group managing director Datuk Wan Mohd Nor Wan Ahmad told Business Times. He denied that KUB is causing the delay but declined to provide a completion date. (Source: Business Times)

Netizens laud Matang's rejection of buyout bid

Shareholders reject reverse takeover of public-listed Scope Industries at the EGM. Netizens have given their thumbs up to reports that Matang Holdings Bhd's shareholders had rejected a proposal at a special shareholders meeting to the takeover of public-listed Scope Industries Bhd via a reverse takeover. Comments flooded social networking sites like Facebook and Twitter soon after the outcome of Matang's extraordinary general meeting (EGM) was made known yesterday. (Source: Business Times)

IHH gets clinic licence in China

IHH Healthcare Bhd's unit Parkway (Shanghai) Hospital Management Ltd has received a licence from the China authorities to establish a wholly owned enterprise reinvestment clinic named Suzhou Industrial Park Yuan Hui Clinic Co Ltd. The licence was valid from May 29 till May 28, 2033 and the clinic had a registered capital of 3 million yuan (RM1.5mil), it told Bursa Malaysia. (Source: The Star)

PJD to buy land in PJ for RM124.2m

PJ Development Holdings Bhd (PJD) has entered into a sale and purchase agreement with DKSH Central Services Malaysia Sdn Bhd to purchase a piece of leasehold land in Petaling Jaya for RM124.2 million cash. This will allow the PJD Group to increase its existing property development landbank and make a foray into the Petaling Jaya district. (Source: Business Times)

Tropicana mulls moving Batu Tiga KTM station

Tropicana Corp Bhd is considering relocating the Batu Tiga KTM commuter station to its RM6.3 billion flagship project in Subang Jaya, Selangor. Its group chief executive officer Datuk Yau Kok Seng said the plan is to enhance its development, Tropicana Metropark. Tropicana (formerly Dijaya Corp Bhd) is developing Tropicana Metropark over 35.6ha of freehold land at the Subang Hi-Tech Industrial Park. (Source: Business Times)

PNB finalizing timeline for 100-storey tower

Permodalan Nasional Bhd (PNB) has obtained a conditional development order from Dewan Bandaraya Kuala Lumpur (DBKL) for the 100-storey Warisan Merdeka tower and “is in the process of fulfilling its requirements”, says a source who has knowledge of the matter. (Source: The Edge)

Eversendai plans maiden Sri Lanka foray

Structural steel turnkey and power plant contractor Eversendai Corp Bhd is set to make its maiden foray into Sri Lanka. Eversendai, set up more than 30 years ago, has made Malaysia proud by playing a role in the construction of some of the world’s largest iconic buildings. Among its notable undertakings are the Petronas Twin Towers, Burj Khalifa, Emirates Tower, Burj Al Arab Hotel, Rose Tower, Ski Dome, Dubai Festival City, Khalifa Olympic Stadium and Kingdom Trade Centre. (Source: Business Times)

Foreign News

U.S. Stocks Post First Two-Week Decline Since November

U.S. stocks fell for the week, sending the Standard & Poor’s 500 Index to its first back-to-back decline since November, as investors speculated the Federal Reserve will consider scaling back stimulus efforts. The S&P 500 slipped 1.1 percent to 1,630.74 over the four sessions in the holiday-shortened week, trimming its 2013 gain to 14 percent. The index finished May up 2.1 percent for a seventh straight monthly rally, the longest stretch since September 2009. The Dow Jones Industrial Average lost 187.53 points, or 1.2 percent, to 15,115.57 for the week after hitting an all-time high of 15,409.39 on May 28.

European Stocks Drop, Trimming 12th Straight Monthly Gain

European stocks fell to a four-week low, paring a 12th consecutive month of gains for the Stoxx Europe 600 Index, as better-than-forecast data on U.S. business activity and consumer confidence bolstered speculation the Federal Reserve will pare its bond purchases. The Stoxx 600 declined 0.9 percent to 300.88 at the close of trading, the lowest since May 2. The benchmark gauge posted a 0.8 percent drop this week as investors weighed the likelihood of the Fed taking steps to reduce monetary stimulus. It has still advanced 1.4 percent in May, completing the longest streak of monthly gains since July 1997.

Emerging Stocks Post Biggest Monthly Drop in One Year

Emerging stocks capped the biggest monthly slump in a year as Brazilian equities tumbled after policy makers raised the benchmark interest-rate more than forecast. Indian shares plunged on bets inflation may rise. The MSCI Emerging Markets Index lost 0.7 percent to 1,008.88, extending its monthly drop to 2.9 percent. Brazil’s central bank raised the benchmark interest-rate by a half-percentage point to 8 percent, surprising 38 of 57 economists surveyed by Bloomberg. India’s economy expanded less than 5 percent for a second straight quarter. The S&P GSCI gauge of commodities slumped a third day.

Bonds Tumble Worldwide as Stocks Reach Highs on Growth Optimism

Global bond markets posted their biggest monthly losses in nine years in May as the U.S. dollar rallied and stocks reached record highs amid speculation a strengthening U.S. economy will allow the Federal Reserve to reduce its monetary stimulus. The over $40 trillion of bonds in the Bank of America Merrill Lynch Global Broad Market Index fell 1.5 percent on average, led by a 2 percent drop in Treasuries. The MSCI World Index lost 0.1 percent while the Standard & Poor’s 500 reached a record high. The U.S. Dollar Index soared 3.3 percent as the greenback gained versus all its major peers. The S&P GSCI Total Return Index of metals, fuels and agricultural products dropped 1.5 percent a month after falling the most since May 2012.

China Manufacturing Tops Estimates in Sign Growth Is Stabilizing

China’s manufacturing unexpectedly accelerated in May, indicating that a slowdown in economic growth in the first quarter may be stabilizing. The Purchasing Managers’ Index rose to 50.8 from 50.6 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing yesterday. That was higher than all estimates in a Bloomberg News survey of 30 analysts and compares with the median projection of 50, which marks the dividing line between expansion and contraction.

Brent Crude Drops Below $100 a Barrel First Time in Four Weeks

Brent crude dropped below $100 a barrel in London for the first time in four weeks amid speculation that stockpiles will climb after OPEC kept its production target unchanged. Brent, used to price more than half of the world’s oil, decreased as much as 0.6 percent as the Organization of Petroleum Exporting Countries maintained its objective of 30 million barrels a day at a meeting May 31 in Vienna. U.S. crude supplies increased 3 million barrels to 397.6 million in the week ended May 24, the most since 1931, a government report showed May 30.

(Source: Bloomberg)