Market Thoughts

US stocks added to their gains in the final minutes of trading to close near session highs Monday, with the Nasdaq reversing its losses and all key S&P sectors in positive territory. Meanwhile, European shares closed near session lows on profit-taking despite better-than-expected euro zone manufacturing data. On the local exchange, the FBM KLCI fell 2.89 points to 1766.33 points. Following the mixed reaction in global markets, we expect the index to remain sideways with a negative bias as Japan's Nikkei might perform lower today following its firm yen currency. For the downside, the FBM KLCI's support is seen at 1750 points.

Stocks in trading interest are: Freight management as the group joint venture with Scomi Energy services Bhd to acquire, own and operate marine vessels for the oil & gas industry; DRB Hicom, the group plans to redevelop Proton’s Shah Alam plant into an integrated development with estimated GDV of RM4b; Yinson, the group proposed to issue and place out new shares to Kencana Capital which is linked to Datuk Mokhzani.

Malaysia News & Highlights

TH Heavy Engineering bids for RM1.5b contract

TH Heavy Engineering Bhd's (THHE) international oil company partner is bidding for a risk service contract (RSC) valued at US$500mil (RM1.55bil), and the results of the bidding process should be made known sometime in July, said chairman Datuk Azizan Abd Rahman. While declining to reveal the name of the partner, Rahman said that if it was successful in garnering the RSC, THHE's role would be in providing services, and not exploration works. The structure between the partner and THHE have yet to be finalised. (Source: The Star)

DRB-HICOM to redevelop Proton’s Shah Alam plant

DRB-HICOM Bhd plans to redevelop Proton’s manufacturing complex in Shah Alam into an integrated development that will generate around RM4 billion in gross development value (GDV). According to Previn Singhe, founder and chief executive officer of Zerin Properties, a GDV of RM4 billion is achievable, depending on the density and types of properties that DRBHICOM plans to build. He said a RM4 billion GDV would net DRB-HICOM a margin of 20 to 30 per cent, or between RM800 million and RM1.2 billion. (Source: Business Times)

UDA in talks to jointly redevelop BB Plaza

UDA Holdings is negotiating with several parties, including the Employees Provident Fund (EPF), Kumpulan Wang Persaraan (KWAP) and Permodalan Nasional Bhd (PNB), on the possibility of jointly redeveloping the Bukit Bintang Plaza (BB Plaza) here. “We have talked to EPF, KWAP and PNB, and they have shown their interest in redeveloping that prime piece of property,” said UDA Holdings chairman Datuk Nur Jazlan Mohamed. (Source: Business Times)

Malindo Air to start flights to India and Singapore after August

More than two months after starting its operations, Malindo Air is already talking about expansion to India and Singapore. After August, the hybrid airline will start operating flights to India and Singapore. It will fly to three destinations in India New Delhi, Trichy and Cochin. To support its expansion, it will add aircraft to its fleet and by year-end, its fleet will consist of 14 aircraft, four ATR72-600 propeller aircraft and 10 B737-900ER planes. (Source: The Star)

AmCorp unit, TNB sign energy deal

Amcorp Properties Bhd has signed renewable energy power purchase agreements worth some RM11mil per year with Tenaga Nasional Bhd (TNB) to supply renewable energy to the latter for 21 years. In a stock exchange filing, the company said it would supply 4.5 MW solar photovoltaic renewable energy via its subsidiary Gubahan Ceria Sdn Bhd and another 4.5 MW and 1.25 MW by Cemara Angsana Sdn Bhd through its plants in Gemas, Negeri Sembilan. It expected the agreement to contribute positively to its future earnings. (Source: The Star)

Govt-linked fund buys into Tropicana

A government-linked institutional investor has subscribed to 18.98 million shares in Tropicana Corp Bhd, formerly known as Dijaya Corp Bhd. A filing with Bursa Malaysia showed the shares were disposed to the investor at an undisclosed price. Stock market data showed the shares, which accounts for 2.15% of the company's paid-up, were crossed at RM1.78 each. Last Wednesday, the company set the share price of the private placement at RM1.78 per share. This was a 9.88% discount to the five-day volume weighted average market price of Tropicana shares up to May 28, which stood at RM1.97. (Source: The Star)

IRM Group, Pan Malaysian Industries lapse into PN17 status

Bursa Malaysia Securities Bhd announced that IRM Group Bhd and Pan Malaysian Industries Bhd had triggered the criteria pursuant to Practice Note No.17 (PN17) of the Main Market Listing Requirements. In a statement, it said IRM had announced on May 31 that it is considered as a PN17 company pursuant to Paragraph 2.1(e) of PN17. Meanwhile, Pan Malaysian Industries said on the same date that it is considered as a PN17 Company pursuant to Paragraph 2.1(a) of PN17. (Source: The Star)

Khazanah to sell 50m TNB shares

Khazanah Nasional Bhd is selling 50 million shares worth up to RM418.5 million in Tenaga Nasional Bhd. The government-owned investment agency said the shares are being priced at between RM8.12 and RM8.37 each. The sale will reduce its stake in the power company to 32.56 per cent from 33.46 per cent, according to Thomson Reuters data. (Source: Business Times)

Foreign News

U.S. Stocks Gain With Commodities as Dollar Index Weakens

U.S. stocks and commodities rallied and the Dollar Index fell for the third time in four days amid speculation the Federal Reserve will maintain its pace of monetary stimulus until economic growth picks up. The Standard & Poor’s 500 Index increased 0.6 percent to 1,640.42 after the benchmark gauge posted its first consecutive weekly declines since November. The Dollar Index, a gauge of the currency against six major peers, slid 0.8 percent to 82.681. The 10-year Treasury yield was little changed at 2.13 percent after earlier climbing as high as 2.19 percent. Nickel and silver surged more than 2 percent and oil rallied 1.6 percent to pace commodity gains. Turkey’s stocks, bonds and currency slid amid anti-government protests.

Surprise Factory Downturn Holds Back U.S. Growth: Economy

Manufacturing in the U.S. unexpectedly shrank in May at the fastest pace in four years, showing slowdowns in business and government spending are holding back the world’s largest economy. The Institute for Supply Management’s factory index fell to 49, the lowest reading since June 2009, from the prior month’s 50.7, the Tempe, Arizona-based group’s report showed today. Fifty is the dividing line between growth and contraction. The median forecast of 81 economists surveyed by Bloomberg was 51.

European Stocks Drop for Second Day to One-Month Low

European stocks declined for a second day, extending a one-month low, amid speculation the Federal Reserve will scale back its debt-buying program. The Stoxx Europe 600 Index dropped 0.8 percent to 298.59 at the close of trading, the lowest level since May 2. The measure earlier climbed as much as 0.2 percent and fell as much as 1.2 percent. The gauge climbed 1.4 percent in May, completing its 12th consecutive month of gains. That was the longest winning streak since July 1997.

European Manufacturing Gauges Climb as Outlook Improves

Euro-area manufacturing output contracted less than initially estimated in May and a U.K. factory index surged, underscoring Mario Draghi’s view that the European economy is stabilizing. A gauge of manufacturing in the 17-nation euro area increased to 48.3 last month from 46.7 in April, London-based Markit Economics said today. That’s above an initial estimate of 47.8 on May 23. The gauge has been below 50, indicating contraction, since July 2011. In the U.K., a separate report by Markit and the Chartered Institute of Purchasing and Supply showed a factory index climbed to a 14-month high of 51.3 from a revised 50.2 in April.

Japan Stock Futures Drop, Signaling Topix Correction Will Deepen

Japanese stock futures fell, indicating a correction in the Topix index will deepen, as the yen strengthened against the dollar, weakening the outlook for exporters. Futures on Japan’s Nikkei 225 Stock Average expiring this month traded at 13,190 in Chicago, down from 13,240 at the close in Osaka, Japan. They were bid in the pre-market at 13,180 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index were little changed as investors awaited a decision at 2:30 p.m. in Sydney from the Reserve Bank of Australia, which is forecast to keep its benchmark interest rate on hold at 2.75 percent. New Zealand’s NZX 50 Index fell 0.2 percent.

(Source: Bloomberg)