Market Thoughts

US stocks closed out a volatile week on Wall Street broadly in the red Friday, led lower by banks, as investors digested a batch of mixed economic reports and remained on edge as concerns lingered over whether central banks will pare back their stimulus programs. Meanwhile, European shares closed narrowly higher, having pared gains when mixed economic reports from the U.S. did little to soothe concerns about an imminent end to the Federal Reserve's bond buying program.

On the local exchange, the FBM KLCI surged 19.32 points to 1762.19 points. Following the volatility and bearish performance in Wall Street, we expect the local market to be negative today. For the downside, immediate support is at 1740 points.

Stocks to watch are: a) Starhill REIT as it has proposed to raise up to RM800million through placement exercise and intends to increase its borrowing limits to 60% of its total assets; b)Ireka Corp following its major shareholders proposed to privatise the company via a selective capital reduction (SCR) and repayment exercise; c) IOI Corp as its group executive chairman Tan Sri Lee Shin Cheng expects IOI Properties to register at least RM2.5billion revenue annually for the next three years; and d) Felda Global Ventures Holdings as it is targeting to announce several M&As later this year with its RM6.2b cash pile.

Malaysia News & Highlights

UEM rebrands, eyes REIT

UEM Sunrise Bhd is the new brand identity and company name replacing UEM Land Holdings Bhd. Its managing director and chief executive officer, Datuk Wan Abdullah Wan Ibrahim, said UEM Sunrise was built upon the strength of both UEM Land as a macro-township developer and Sunrise Bhd, specialising in luxurious condominiums and high-rise integrated projects. “We can tap into Sunrise’s network and expertise in high-rise condominiums and they into our expertise and financial resources in township projects. Sunrise has helped us become one of the largest players in Malaysia. At one point, our market capitalisation hit RM16bil,” he told a media briefing to unveil UEM Sunrise.(Source: The Star)

FGVH ready for M&As with RM6.2b cash pile

Felda Global Ventures Holdings Bhd (FGVH) is targeting to announce several mergers and acquisitions (M&As) later this year which will be financed with its RM6.2bil cash pile, according to its chief executive officer designate, Dr Mohammed Emir Abdullah. “We are reviewing several M&As right now and we are very serious about it,” he told StarBizWeek after the group’s presentation at Invest Malaysia 2013. (Source: The Star)

Ranhill RM1bil IPO likely on June 28

Malaysian energy and water company Ranhill Energy and Resources Bhd is expected to launch its initial public offering (IPO) on June 28 that will target raising RM1bil, according to two sources. “They are finalising the cornerstone investors now,” said one of the sources, who declined to be named because the matter was private. (Source: The Star)

IOI Properties expects at least RM2.5bil revenue annually

IOI Corp Bhd group executive chairman Tan Sri Lee Shin Cheng expects IOI Properties Bhd to register a revenue of “not less” than RM2.5bil annually for the next three years. “IOI Properties has various projects in its line-up set to be launched in strategic locations such as Iskandar Malaysia, the Klang Valley, Singapore and Xiamen in China,” he told reporters on the sidelines of Invest Malaysia 2013. He added that the company was looking at about a 35% to 40% turnover contribution from its overseas property business. (Source: The Star)

Proton gives bigger discounts on Saga SV for bigger market share

Proton Holdings Bhd has turned aggressive with its aim to control 30% of the B-segment market by year-end, with more offerings for the public. Its current 24% B-segment market share would be given a boost after the national carmaker launched the new Saga SV, which saw a further RM5,000 or 12% reduction in prices, without compromising on features, and at prices starting from RM33,438, is the cheapest among its competitors. (Source: The Star)

Protasco going back to Libya, seeking compensation from Libyan Govt

Undeterred by previous losses, Protasco Bhd, a mid-sized integrated infrastructure company, is returning to Libya after halting operations there due to a revolution. Group managing director Datuk Chong Ket Pen said the company was restarting business in Libya at end-June after exiting the country two years ago. “We have written off RM20mil in provision in the past two years for our halted operations in Libya. “Our machines are still there. We've been asked to start work by the government and our team has gone back a few times,” Chong toldStarBiz. (Source: Business Times)

Starhill REIT plans to raise up to RM800mil

Starhill Real Estate Investment Trust (REIT) has proposed to undergo a placement exercise to raise up to RM800mil to repay some of its borrowings and reduce its gearing level. In November last year, Starhill REIT primarily financed the acquisitions of the Sydney Harbour Marriott Hotel, Melbourne Marriott Hotel and Brisbane Marriott Hotel along with the business assets of the respective hotels via borrowings. To accommodate the placement exercise, it has also proposed to increase its existing fund size to a maximum of 2.125 billion units from the current 1.324 billion units. (Source: The Star)

Shareholders propose to take Ireka private

Ireka Corp Bhd’s major shareholders have proposed to take the company private via a selective capital reduction (SCR) and repayment exercise. The major shareholder, via special-purpose vehicle Olymvest Sdn Bhd, collectively holds approximately 64.7% of Ireka’s total issued and paid-up share capital, and plans to cancel the remaining 35.3% they do not own. (Source: The Star)

Foreign News

U.S. Stocks Drop for Week as Investors Await Fed Signals

U.S stocks fell for the week, sending benchmark indexes lower for the third time in four weeks, as investors speculated whether the Federal Reserve will signal a reduction of stimulus efforts after its next meeting. The S&P 500 lost 1 percent to 1,626.73 for the week. The benchmark equity gauge declined for four out of the five days, trimming its gains for the year to 14 percent. The Dow Jones Industrial Average decreased 177.94 points, or 1.2 percent, to 15,070.18.

Treasuries End Longest Losing Streak in 4 Years as Fed Bets Ebb

Treasuries rose, breaking the longest streak of weekly losses since 2009, amid skepticism the Federal Reserve is about to slow its bond-buying program designed to hold down borrowing costs and spur the economy. U.S. 10-year yields ell four basis points, or 0.04 percentage point, to 2.13 percent this week in New York, according to Bloomberg Bond Trader data. The price of the 1.75 percent note due May 2023 advanced 3/8, or $3.75 per $1,000 face amount, to 96 5/8. The benchmark yield climbed to 2.29 percent on June 11, the highest since April 2012, after reaching a 2013 low of 1.61 percent May 1. It rose for the six weeks ended June 7, the longest stretch since May 2009.

Pound Climbs a Third Week Versus Dollar as Jobless Claims Fall

The pound climbed for a third week versus the dollar, the longest run of gains since September, as a report showed U.K. jobless claims fell more than economists forecast in May, adding to signs the economy is recovering. Sterling climbed to its highest level in more than four months against the U.S. currency as a wider measure of unemployment (UKUEILOR) declined in April, adding to speculation Bank of England policy makers will refrain from expanding their asset-purchase plan. Gilts were little changed after 10-year yields rose to the highest level since February as the U.K. sold 6 billion pounds ($9.4 billion) of debt due in 2023 and 2032. The pound advanced 0.8 percent in the week to $1.5684 as of 5 p.m. London time yesterday. It rose to $1.5738 on June 13, the strongest level since Feb. 11. Sterling was little changed at 84.99 pence per euro. U.K. jobless claims fell by 8,600 in May to 1.51 million, the Office for National Statistics said in London on June 12. Economists surveyed by Bloomberg News predicted a decline of 5,000. Unemployment as measured by International Labour Organisation methods fell 5,000 in the three months through April to 2.51 million, a rate of 7.8 percent.

China Debt Sale Fails for First Time in 23 Months on Cash Crunch

China’s Finance Ministry failed to sell all of the debt offered at an auction for the first time in 23 months owing to a cash squeeze that threatens to exacerbate a slowdown in the world’s second-largest economy. The ministry sold 9.53 billion yuan ($1.55 billion) of 273-day bills, less than the 15 billion yuan target, according to Chinabond, the nation’s biggest bond-clearing house. Agricultural Development of China Co. raised 11.51 billion yuan in a sale of six-month bills last week, less than its 20 billion yuan goal. The average yield at today’s bill sale was 3.76 percent, according to two traders who are required to bid at the auctions. That compares with a 3.14 percent rate yesterday for similar-maturity existing securities according to data compiled by Chinabond. The ministry’s last failed auction was a sale of 182-day bills in July 2011.

Asian Stocks Decline for Fifth Week on Stimulus Concern

Asian stocks outside Japan fell for a fifth week, the longest streak of losses in two years, amid concern central banks are losing an appetite for more stimulus. Japanese stocks rebounded the final day of the week as Nomura Holdings Inc. and Fidelity Worldwide advised buying shares. The MSCI Asian Pacific excluding Japanese Index dropped 1.3 percent this week to 440.07, extending this year’s loss to 6.6 percent. A gauge that includes Japanese shares added 0.3 percent for the week. The Hang Seng China Enterprises Index fell for a record 12 straight days through June 14 amid concern that growth is slowing in the world’s No. 2 economy. More than $1 trillion was wiped from the value of the Asia-Pacific benchmark equities gauge from May 20 through June 13.

Singapore Censures 20 Banks on Traders’ Bids to Manipulate Rates

Singapore’s monetary authority censured banks for trying to rig benchmark interest rates and ordered them to set aside as much as S$12 billion ($9.6 billion) at zero interest pending steps to improve internal controls. ING Groep NV (INGA), Royal Bank of Scotland Group PLC (RBS) and UBS AG (UBSN) were among 20 banks at which 133 traders tried to manipulate the Singapore Interbank offered rate, swap offered rates and currency benchmarks in the city-state, the Monetary Authority of Singapore said in a statement yesterday. The regulator said it will also make rigging key rates a criminal offense and bring supervision under its direct oversight. Singapore, seeking to bolster its reputation as a major financial hub, is cracking down amid a widening global review of benchmarks. Bloomberg news reported this week traders manipulated key foreign-exchange rates in the $4.7 trillion-a-day currency market Barclays Plc, UBS and RBS have been fined $2.5 billion over the past year for rigging Libor.

IMF Sees Fed QE Through 2013, Warns of Exit Plan Challenges

The International Monetary Fund sees the Federal Reserve maintaining large monthly bond purchases until at least the end of this year and urged the central bank to carefully manage its exit plan to avoid disrupting financial markets. Unwinding a policy of record-low interest rates and $85 billion in monthly bond-buying known as quantitative easing will be challenging even though the Fed has “a range of tools” to withdraw the stimulus, the IMF staff wrote in its annual assessment of the U.S. economy.

(Source: Bloomberg)