Market Thoughts

US stocks closed narrowly mixed in choppy trading Monday, as investors seemed to take a breather following last week's sharp rally and amid worries over when the Fed might scale back its stimulus program. Meanwhile, European shares closed slightly lower, dragged down by miners following warnings from analysts that Chinese growth would slow further after weaker than expected economic data. On the local exchange, the FBM KLCI surged 12.21 points to 1787.80 points. Following the mild performance in US markets, we expect the FBM KLCI to remain range bound below the resistance of 1800 points.

Stocks in action are: Yinson as the group is acquiring the entire stake in Norway-listed oil & gas support service provider, Fred Olsen Production ASA for RM551m; Protasco after the group won a tender worth RM50m for the construction and completion of a proposed infrastructure works in Desaru; Tanjung Offshore as the media reported that the group is in the final stages of acquiring a controlling stake in a foreign oil & gas company that owns and manages several offshore oil rigs for a price of close to RM1b; and Plantation counters following the positive MPOB data indicating inventory fell and production stalled which render a relief support to CPO price.

Malaysia News & Highlights

AiAsia X banking on retail market

AIRASIA X Bhd, the long-haul arm of AirAsia Group, is banking on retail market to help make its initial public offer (IPO) a success. Founder Tan Sri Tony Fernandes, who helped turn the once-ailing AirAsia Bhd into one of the world's biggest low-cost airlines, is keen to raise as much as RM860 million from the listing exercise. Some 150 million shares, or 19 per cent, on the table are being offered to the Malaysian public at RM1.45 each, which will value the company at more than RM2.2 billion. The large number of shares offered to the public was given the thumbs up by Minority Shareholders Watchdog Group. "As regards to AirAsia X's IPO, we are positive on the higher proportion of share allocation to retail investors at around 10 per cent, compared with the two per cent offered by most other companies," MSWG chief executive officer Rita Benoy Bushon said in its newsletter last month. "This translates to around 252 million shares of its enlarged share capital." AirAsia X is enroute to be listed on the Main Board of Bursa Malaysia Securities on July 10. (Source: Business Times)

Yinson joins FPSO big league

Yinson Holdings Bhd is poised to become a major player in the provision of floating, production, storage and offloading(FPSO) services in the region with its proposed acquisition of a Norwegian company. Yinson announced yesterday that it had proposed a conditional takeover of Oslo-listed Fred Olsen Production ASA(FOP) in a transaction valued at 995.7 million Norwegian krones(NOK), or RM551.3 million. FOP and its subsidiaries own and operate a fleet of three FPSO vessels, one of which is owned on a 50:50 joint venture, in the international oil and gas markets. The group, with offices in Singapore, Nigeria, Gabon and Texas, also operates a mobile offshore production unit(MOPU) for an international oil and gas company. (Source: The Edge)

ETCM May sales hit all-time high of 4,540 units

Edaran Tan Chong Motor’s (ETCM) sales of Nissan vehicles hit an all-time monthly high of 4,540 units in May, a 60.7% increase from the previous year. In a statement, Nissan said its May sales for the Asia and Oceania region, totaling 22,620 units, was down 18.2% from the previous year. Almera (2,270 units) and Grand Livina (790 units) were the main contributors to May sales for ECTM. “Sales in the region has been impacted by government measures,” said Kumura, Nissan regional vice-president for Asia and Oceania. (Source: Bernama)

Maxis streamlines its business operations

MAXIS Bhd has streamlined its business operations through a more refined organisational structure which is designed to strengthen its core business areas for future growth. In a statement yesterday, the telecommunications company said the new structure will streamline its operations, improve processes and make Maxis more agile and cohesive in delivering its integrated propositions across its wide range of products and services, as well as support the company's growth strategies. The new structure will consist of a team led by joint chief operating officers Nasution Mohamed and Suren J. Amarasekera, who will both provide overall leadership to the company and are responsible for its performance. (Source: Business Times)

CIMB gets nod for Thai dual listing

Malaysia's second largest lender CIMB Group boldings Bhd has received Bursa Malaysia Securities Bhd's approval for dual listing on the Stock Exchange of Thailand (SET). In a statement yesterday, CIMB said the approval by Bursa Securities is subject to, among others, approvals from SET and the Securities and Exchange Commission of Thailand. "CIMB and its adviser must fully comply with the relevant provisions under the Main Market listing requirements of Bursa Securities pertaining to the implementation of the proposed SET listing. "CIMB and its adviser must inform Bursa Securities upon the completion of the proposed SET listing and furnish Bursa Securities with written confirmation of its compliance with the terms and conditions of Bursa Securities' approval once the SET listing is completed. (Source: Business Times)

Proton launches Satria Neo R3, 3S centre in Brunei

Proton Holdings Bhd launched the Satria Neo R3 in Brunei last week, marking the car's first international debut. Proton believes there is a demand in Brunei for affordable sports hatchbacks that is not being fulfilled, said its deputy chief executive officer Datuk Lukman Ibrahim. "Some of our customers there are waiting for the revival of the iconic Proton Satria Neo so that they can purchase a sports hatchback that is not only competitively priced but proven in quality," he said. The launch was held in conjunction with the opening of Proton's first 3S (sales, service and spare parts) centre in Bandar Seri Begawan. (Source: Business Times)

Protasco unit wins RM50.4m Johor project

Protasco Bhd’s unit, HCM Engineering Sdn Bhd, has been awarded a RM50.4 million contract to construct the proposed infrastructure package in Desaru Coast Course, Johor. The contract for the proposed infrastructure package includes road and drainage works for a pe-riod of 12 months commencing June 17. In a statement, Protasco Bhd, a road construction and maintenance specialist, said the project is expected to contribute positively towards the group’s results for the financial year ending December 31, 2013. (Source: Business Times)

IGB subsidiary partners Tower Ray

Property firm IGB Corp Bhd’s wholly-owned subsidiary Verokey Sdn Bhd has partnered Tower Ray Limited to explore opportunities for property investment in the United Kingdom and such other businesses. In a statement yesterday, IGB said it has established anagreement to form a joint venture through an equity participation of 50:50 in Black Pearl Limited. “The business (if realised) arising from the joint venture is expected to contribute positively to the future profits of the IGB Group,” the company told Bursa Malaysia. (Source: Business Times)

Inari receives RM9.1m grant from Mida.

Inari Bhd has received a government grant of RM9.1 million from the Malaysian Investment Development Authority (Mida) for capital expenditure and purchase of machinery. In a statement to Bursa Malaysia yesterday, Inari said its wholly-owned subdiary Inari Technology Sdn Bhd has been given grants under the Local Investment Strategic Fund pertaining to Inari Technology’s activity in “Fine Pitch Flip Chip Assembly”. (Source: Business Times)

Tanjung said to be buying controlling stake in foreign firm in RM1bil deal

Tanjung Offshore Bhd is in the final stages of acquiring a controlling stake in a foreign oil and gas (O&G) company that owns and manages several offshore oil rigs for a price tag of close to RM1bil. According to a source, if successful, the new asset would become would become Tanjong Offshore's main business. Tanjung Offshore was formerly an offshore supply vessel (OSV) operator and owner, before selling that business to Ekuiti Nasional Bhd (Ekuinas). Sources said Tanjung Offshore would acquire the stake via the issuance of new shares and bonds as well as cash. Investment bankers and advisers are in the process of being appointed. “The investment banks have conducted a preliminary study with positive feedback on the bonds,” the source said. (Source: The Star)

Petronas gets nod to develop Vietnamese fields with EPS

Petronas has received the green light from the Vietnamese government to proceed with the development of shallow-water fields in blocks 102 and 106 using the early production system (EPS), according to oil and gas publication Upstream. The publication said bid documents were issued recently for the two principal facilities, a mobile offshore production unit (MOPU) and a floating storage and offloading vessel (FSO), for the long-awaited Ham Rong field development, which has been going for some years. Quoting unnamed sources, it said the contracts being offered were short term, with a fixed period of three years plus two optional years. It speculated that bidders for the project would include those that had existing MOPUs or FSOs to offer, including joint bidders Perisai Petroleum, SapuraKencana, Petrofac, and PetroVietnam Technical Services Corp (PTSC) with Vietsovpetro. (Source: The Star)

Kenanga completes merger with ING Funds

K&N Kenanga Holdings Bhd’s subsidiary, Kenanga Investors Bhd, announced yesterday that ING Funds Bhd’s entire business had been successfully transferred to Kenanga Investors. The transfer of ING Funds’ entire business, which included all of its assets and liabilites, marked a milestone for the integration exercise, as both institutions now operated as one entity, said Kenanga in a statement.Kenanga would now have over RM5bil in AUM as well as a larger retail customer base of over 30,000 investors, he said. (Source: The Star)

Foreign News

U.S. Stocks Fall Amid S&P Outlook for America, China Data

U.S. stocks declined, following the biggest two-day gain for the Standard & Poor’s 500 Index since January, as investors weighed S&P’s move to boost its outlook for America and Chinese data missed estimates. The S&P 500 fell less than 0.1 percent to 1,642.81 at 4 p.m. in New York, after gaining as much as 0.3 percent earlier. The Dow Jones Industrial Average slipped 9.53 points, or 0.1 percent, to 15,238.59. More than 5.5 billion shares traded hands on U.S. exchanges, or 12 percent below the three-month average.

U.S. Outlook Revised to Stable by S&P as Fiscal Risks Diminish

The U.S.’s AA+ credit rating outlook was increased to stable from negative by Standard & Poor’s, based on receding fiscal risks, less than two years after the company stripped the world’s largest economy of its top ranking. The U.S. has a less than one-in-three likelihood of a downgrade in the “near term” with the revision, S&P said today in a statement. The New York-based company said it sees “tentative improvements,” such as the deal politicians reached to resolve what became known as the fiscal cliff and through spending cuts in the Budget Control Act of 2011.

European Stocks Are Little Changed; Balfour Beatty Jumps

European stocks closed little changed after fluctuating between gains and losses more than a dozen times as Japan’s economy expanded more than initially estimated while growth in Chinese exports slumped. The Stoxx Europe 600 Index slipped less than 0.1 percent to 295.22 at the close of trading. The benchmark gauge earlier climbed as much as 0.3 percent after Standard & Poor’s upgraded its outlook on the U.S.’s AA+ credit rating to stable from negative, citing receding fiscal risks.

U.K. RICS House-Price Index Reaches 3-Year High on Buyer Revival

A U.K. house-price gauge rose in May to a three-year high as government credit-easing programs revived buyer interest across the country, the Royal Institution of Chartered Surveyors said. A price index increased to 5 from 1 in April, London-based RICS said in an e-mailed report today, citing a monthly poll of property surveyors. A positive number means more respondents saw values increase rather than decline. Measures of new buyer enquiries and newly agreed sales reached levels last seen in 2009.

Italian Economy Contracts as French Confidence Stalls: Economy

Italy’s economy shrank more than initially reported in the first quarter and French industrial confidence stalled in May, as the euro area struggled to emerge from a record-long recession. Italian gross domestic product fell 0.6 percent from the previous three months, the Rome-based National Statistics Institute, said today, after a May 15 estimate of a 0.5 percent drop. A French index of sentiment among factory managers was unchanged at 94, while an index of service companies fell to 88 from 89, according to the Bank of France.

China Car Sales Rise More Slowly as Trade Data Seen Slowing

China’s passenger-vehicle sales rose at a slower pace in May as consumer confidence waned amid signs that momentum for economic growth is slowing. Wholesale deliveries of cars, multipurpose and sport utility vehicles increased 9 percent to 1.4 million units in May, according to the state-backed China Association of Automobile Manufacturers yesterday. That compares with growth of 13 percent in April and 13.3 percent in March.

(Source: Bloomberg)