November 24, 2008 Daily Highlights

December 1, 2008 at 8:23 am Leave a comment

MARKET REVIEW

KLCI Update
THE Malaysian stock market fell further last week, with banks and plantation stocks leading losses, depressed by heavy falls in global markets as concerns over a deepening global recession and the survival of Citigroup and the US car industry increased. The benchmark Kuala Lumpur Composite Index’s (KLCI) retreated 14.77 points, or 1.7 per cent, last week to settle at 866.88, as daily average trading volume shrank to 576.2 million shares from 819.7 million in the previous week. Looking ahead, the KLCI may stage a technical rebound early this week following the sharp rally in US stocks last Friday. Nevertheless, this bear market rally could be capped between 900 and 920 by negative news from the external front and more lower-than-expected results from Malaysian listed companies in current results season which will come to a conclusion this week. The central bank will release the third quarter economic growth numbers on Friday. The consensus is an expansion of 4.5 per cent against 6.3 per cent in the second quarter.

Regional Update
Last week, Asian stocks fell for a second week, led by financial companies and commodity producers, as a global recession and plunge in oil prices heightened concern demand and profits will be hurt. Japan’s Nikkei 225 Stock Average declined 6.5 percent to 7,910.79, after the world’s second-largest economy slipped into recession for the first time since 2001. Hong Kong’s Hang Seng Index retreated 6.5 percent as the city entered its first recession since the outbreak of a deadly epidemic in 2003. Taiwan and Singapore forecast deeper contractions. All markets in the region declined this week.

US Stocks
Week on week , U.S. stocks dropped for a third week on signs of a deepening recession and growing concern about the fate of Citigroup Inc. and the nation’s automakers. However, the Standard & Poor’s 500 Index rallied from an 11-year low last Friday after President-elect Barack Obama picked New York Federal Reserve Bank chief Timothy Geithner as Treasury secretary. The Dow Jones Industrial Average slid 450.89 points, or
5.3 percent, to 8,046.42. The Russell 2000 Index of small-company stocks retreated 11 percent to 406.54.

MEDIA HIGHLIGHTS

Economists give mixed views on Malaysia rate cut
ECONOMISTS are mixed in their views of an interest rate cut, which may be announced today, as falling inflation will give room for Bank Negara to manouevre. The central bank has left the Overnight Policy Rate (OPR), the key benchmark interest rate, unchanged at 3.50 per cent for the past 30 months.The monetary
policy committee meets today, its last scheduled meeting for the year.According to a Business Times poll of 19 research houses, close to half felt that the central bank may make its move today while others felt that the cut may be in the first quarter of 2009.

IJM bids for more work in India
IJM Corp Bhd , a construction to plantation firm, is bidding for RM1 billion worth of projects in India, half of which are facilities for the 2010 Commonwealth Games in New Delhi, a top official said. It still has RM2 billion existing jobs in that country, which will last the company for three years, deputy chief executive officer Teh Kean Ming told Business Times.”About RM500 million works that we are bidding are for car parks and facilities surrounding the Games stadium in New Delhi,” Teh said in an interview in Mumbai last week on the sidelines of a capital market forum organised by the Securities Commission and its counterpart in India. IJM is among the largest foreign infrastructure groups in India.The balance of contracts in bid are mainly road projects in various states in India, Teh added.Works from India and the Middle East make up about half of IJM’s total order book estimated at RM4.6 billion currently.Despite the global financial turmoil that is set to hit growth in India, Teh said IJM had yet to see any slowdown in its projects there although future contracts could come in slower.The weaker economy also presents a different opportunity to the company.”Our margin has been squeezed in the past few months, but the slowdown has made prices of bitumen and steel cheaper. We will take the opportunity to quickly finish off existing projects,” Teh said.

Big Apple still going big on expansion
BIG Apple Donuts & Coffee, a Malaysian-owned company, is expanding its wings to the world with the recent opening of an outlet in Hangzhou in the Zhejiang province of China.Its director Mike U.K. Chan said the company, which opened last year, has managed to grow tremendously from just one outlet to 24 local outlets and one outlet in China.“We are planning to expand next year amid the economic slowdown and we plan to open outlets in Indonesia, Thailand, Hong Kong, the Middle East, Vietnam and Cambodia, to name some,” he said in an interview in Kuala Lumpur recently.“People still have to eat and with that in mind we are still going big on expansion next year, because we know the café business will take off despite the impending recession,” he said.For China, Chan has big plans for the company, aiming at 600 outlets to 1,000 outlets in various locations in five years.

IPPs yet to pay two months’ windfall levy
INDEPENDENT power producers (IPPs) have yet to pay the levy for October and November as they are still awaiting the decision of the Finance Ministry on a proposal to restructure the payment period of the windfall profit tax.According to Penjanabebas president Dr Philip Tan, the members have so far made payments for the months of August and September but have not paid for October and November.Penjanabebas is the umbrella body for IPPs in the country.The total to be paid, according to earlier reports, varies depending on how the levy is calculated and may be up to RM550mil spread over 12 months.Originally payable annually, the Government had discontinued the tax in September and instead, the IPPs now have to make a one-off payment equivalent to the windfall profit tax in a year.“We put in our proposal last month for the payments to be spread over two years instead of the current one year,” Tan told StarBiz recently.

UBS Overvalued Property by $100 Million, Fired Executive Says
UBS AG, Switzerland’s biggest bank, charged inflated fees at an $11.7 billion U.S. real-estate fund by overvaluing some commercial properties, a former official alleges in his wrongful-termination lawsuit. Richard Trusz, 52, who was managing director and head of valuations at UBS Realty Investors LLC in Hartford, Connecticut, said in court papers that before being fired in August he repeatedly clashed with his bosses over returning fees to clients, including public pension funds in Alaska and Iowa. “No disclosures have been made to clients, no errors have been corrected to reflect accurate information for the respective quarters and no excess fees collected by defendant UBS Realty have been refunded,” Trusz said in a Sept. 22 complaint filed under the state’s so-called whistleblower law in Superior Court in Hartford.

German Business Confidence Probably Declined to Five-Year Low
German business confidence probably fell to the lowest level in more than five years in November as the global financial crisis sapped demand for exports. The Ifo institute‘s business climate index declined to 88.7 from 90.2 in October, according to the median of 41 forecasts in a Bloomberg News survey. That would be the weakest reading since April 2003. Ifo will release the report, based on a survey of 7,000 executives, at 10 a.m. in Munich today. German companies such as BASF SE, the world’s largest chemicals maker, and carmakers Bayerischer Motoren Werke AG and Daimler AG are scaling back production as export orders dwindle

Shirakawa to `Dodge’ Zero Rates, Focus on Funding for Companies
Bank of Japan Governor Masaaki Shirakawa indicated that the central bank wants to avoid cutting interest rates to zero and will instead focus on pumping cash into the financial system to buoy the economy. “An additional rate cut would have many adverse effects on the functioning of the money market,” Shirakawa told reporters after his policy board left the benchmark rate at 0.3 percent yesterday, three weeks after the first reduction in seven years. Shirakawa instructed his staff to study new ways of making money available for lending, such as accepting corporate debt as collateral, on concern that businesses are struggling to obtain funds. The bank could be forced to follow the Federal Reserve and the European Central Bank in trimming
borrowing costs anyway, should the global financial turmoil prolong Japan’s recession.

Citigroup Said to Offer Japan’s Nikko Workers Early Retirement
Citigroup Inc., which announced 52,000 job cuts this week, plans to reduce the workforce at its Japanese brokerage unit by offering earlier retirement to employees, two people familiar with the situation said. Nikko Cordial Securities Inc., which employs about 7,000 in Japan, made the proposal to employees over the age of 40 in a memo from President Eiji Watanabe yesterday, the people said, declining to be identified because a public announcement hasn’t been made. The offer also includes about two years of pay, the people said.

ECONOMY HIGHLIGHTS

Iran Can Survive With Oil at $5 a Barrel, Ahmadinejad Says
Iran, OPEC’s second-largest crude producer, can survive even with oil prices at $8 or $5 a barrel, President Mahmoud Ahmadinejad said. “We have in the past managed with oil at $9,” Ahmadinejad was cited as saying by the Islamic Republic News Agency in Tehran today. “Some believe today the decline in oil prices can result in economic crisis in the country, but in the same way that the global financial crisis did not impact Iran’s economy, the fall in oil prices can not have much influence on our nation’s economy.” Iran, which relies on oil sales for at least half of its budget, is facing decreasing revenue amid the declining oil price. Crude oil settled at $49.93 a barrel on the New York Mercantile Exchange on Nov. 21.

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24 November 2008 Property : Is the property market resilient? Telecommunications Weekly Review: 17th – 23rd November 2008

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