TECHNOLOGY (OVERWEIGHT) Sector Update: Turning Positive Withthe next results season just around the corner, we assess some coincident and laggingindicators for the global HDD and semiconductor industries  that could help us form expectations on thetechnology sector's upcoming numbers. Overall, we are positive on the local HDDcomponent, and semiconductor packaging and testing companies under ourcoverage. For the former, we see rising demand and higher ASPs driving growth,while we expect the latter to see demand recovery in the second half of theyear. That said, we are upgrading our call on the sector to OVERWEIGHT.

Takes a breather.The FBM KLCI erased 7.36 pts to 1,599.27, weighed down by a spike in Spanishbond  yields at a recent auction and  fading prospects of further monetary stimulusin the US. Among the key corporate headlines are: AMMB gets nod to acquire a 100%stake in Kurnia Insurans (M) Bhd, Pharmanagia expects to spend RM95m in capex thisyear, the Axiata Group has given its commitment for a stronger foothold inIndia and Xian Leng Bhd has been suspended ahead of the special audit resultson its capex in recent years. Overnight, the Dow closed 124.8 points lowerdampened by weaker demand at a Spanish debt auction and  the Federal Reserve's  reluctance toadd more monetary stimulus, which raised concerns on the sustainability of thecurrent economic recovery.

US stocks fell for a second day on Wednesday as investorscontemplated a world without monetary stimulus and a poorly received bondauction in Spain suggested the effects of Europe's funding operations werewaning. Spanish borrowing costs jumped at bond auctions, raising concerns thatthe rally in the troubled sovereign debt of euro-zone peripheral nations may becoming to an end. The yield on Spain's 10-year bond leaped to 5.7%, its highestsince January. Stocks continued to feel the fallout from the minutes from theFederal Reserve's latest meeting, published on Tuesday. The DJIA fell 124.80pts, or 0.95%, to 13,074.15. The S&P 500 Index lost 14.42 pts, or 1.02%, to1,398.96. The Nasdaq Composite Index dropped 45.48 pts, or 1.46%, to 3,068.09.(Financial Daily)

The Axiata Group will stay put in the Indian mobile marketbut is hoping to operate in a more stable regulatory environment. The IndianGovernment's recent revocation of 122 of the 2G licences issued in 2008 hadcreated uncertainty and angered some foreign investors, some of whom havethreatened to withdraw from the market place and to even sue the government. However,Axiata president and group chief executive officer Datuk Seri Jamaludin Ibrahimsaid, 'we want more of a stronger foothold there.' (StarBiz)

The share price of Malaysia Smelting Corp (MSC) was notaffected by the news that the Indonesian government may increase  the export tax on coal and base metals this year. The firmness in the shareprice could be supported by a report by Bloomberg yesterday that said Indonesia was not formally discussing asuggestion from the industry ministry to tax exports of coal and minerals,according to government and industry officials. (StarBiz)

The proposed sale of Kurnia Insurans (M) to AmG Insurancetakes another step forward. AMMB Holdings announced yesterday that it hadreceived the Finance Ministry's approval, through Bank Negara, for the acquisitionof a 100% equity interest in Kurnia Insurans by AmG. AMMB has a 51% stake inAmG, while Kurnia Insurans is wholly owned by Kurnia Asia. (StarBiz) Please seeaccompanying report

To further strengthen its regional footprint, MalayanBanking  (Maybank) recently incorporatedits branch in Cambodia and aims to be among the top five banks in Cambodia by2015. It is currently ranked seventh in terms or assets among 33 banks, and has11 branches in Cambodia. Since establishing its presence in Cambodia in 1993,Maybank announced that it will be investing in a new 10-storey corporate officein Phnom Penh which is expected to be ready in two years. 'Maybank Cambodia hadbeen growing at a healthy pace with assets and deposits doubling in the lastfour years since its branch expansion got underway,'  said president and chief executive officerDatuk Seri Abdul Wahid Omar. (Malaysian Reserve)

Pharmaniaga has set side RM30m to build a manufacturingplant in Indonesia which the company hopes will act as a 'gateway for exports'into the republic of almost 240m people. The funding is to come from internallygenerated funds. According to the company, it is now in discussions with a fewparties and has yet to decide on the purchase target. (Malaysian Reserve)

Philippine inflation unexpectedly slowed to a 30-month lowin March as gains in transport costs eased, supporting the central bank'sdecision to cut interest rates twice in the first quarter. Consumer prices rose2.6% from a year earlier, after a 2.7% advance in February, the NationalStatistics Office said yesterday. Inflation may accelerate in the coming months after the governmentapproved an increase in minimum fares for jeepneys, a common form of publictransport, and as wage boards study petitions to raise the minimum pay.  (Bloomberg)

Service industries in the U.S. grew in March, capping thestrongest quarter in a year and indicating the world's largest economy willkeep generating jobs. The Institute for Supply Management's non-manufacturingindex fell to 56 from a one-year high of 57.3 in February, the Tempe,Arizona-based group's data showed yesterday. Last month's reading still toppedthe average for the previous economic expansion.  Another report showed companies added anestimated 209,000 workers to payrolls in March. Sales at businesses likerestaurants and retailers are climbing as an improving labor market shores uphousehold incomes and confidence in the face of more expensive gasoline.(Bloomberg)Indian services grew at the slowest pace in five months in March, bolsteringthe case for a cut in interest rates to support economic expansion.  The Purchasing Managers' Index fell to 52.3from 56.5 in February, HSBC Holdings Plc and Markit Economics said yesterday. Areading above 50 indicates expansion. The report follows a decline in themanufacturing PMI for March that signaled slower Indian factory-output growthas the highest borrowing costs since 2008 sap domestic demand and the debtcrisis in Europe crimps exports. The Reserve Bank of India is juggling the needto shield growth with inflation risks from a weaker rupee, rising energy costs andgovernment spending. (Bloomberg)

China accelerated the opening of its capital markets by morethan doubling the amount foreigners can invest in stocks, bonds and bankdeposits as the government shifts its growth model to domestic consumption fromexports. The China Securities Regulatory Commission increased the quotas forqualified foreign institutional investors to USD80bn from USD30bn, according toa statement on its website yesterday. Offshore investors will also be allowedto pump an extra 50bn yuan (USD7.95bn) of local currency into the country, upfrom 20bn yuan.  China has pledged thisyear to free up control of the yuan and liberalize interest rates as thegovernment deepens reforms to revive growth and offset slowing exports and acooling housing market. (Bloomberg)

Australia unexpectedly posted back-to-back trade deficits ascoal and metal exports slumped, sending the currency lower and intensifyingpressure on the central bank to resume cutting interest rates. Imports outpacedexports by AUD480m in February, from a revised AUD971m deficit a month earlier, the first consecutive shortfallsin two years, a Bureau of Statistics report showed yesterday. The data boostthe case for Reserve Bank of Australia Governor Glenn Stevens to lower rates atthe 1 May policy meeting  becauseoverseas shipments account for about a quarter of gross domestic product.(Bloomberg)

U.K. house prices rose the most in almost three years inMarch, boosted by demand from first-time buyers before the expiry of a taxholiday on some home purchases, Halifax said. Prices jumped 2.2% from Februaryto an average GBP163,803 (USD260,300), the mortgage unit of Lloyds BankingGroup Plc said in a statement in London yesterday. That's the biggest monthlyincrease since May 2009. From a year earlier, values were up 0.8%. (Bloomberg)

The European Central Bank left interest rates unchanged aspolicy makers balance the threat of inflation in Germany against the need tofight the sovereign debt crisis. ECB officials meeting in Frankfurt yesterdaykept the benchmark rate at a  record lowof 1%. While nations from Greece to Spain are battling recessions and recordunemployment, workers in Germany are winning some of the biggest pay increasesin 20 years, widening the gaps between Europe's largest economy and itseuro-area peers. (Bloomberg)

Service industries in the U.S. grew in March, capping thestrongest quarter in a year and indicating the world's largest economy willkeep generating jobs. The Institute for Supply Management's non-manufacturingindex fell to 56 from a one-year high of 57.3 in February, the Tempe,Arizona-based group's data showed yesterday. Last month's reading still toppedthe average for the previous economic expansion.  Another report showed companies added anestimated 209,000 workers to payrolls in March. Sales at businesses likerestaurants and retailers are climbing as an improving labor market shores uphousehold incomes and confidence in the face of more expensive gasoline.(Bloomberg)

Source: OSK188