Market Thoughts

US stocks rallied to finish near session highs Tuesday, with the Dow soaring nearly 150 points, as members of the Federal Reserve kicked off their two-day meeting to discuss the future of the central bank's bond-buying program. Meanwhile, European shares closed mixed, after better-than-expected economic data from Germany, and stock market gains in the U.S.

On the local market, the FBM KLCI rose 1.88 points to 1774.05 points. Following the optimism in the US, we expect the index to remain positive for today.

Stocks to watch are: a) MAHB as it has announced a revised opening date for KLIA2; b) Berjaya Sports Toto following it reported lower net profit for the fourth quarter as a result of higher operating expenses; c) Octagon Consolidated as it has proposed to dispose its entire stakes in Advanced Pyrotech Sdn Bhd for RM30 million to uplift Octagon from PN17; and d) Hibiscus Petroleum following its joint venture company has received a US$10mil capital injection from corporate investor.

Malaysia News & Highlights

Astro aims to boost user base to 3.6 million by year-end

Astro Malaysia Holdings Bhd expects its average revenue per user (Arpu) to grow by 5% to 6% this year in tandem with the country's gross domestic product growth, as the nation's leading pay-TV player pushes more content in a crowded marketplace. The broadcaster also expects to grow its user base from 3.58 million to 3.6 million by the year-end, said chief commercial officer Liew Swee Lin. At current levels, its service is available in 53% of the total 6.7 million television households in the country. Astro reported an Arpu of RM94.2 for the first quarter of this year and RM93 for the full financial year 2013 (FY13). (Source: The Star)

1MDB hopes to raise RM3.2bil from power assets IPO

1Malaysia Development Bhd (1MDB) hopes to raise some US$1bil (RM3.2bil) by spinning off its power assets in an initial public offering (IPO) next year, according to a Dow Jones newswire report. The funds were necessary to pare down debts incurred for its purchase of utility companies belonging to tycoon T. Ananda Krishnan and the Genting group last year, analysts said. 1MDB bought Ananda’s Tanjong Energy Holdings Sdn Bhd, which he had privatised in late 2010, in March last year for RM8.5bil. (Source: The Star)

MAHB sets May 2, 2014 as KLIA2 revised opening date

Malaysia Airports Holdings Bhd (MAHB) has announced a revised opening date for KLIA2 – May 2, 2014. The airport operator said it had received confirmation from the contractors of the terminal building – the UEMC-Bina Puri joint venture – that construction would be completed on April 30, 2014, including the securing of the Certificate of Completion and Compliance and the Operational Readiness and Airport Transfer. (Source: The Star)

Hibiscus JV firm gets US$10mil capital injection from Triax

Hibiscus Petroleum Bhd’s 50:50 joint-venture (JV) company, Hirex Petroleum Sdn Bhd, has received a US$10mil (RM31.6mil) capital injection from corporate investor Triax Ventures Corpfor a 15% stake. Hirex is a JV between Hibiscus’ wholly owned subsidiary, Orient Hibiscus Sdn Bhd, and Rex South East Asia Ltd. According to Hibiscus’ filing with the stock exchange, the subscription of shares by Triax would enable Hirex to fund the licence fee payable for the utilisation of Rex’s proprietary technology in the pursuit of high-impact exploration assets. (Source: The Star)

BToto profit down on high operating expenses

Berjaya Sports Toto Bhd’s net profit for the fourth quarter ended April 30 was down to RM75.6mil compared with RM91.2mil a year ago due to higher operating expenses incurred by the group as well as the results of Berjaya Philippines Inc Group (BPI). “BPI recorded a decrease in revenue and pre-tax profit of 9% and 33.5% respectively for the quarter under review mainly due to lower lease rental income earned as a result of lower sales reported by the Philippine Charity Sweepstakes Office,” said the number forecast operator (NFO) in a statement. (Source: The Star)

Genting ups stake in Australia’s Echo

Genting Bhd has increased its stake in Australia’s Echo Entertainment Group, just weeks after rival Crown Ltd sold its 10 per cent stake in Echo. Genting raised its stake in Echo to 6.6 per cent from 5.22 per cent via its Genting Hong Kong Ltd unit, according to a regulatory filing. Financial details were not disclosed. The increase comes as Crown and Echo wage an increasingly acrimonious war to gain a lock in Sydney on tourists from mainland China. (Source: Business Times)

Octagon to sell Advanced Pyrotech

Octagon Consolidated Bhd has proposed to dispose of its entire shareholdings in Advanced Pyrotech Sdn Bhd to Ecobound Sdn Bhd for RM30 million. The disposal is part of the proposed regularisation plan to uplift Octagon from PN17, a list of financially distressed companies. (Source: Business Times)

Vehicle sales down for 2nd consecutive month

Total industry volume (TIV) for vehicles declined for the second consecutive month with May's sales volume lower than April's by 2,855 units or 5.4%. According to the Malaysian Automotive Association (MAA), sales volume in May slid by 8,667 units or 15% from a year ago. “This is largely due to consumers adopting a wait-and-see attitude due to uncertainties in the market,” it said in a press release yesterday. Nevertheless, the sales and production of passenger vehicles showed a growth for the first five months of this year against the corresponding period in 2012. (Source: The Star)

Foreign News

U.S. Stocks Rally for Second Day as Investors Await Fed

U.S. stocks rose for a second day, pushing the Standard & Poor’s 500 Index to its highest in June, as investors awaited the outcome of a Federal Reserve policy meeting for clues to the central bank’s plan for stimulus. The S&P 500 increased 0.8 percent to 1,651.81, extending its two-day rally to 1.5 percent. The Dow Jones Industrial Average gained 138.38 points, or 0.9 percent, to 15,318.23 today. About 5.7 billion shares traded hands on U.S. exchanges, or 8.6 percent below the three-month average.

Asian Futures Tip Gains as U.S. Jumps on Fed; Gas Rallies

Asian equity futures rose, indicating shares from Japan to Australia may follow U.S. stocks higher, on prospects the Federal Reserve will signal the fate of monetary stimulus after its meeting today. The yen held declines, while natural gas and gasoline gained. Futures on the Nikkei 225 Stock Average due in September added 1.9 percent to 13,240 by 3 a.m. in Osaka, after closing at 13,235 in Chicago and 13,000 yesterday in Japan. Contracts on Australia’s S&P/ASX 200 Index increased 0.7 percent, while Hang Seng Index futures rose 0.1 percent. Standard and Poor’s 500 index futures gained 0.1 percent, after the measure climbed 0.8 percent in New York, rising for a second day. Japan’s currency weakened 0.1 percent versus the dollar after dropping the past two days. Crude oil extended gains from a nine-month high.

Housing Starts in U.S. Rose in May to 914,000 Annual Rate

Housing starts climbed 6.8 percent, less than forecast, to a 914,000 annualized rate from a revised 856,000 in April, Commerce Department figures showed today in Washington. Applications for one-family home construction increased to a 622,000 pace, the fastest since May 2008. Data from the Labor Department showed May consumer prices rose less than projected.

European Stocks Little Changed; Kabel Deutschland Gains

European stocks were little changed as U.S. housing starts for May missed estimates amid concern the Federal Reserve will signal stimulus cuts at its policy meeting starting today. The Stoxx Europe 600 Index lost less than 0.1 percent to 293.02 at the close of trading. The gauge has declined 5.7 percent since Federal Reserve Chairman Ben S. Bernanke said May 22 the central bank could scale back stimulus measures if the U.S. economy improves sustainably.

Rigged-Benchmark Probes Proliferate From Singapore to UK

The probe of Libor manipulation is proving to be the tip of the iceberg as inquiries into assets from derivatives to foreign exchange show that if there’s a chance to rig benchmark rates in world markets, someone is usually willing to try. Singapore’s monetary authority last week censured 20 banks for attempting to fix interest rate levels in the island state and ordered them to set aside as much as $9.6 billion. Britain’s markets regulator is looking into the $4.7 trillion-a-day currency market after Bloomberg News reported that traders have manipulated key rates for more than a decade, citing five dealers.

(Source: Bloomberg)