December 11, 2008 Daily Highlights

December 11, 2008 at 2:15 am Leave a comment

MARKET REVIEW

KLCI Update
Malaysian shares were firmer at the end of the trading session yesterday as investors lent their support by buying some undervalued quality stocks amid continued worries over the global economic slowdown, dealers said.The overnight decline on Wall Street failed to drag down the local bourse which saw the benchmark Kuala Lumpur Composite Index (KLCI) close 19.49 points higher or 2.334 per cent at 854.66.The dealers said gains particularly in banking and plantation stocks had pushed the KLCI higher.

Regional Update
Asian stock markets rose yesterday, with dealers reporting heavy bargain hunting as well as hopes for a rescue of US carmakers and for new economic stimulus measures by China.Japan analysts said auto stocks led the rise in Tokyo as investors were also encouraged by hopes that US lawmakers were on the verge of clinching a bailout package for the so-called Big Three US carmakers. Failing to rescue the three – General Motors, Ford and Chrysler – would be a blow to Japanese carmakers and especially parts manufacturers, SMBC Friend research analyst Shigeru Matsumura said. Japan’s Nikkei share index ended up 3.15 per cent. Australian shares closed 1.0 per cent higher. The benchmark S&P/ASX 200 index rose 36.4 points to 3,640.7. National turnover was 1.2 billion shares worth A$4.50 billion. Taiwan share prices finished 4.16 per cent higher. The weighted index rose 186.21 points at 4,658.87 on turnover of NT$92.36 billion.

US Stocks
U.S. stocks gained, recovering half of yesterday’s slide, as higher energy and metal prices triggered a rally in commodity producers that overshadowed concern Congress won’t rescue the nation’s auto industry. The Standard & Poor’s 500 Index increased 1.2 percent to 899.22, with producers of energy and raw materials leading gains among 10 industry groups. The Dow Jones Industrial Average added 70.09 points, or 0.8 percent, to 8,761.42. The MSCI World Index of 23 developed markets rose 1.3 percent to 899.09. The S&P 500 extended its rebound from an 11-year low to 21 percent this week, marking a technical end to a 14-month bear market, as President-elect Barack Obama stepped up proposals to pull the economy out of a recession. The index has tumbled 43 percent from its 2007 record as the collapse of the subprime mortgage market curbed earnings for five straight quarters.

MEDIA HIGHLIGHTS

Time to buy battered stocks: JPMorgan
Now is the time for investors to buy battered stocks as the global financial crisis is expected to retreat by the second half of next year, an equity strategist says. “We have seen the peak of selling (of the stock market) in October,” said JPMorgan Asian and emerging markets equity strategist Adrian Mowat at a briefing in Kuala Lumpur yesterday.The stock market, which took a beating in October, following panic-selling in global markets, led the local benchmark Kuala Lumpur Composite Index to a four-year low.Valuations are cheaper compared with previous crisis, he
added, but investors are staying on the sidelines.”Malaysia is unlikely to be a leader in recovery because international markets tend to go for markets with more liquidity and China will lead the story,” Mowat said.

Biodiesel jump-start
Three government bodies, namely Kuala Lumpur City Hall (DBKL), Selangor’s Jabatan Kerja Raya (JKR) and the Army, have started using biodiesel in their vehicles ahead of schedule. “Although February 2009 is the effective date for compulsory use of B5 at the pump stations, these three agencies volunteered to start using it now,” Plantation Industries and Commodities Minister Datuk Peter Chin said.B5 is a mix of 95 per cent regular diesel and five per cent methyl ester, which is derived from palm oil.This initiative will help Malaysia reduce its current oversupply
of palm oil and help support palm oil prices that have fallen by two-thirds since March this year.Yesterday, third-month benchmark crude palm oil futures traded RM40 higher to close at RM1,595 a tonne.

Jobless rate may hit 4.5pc in 2009: MIER
THE unemployment rate next year may rise to 4.5 per cent compared to about 3.5 per cent this year amid the global economic downturn, according to the Malaysian Institute of Economic Research (MIER).Executive director Professor Emeritus Dr Mohamed Ariff Abdul Kareem said in the third quarter this year, the number of jobless Malaysians stood at 12,000.“The unemployment number is growing. We have to watch it very closely,” he said in a keynote speech at a dialogue with Professor Robert Engle, who won the Nobel Prize for economics in 2003.Mohamed Ariff said a 4.5 per cent rate is considered high by Malaysian standard.“It is high
because we are used to 2.2 and 2.5 per cent but if compared to Europe, Japan and North America, 4.5 per cent is very low,” he said.Mohamed Ariff said the manufacturing industry is expected to be the most highly affected by the economic downturn.“We think that the electrical and electronic sector in particular is very vulnerable,” he said. “The main support for the economy will probably come from the services sector. It will be the engine of growth, helping us to avoid the real recession next year,” he added.According to Mohamed Ariff, Malaysia has a 40 per cent chance of falling into a technical recession next year and 30 per cent chance of going into a real recession.

Palm oil futures jump 3.2pc
MALAYSIAN palm oil futures jumped as much as 3.2 per cent to touch one-week highs yesterday after cargo surveyors reported that exports for the first 10-days of the month nearly doubled.Palm oil prices appear to be recovering after plummeting about 65 per cent in the past 10 months from a peak of RM4,486 in the financial crisis that started in the US subprime markets.The benchmark February palm oil contract on Bursa Malaysia’s Derivatives Exchange rose as much as RM50 to RM1,605 per tonne, a level last seen on Dec. 2, before settling at RM1,595.”There appears to be some massive buying from India ahead of the possible imposition of an import duty on palm oil,” said a head trader from a foreign commodities brokerage.

Obama Picks Chu to Head Energy, Jackson as EPA Chief
President-elect Barack Obama will name Nobel Prize-winner Steve Chu, director of the Lawrence Berkeley National Laboratory, to head the Department of Energy, a person close to the presidential transition said. Former EPA chief Carol Browner is his likely pick for a newly created position overseeing energy, climate and environmental issues, Democratic aides said. Nancy Sutley, an energy official for the city of Los Angeles, is Obama’s choice to head his White House Council on Environmental Quality, according to one aide.

Auto rescue bill in peril, opposed by GOP senators
Emergency aid for the nation’s imperiled auto industry was thrown into jeopardy Wednesday, opposed by Republicans who were revolting against a hard-fought deal between Democrats and the Bush White House to speed $14 billion to ailing carmakers. The House was on track to vote on the bailout Wednesday night, and Democrats held out hope that it could be enacted by week’s end. But a growing number of GOP senators declared they would not go along. The Republicans’ revolt came as the House began procedural votes on the package.

South Korea, Taiwan May Cut Interest Rates as Recession Deepens
South Korea and Taiwan will probably cut interest rates today to shore up economies buffeted by declining demand for exports amid recessions in the U.S., Japan and Europe and weakening growth in China. The Bank of Korea will reduce its key rate a half-point to 3.5 percent, a three-year low, according to 10 of 16 economists surveyed by Bloomberg News. Taiwan’s central bank may trim its benchmark to 2.25 percent from 2.75 percent, the biggest cut since September 2001, a separate survey showed. The Bank of Korea meets about 9 a.m. in Seoul and a decision is due before 11 a.m. local time. The Central Bank of the Republic of China (Taiwan)’s board gathers at 3:30 p.m. in Taipei and announces its verdict at 4:20 p.m. Taiwan and South Korea have joined policy makers globally in pumping funds into their financial systems, slashing borrowing costs and increasing government spending to fight a deepening economic slump. South Korea plans a 14 trillion won ($10 billion) stimulus in 2009. Taiwan will spend an extra NT$400 billion ($12 billion) over the next four years, including building new bridges and highways and providing shopping vouchers.

New Zealand November House Sales Plunge 45.4%, Institute Says
New Zealand home sales plunged in November as a contracting economy and tighter credit deterred buyers. A total of 4,279 homes were sold last month, down 45.4 percent from the same month in 2007, the Auckland-based Real Estate Institute of New Zealand Inc. said today in an e-mailed report. The median house price dropped 4.1 percent from a year earlier to NZ$337,500 ($183,000). Home sales are near an 18-year low, adding to signs the nation’s first recession in 10 years will be prolonged by the effects of a global credit freeze on bank lending and consumer spending. Reserve Bank of New Zealand Governor Alan Bollard has lowered the benchmark
lending rate by 3.25 percentage points since July to try to kick-start the economy.

ECONOMY HIGHLIGHTS

Blanchflower, BOE’s ‘Cassandra,’ Leaves After Winning Battle David Blanchflower, the first Bank of England official to predict the recession, plans to step down in May after winning a year-long campaign to take an ax to interest rates. Blanchflower, 56, called for rate cuts every month since October 2007, arguing that weakness in the labor market warranted a stronger response from the Monetary Policy Committee. While his push put him at odds with Governor Mervyn King, the
economy is now contracting and the Bank of England has reduced the benchmark rate three times in as many months to a five-decade low of 2 percent. “The important thing now is that the MPC understands the severity of the situation. It would have been worse had they continued to bury their heads in the sand.” Blanchflower’s decision to leave after his term expires will deprive the Bank of England’s ninemember board of its most vocal dissenter and a job-market economist at a time when unemployment is rising the most since 1992. Since October 2007, he voted against
King nine times and was the lone rate-cut advocate on seven occasions.

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11 December 2008 Newz Bits Thursday, 11 December 2008 Asian Markets

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