Market Thoughts

US stocks recovered from their session lows but still finished in the red, with the Dow snapping its Tuesday winning streak, amid ongoing worries over the future of the Fed's bond-buying policy and ahead of Japanese Prime Minister Shinzo Abe's speech. Meanwhile, European markets closed higher, but off session highs on Tuesday, as worse-than-expected factory data for the euro zone dented investor sentiment. On the local market, the FBM KLCI surged 10.41 points to 1776.74 points. Given the mixed reaction in global markets, we expect the index to remain sideways below its resistance of 1800 points.

Stocks in the limelight are: a) SapuraKencana as the group bagged RM108m oil & gas service contract in Vietnam; b) Bina Puri following the media highlighted that the group and UEM JV consortium is seeking RM300m from MAHB for additional works at main terminal and satellite buildings; c) Alam Maritim, the group again secured RM72m contract to supply an anchor handling tug supply vessel to an oil & gas company; d) Axiata, media reported that the group is in talks with Idea Cellular for the acquisition of telco towers; and e) Developers having property projects in Iskandar Malaysia as the first Angry Bird Activity Park in South East Asia will be located at KOMTAR JBCC in downtown Johor Baru.

Malaysia News & Highlights

SapuraKencana unit bags US$35m job

SapuraKencana Petroleum Bhd’s wholly-owned unit TL Offshore Sdn Bhd has won a US$35 million (RM108 million) contract for the Diamond Development project, Blocks 1 and 2, offshore Vietnam. In a filing to Bursa Malaysia, the company said the contract is for the installation services for platform and pipeline in the Diamond field, located 18km North of Ruby field and 155km East of Vung Tau. (Source: The Star)

Alam Maritim wins RM72mil contract

Alam Maritim Resources Bhd has been awarded a contract valued up to RM71.54mil to supply a vessel. In its announcement to Bursa Malaysia, the company said its unit Alam Maritim (M) Sdn Bhd won the contract to provide a anchor handling tug supply vessel from an undisclosed party. The contract, expected to commence in the second half of this year, is for a five-year period with an extension option of an additional two years. (Source: The Star)

UEM, Bina Puri seek RM300m from MAHB

The UEM-Bina Puri joint venture (JV) is seeking as much as RM300 million from Malaysia Airports Holdings Bhd (MAHB) for additional works being done at the Kuala Lumpur International Airport 2 (klia2) project, a person with first-hand knowledge of the matter says. It is learnt that MAHB has requested the joint venture to expand the floor area at the airport’s main terminal and satellite buildings to cater to requirements from various government agencies. A source said extra floor space is also required at the three-storey main terminal building to cater to Malindo Air, Malaysia’s newest domestic low-cost carrier, which plans to move to klia2 when it opens next year. (Source: Business Times)

IRDK Land plans RM1b projects this year

IRDK Land Group plans to launch RM1 billion worth of property projects in Puchong, Ampang and Shah Alam, Selangor, this year. Its managing director Tan Sri Dr M. Ramasamy said among them is a mixed development project at a 2.4ha land located next to SetiaWalk in Puchong. “This project will take two-and-a-half years to complete. We will build condominiums and super link houses," he said at the groundbreaking of the Puchong project near here yesterday. (Source: Business Times)

Sunway Velocity to contribute RM1bil upon completion

Sunway Bhd will see the book value of its investment properties balloon by about RM1bil after the completion of the shopping mall, hotel and office tower at its integrated mixed development Sunway Velocity along Jalan Cheras. Central region property development division executive director Ong Ghee Bin said the investment cost for phase two, which included a 1.4 million sq ft shopping mall, hotel, office tower and corporate office, was RM1.5bil. (Source: The Star)

Hytex is PN17 company now

Hytex Integrated Bhd is now a Practice Note 17 (PN17) company. The company said in a filing with Bursa Malaysia that status was triggered as a result of the company’s latest unaudited accounts for the financial year ended 31 March, where the shareholders’ equity on a consolidated basis is 50% or less of the issued and paid-up share capital (excluding treasury shares). (Source: The Star)

Angry Birds to attack Johor Baru

Angry Birds are coming to town with the opening of the Angry Birds Activity Park here in May next year. The first Angry Birds Activity Park to open in South-East Asia, the 26,000 sq ft indoor theme park will be located at Komtar JBCC in downtown Johor Baru. “Our goal is to delight the fans, both adults and children and create an exciting experience for the whole family,’’ said the Finland-based Rovio Entertainment Ltd chief operations officer Harri Koponen. He said this after the signing ceremony between Johor Corp’s subsidiary Damansara Assets Sdn Bhd presented by its executive director Yusaini Sidek yesterday. (Source: The Star)

Axiata in talks with Idea

India's Aditya Birla Group-owned Idea Cellular, is in discussions with its second-largest shareholder, Axiata of Malaysia, to sell its towers to it, but the deal could get stuck over valuation of assets. Two persons familiar with the development said Idea was looking to divest its 9,400 towers to raise funds for capital expenditure, licence renewals, as well as purchase of airwaves, The Economic Times reported. In the past, Axiata had broached the option of a stock swap deal but Idea prefers to cash out, even at a slightly lower valuation, said an individual in the know of the talks. According to the report, a team from Axiata is scheduled to arrive in India in the next few weeks, to take negotiations further. While the two companies have been in discussions for the past few months, it is possible that the talks could convert into a concrete deal agreement during this visit. (Source: The Star)

Khazanah trims TNB stake via private placement

Khazanah Nasional Bhd has trimmed its stake in Tenaga Nasional Bhd (TNB) via a RM412mil private placement of 50 million existing shares of the utility giant. Joint placement agents CIMB Bank and Deutsche Bank said in a statement that the sovereign fund’s sale represented about 0.9% of TNB’s paid-up share capital. The placement agents said the placement price at RM8.24 per share represents a 1.6% discount to the closing market price on Monday. “There was strong demand from both domestic and foreign institutional investors for the placement. With the placement, Khazanah’s stake in TNB has been marginally reduced to 32.6% from 33.5%,” both banks said. (Source: The Star)

Che Khalib tipped to head MMC

Former Tenaga Nasional Bhd (TNB) chief Datuk Seri Che Khalib Mohamad Noh (pic) is tipped to head MMC Corp Bhd, taking over from group managing director Datuk Hasni Harun whose contract expires end-June. An announcement on this could be made as early as next month. Sources said the appointment was likely, owing to the expertise of Che Khalib in the area of utilities, specifically power and energy. “He definitely has the expertise, having headed TNB for eight years,” noted a source. (Source: The Star)

Foreign News

U.S. Stocks Decline With Treasuries While Yen Weakens

U.S. stocks and Treasuries retreated as economists said the Federal Reserve may scale back its stimulus efforts as early as September amid an improving economy. The yen fell against most of its counterparts and Turkish shares rebounded from the worst drop in a decade. The Standard & Poor’s 500 Index lost 0.6 percent to 1,631.38 as of 4 p.m. in New York. The Dollar Index climbed 0.1 percent, while the yen slid against the U.S. currency for the first time in five days. Ten-year Treasury yields rose two basis points to 2.14 percent, trading near 14-month highs. Silver, corn and gold retreated at least 1 percent, while gains in industrial metals sent the S&P GSCI Index of commodities up 0.5 percent. Turkey’s benchmark equity gauge recovered about half of yesterday’s 10.5 percent slump.

Trade Deficit in U.S. Widened From Three-Year Low

The trade deficit in the U.S. widened in April from a more than three year low, reflecting a rebound in imports of consumer goods and business equipment that eases concern about the degree of slowing in economic growth. The gap grew by 8.5 percent to $40.3 billion from a $37.1 billion in March shortfall that was smaller than previously estimated, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg survey of 68 economists called for the deficit to grow to $41.1 billion. Imports climbed by 2.4 percent, twice the gain in exports.

European Stocks Climb as Fed’s Lockhart Backs Stimulus

European stocks rose, rebounding from a one-month low, as Federal Reserve Bank of Atlanta President Dennis Lockhart said the central bank is committed to its stimulus program. The Stoxx Europe 600 Index climbed 0.3 percent to 299.59 at the close. The benchmark gauge fell to the lowest level since May 2 yesterday amid speculation the Fed will scale back bond buying. The measure rose 1.4 percent in May for a 12th straight monthly advance and has rallied 7.1 percent this year.

U.K. Recovery Signs Mount From Builders to Retailers: Economy

U.K. construction unexpectedly returned to growth last month and retail sales increased, adding to indications of a tentative economic recovery. An index of building activity rose to 50.8 from 49.4 in April, Markit and the Chartered Institute of Purchasing and Supply said today in London. This is the first reading above 50, which divides expansion from contraction, since October. A separate report from the British Retail Consortium showed like-for-like retail sales increased an annual 1.8 percent in May.

China’s Stocks Fall for 4th Day, Led by Appliance Shares

China’s stocks fell the most in six weeks on speculation demand for consumer appliances will slow and as small-company shares extended a slump after valuations jumped to a two-year high. The Shanghai Composite Index fell 1.2 percent to 2,272.42 at the close. It dropped for a fourth day, the longest losing streak in two months. The CSI 300 Index slid 1.4 percent to 2,565.67, as all 10 industry groups lost at least 1 percent. The ChiNext fell 2.8 percent, paring this year’s gain to 43 percent. The Hang Seng China Enterprises index was little changed.

WTI Crude Advances as U.S. Stockpiles Decline by Most This Year

West Texas Intermediate crude rose for the second time in three days as an industry report showed U.S. inventories dropped the most this year. Futures gained as much as 0.7 percent in New York after the American Petroleum Institute said crude stockpiles shrank 7.8 million barrels last week, the most since December. A government report today is forecast to show supplies declined by 800,000 barrels, according to a Bloomberg News survey. The U.S. will extend waivers for nine nations that import Iranian oil from sanctions aimed at thwarting the Tehran government’s nuclear program, an official said.

(Source: Bloomberg)