Market Thoughts

US stocks accelerated their selloff in the final hour of trading to end near session lows Wednesday, after the Federal Reserve said it will maintain its bond-buying program, though Chairman Ben Bernanke hinted that the central bank plans to moderate purchases later this year. Meanwhile, European shares closed lower, as investors awaited a key policy statement by the Federal Reserve after its two-day meeting.

On the local exchange, the FBM KLCI fell 1.17 points to 1772.88 points. Asian stock markets are poised to open lower today, falling in step with Wall Street shares after Bernanke hinted that the central bank could moderate the pace of its bond purchases later this year.

Stocks to watch are: a) Kulim which had requested for suspension of trading is highlighted by media that it is to acquire the remaining shares in New Britain Palm Oil Ltd (NBPOL); b) MRCB as Nusa Gapurna Development Sdn Bhd has rejected the Selangor State Development Corp’s (PKNS) purchase offer for its 70% equity interest in PJ Sentral; c) Luster following media highlighted that three parties are said to be in talks to take over Luster; and d) Eversendai as it is tendering for RM8bil worth of projects which include oil and gas sector.

Malaysia News & Highlights

Kulim to take New Britain Palm Oil Ltd private?

Kulim (M) Bhd, which has a 50% stake in palm oil manufacturer New Britain Palm Oil Ltd (NBPOL), is planning to make an announcement today to acquire the remaining shares in NBPOL. NBPOL is currently listed on the London Stock Exchange and the Port Moresby Stock Exchange of Papua New Guinea (PNG). NBPOL was traded at £4.77 (RM23.80) with a market capitalisation of £716.5mil (RM3.6bil). At the current price, the cost of acquiring NBPOL could be substantially cheaper, given that its share price has fallen more than 42% from £8.30 (RM41.42) in August 2012. (Source: The Star)

AirAsia signs RM27.5bil engine deal

As part of its expansion programme, low cost carrier AirAsia Bhd signed a purchase agreement with commercial aircraft supplier CFM International for the purchase of 100 sets of airplane engine. The CFM LEAP-1A and CFM56-5B engines were purchased in a US$8.6bil (RM27.52bil) deal to power the 100 Airbus A320 aircraft it ordered last year. (Source: The Star)

Nusa Gapurna rejects PKNS offer to up stake in PJ Sentral

As the scuffle for the reins of mixed development PJ Sentral unfolds, Nusa Gapurna Development Sdn Bhd has rejected the Selangor State Development Corp’s (PKNS) purchase offer for its 70% equity interest in the asset, on grounds that PKNS did not have any enforceable pre-emption rights. In a Bursa Malaysia announcement, private developer Nusa Gapurna notified Malaysian Resources Corp Bhd (MRCB) that it remained committed to the share sale agreement (SSA) with MRCB. (Source: The Star)

Pos Malaysia proposes 9.5 sen final dividend

Pos Malaysia Bhd has proposed a final dividend of 9.5 sen per ordinary share less 25% income tax for the financial year ended March 31, subject to the shareholders’ approval at its AGM. The company said in a statement to Bursa Malaysia the entitlement and payment date would be determined and announced in due course. (Source: The Star)

Consumer Price Index up 1.6% in May

The Consumer Price Index (CPI) for May rose by 1.6% to 106.2 from the 104.5 registered in the same month last year. As compared with the previous month, the CPI was up 0.3%. Between January and May, the index increased 1.8% to 106.6 from the 104.7 recorded in the same period last year, the Statistics Department said in a statement. (Source: The Star)

Eversendai tendering for RM8bil projects

Eversendai Corp Bhd is tendering for RM8bil worth of projects and is poised to add more contracts to its growing order book in the next couple of months. The structural steel turnkey and power plant contractor has an order book of RM1.5bil at present. Executive chairman and group managing director Tan Sri A.K. Nathansaid some of the concluded contracts were slated for announcement soon, while some were now in the process of being finalised. (Source: The Star)

Integrax may gain if TNB wins

Integrax Bhd, which owns and operates Lumut Port in Manjung, Perak, hopes Tenaga Nasional Bhd (TNB) will secure the 1,000MW Track 3A power plant tender being evaluated by the regulators. This is because Integrax stands to benefit from the additional coal cargoes that would pass through Lumut Port to TNB’s power generation complex in Manjung, according to deputy chairman Amin Halim Rasip. (Source: The Star)

IGB plans to inject Johor assets into REIT in 5 years

IGB Corp Bhd is set to grow its real estate investment trust (IGB REIT), currently valued at RM4.5 billion, by injecting assets from its property development ventures in Johor in about five years. Group managing director Robert C.M. Tan said it is in IGB's plan to retain some assets to diversify its recurring income base. (Source: Business Times)

Foreign News

S&P 500 Falls Most in 2 Weeks After Fed Policy Statement

The Standard & Poor’s 500 Index retreated the most in two weeks as Federal Reserve Chairman Ben S. Bernanke said the central bank may reduce bond purchases later this year as the economy strengthens. The S&P 500 lost 1.4 percent to 1,628.93 at 4 p.m. in New York, for the largest decline since May 31. The index rallied 1.5 percent in the previous two sessions. The Dow Jones Industrial Average dropped 206.04 points, or 1.4 percent, to 15,112.19 today. About 6.7 billion shares traded hands on U.S. exchanges today, or 6.8 percent above the three-month average.

Bernanke Says Fed on Course to End Asset Buying in 2014

Federal Reserve Chairman Ben S. Bernanke said the central bank may start dialing down its unprecedented bond-buying program this year and end it entirely in mid-2014 if the economy finally achieves the sustainable growth the Fed has sought since the recession ended in 2009. The Federal Open Market Committee today left the monthly pace of bond purchases unchanged at $85 billion, while saying that “downside risks to the outlook for the economy and the labor market” have diminished. Policy makers raised their growth forecasts for next year to a range of 3 percent to 3.5 percent and reduced their outlook for unemployment to as low as 6.5 percent.

Japan Futures Drop as Fed Sinks U.S. Stocks; Aussie Slips

Japanese and Australian equity futures followed U.S. stocks lower as the dollar surged after Federal Reserve Chairman Ben S. Bernanke said bond purchases may be reduced later this year should risks to the U.S. economy abate. Australia’s currency slumped while oil slid. Futures on Japan's Nikkei 225 Stock Average fell 0.4 percent to 13,160 in Chicago and traded at 13,200 by 3 a.m. in Osaka, after closing at 13,260 yesterday. Contracts on Australia’s S&P/ASX 200 Index slid 1.1 percent. Standard & Poor’s 500 Index futures dropped 0.1 percent by 7:39 a.m. in Tokyo. The gauge lost 1.4 percent in New York to erase most of a two-day rally as the dollar jumped against 13 of 16 major peers. The Aussie sank to the weakest level on a closing basis since September 2010, while gold futures declined.

Swiss Banks Face U.S. Charges as Parliament Rejects Deal

Swiss parliament rejected a bill designed to resolve a dispute over undeclared bank accounts held by U.S. citizens, potentially setting the stage for American prosecution of the country’s banks. Members of parliament’s lower house voted 123 to 63 against the bill, which would have allowed Swiss banks to cooperate with the U.S. and to settle a long-running dispute over wealthy American tax evaders. The government has said it has no plan B, in the event of the bill failing to pass.

Chinese Govt Says Financial System Must Support Economy

China 's government said the financial system must better support the economy, after a surge in credit failed to ignite growth and interbank borrowing costs jumped to a two-year high. Authorities will boost credit support for industries the government has defined as strategic and those that are labor-intensive, the State Council, or Cabinet, said in Beijing yesterday after a meeting led by Premier Li Keqiang. The nation must more firmly guard against financial risks, according to a statement on the central government’s website.

Singapore Urges Naming of Firms After Record Smog Level

Singapore asked Indonesia to name the firms involved in forest burning on the island of Sumatra that caused smog to reach an all-time high in the city-state. Singapore’s pollution index climbed to a “very unhealthy” 290 at 9 p.m. today, the country’s National Environment Agency, or NEA, said on its website. That’s the highest ever, according to Channel NewsAsia. A value above 300 is deemed “hazardous.” Singapore’s Foreign Affairs and Law Minister K. Shanmugam emphasized the urgency of the situation and the country’s commitment to help fight the fires during a telephone call with Indonesia’s Foreign Minister Marty Natalegawa yesterday, according to a statement by the government.

(Source: Bloomberg)