December 17, 2008 Daily Highlights

December 19, 2008 at 7:23 am Leave a comment

MARKET REVIEW

KLCI Update
Share prices on Bursa Malaysia ended mixed for the second consecutive day yesterday amid sustained interest led by key financial stocks, dealers said.They said investors seemed to have renewed their positions, accumulating stocks which were considered undervalued following the recent market selloff.The benchmark Kuala Lumpur Composite Index (KLCI) closed 8.33 points higher at 854.80 after opening 0.04 point higher at 846.51 in the morning.

Regional Update
Asian stock markets were mixed yesterday as analysts predicted the US Federal Reserve would cut interest rates to almost zero in a new move to tackle the world economic downturn. Short-term investors maintained a cautious stance ahead of the FOMC’s decision on interest rates late Tuesday,” one Malaysian dealer told Dow Jones Newswires. “Investors will continue to look for direction from US stocks.in Japanese shares eased after Wall Street retreated overnight. The Nikkei dropped 96.64 points, or 1.12 per cent, to 8,568.02. Share prices in Sydney closed down 1.0 per cent with the energy and materials sectors hit hardest.The benchmark S&P/ASX200 lost 35.2 points to 3,556.2, while the broader All Ordinaries dropped 36.8 points to 3,498.9. Shanghainese shares closed up 0.54 per cent, reversing early losses as carmakers and property
developers advanced on hopes of further government support measures. The benchmark Shanghai Composite Index rose 10.63 points to 1,975.01.

US Stocks
US stocks soared Tuesday as investors cheered a surprise Federal Reserve decision to cut its key rate to near zero and its pledge of more steps to revive economic activity.The Dow Jones Industrial Average leapt 359.61 points (4.20 per cent) to close at8,924.14.The Nasdaq jumped 81.55 points (5.41 per cent) to 1,589.89 and the Standard & Poor’s 500 broad-market index vaulted 44.61 points (5.14 per cent) to 913.18.Gains accelerated after the Fed slashed its base lending rate to virtually zero while pledging to take further actions to get credit flowing and revive an economy in the worst recession in decades.The central bank’s Federal Open Market Committee lowered its target federal funds rate from 1.0 per cent, already at a historic low, to a range of zero to 0.25 per cent.The move was more aggressive than most investors had anticipated, and prompted a drop in the dollar while stocks and bonds rallied.“Today’s Fed actions have been forceful and effective,” said Brian Bethune, economist at IHS Global Insight.

MEDIA HIGHLIGHTS

Property prices expected to fall 5-10pc next year
PROPERTY prices will fall by 5-10 per cent from the first quarter of next year as a slower economy cools demand, a property consultant said.The slump in prices will be for properties across the board, Association of Valuers & Property Consultants in Private Practice Malaysia (PEPS) president James Wong Kwong Onn said.He said properties below the RM300,000 radar and luxury condominiums tagged at above RM750,000 are already hit from a slower economy.Wong believes there will be a correction in the housing market next year.”There will be fewer launches due to poor demand. Prices will fall, but gradually, due to lack of confidence in the market,” Wong said after a media briefing on the 2nd Malaysian Property Summit 2009 in
Kuala Lumpur yesterday.

Gamuda feels the heat
Gamuda Bhd’s first quarter earnings to be announced today will be lower, and this will reflect the builder’s performance next year, its chief said. Managing director Datuk Lin Yun Ling warned that profits in the first quarter ended October 2008 will dip as projects get delayed.Accordingly, Gamuda expects to pay a smaller dividend in 2009, Lin told reporters after its annual shareholders’ meeting in Shah Alam yesterday.”We expect a drop in earnings due to project delays. What we are going to show tomorrow will be quite reflective of the whole year. Likewise, dividend will also be lower,” he said. The slowing global economy and land acquisition problem
will delay Gamuda’s projects such as Vietnam’s new central district in Hanoi and the RM12.5 billion double-tracking rail development back at home.Higher income from its Middle East projects will offset any drop in turnover but not earnings because of low margins from the jobs there, Lin said.Gamuda made a RM325.08 million net profit in the year ended July 2008, up from RM185.42 million previously. Group revenue rose to RM2.4 billion from RM1.51 billion.Lin said despite troubles in the global economy, Gamuda will continue to work on its Yen So Park project in Hanoi.”The financial crisis will delay things in (Hanoi) for one to two years but it will not have an impact over a 12-year development period,” he said.Part of the Hanoi project required Gamuda to build a sewerage treatment plant for the Vietnamese government in return for 202 hectares of development land.

Goldstar claiming RM520mil from Proton for breach of contract
Proton Holdings Bhd is being sued for alleged breach of contract by its former Chinese joint-venture partner, Goldstar Heavy Industrial Co Ltd, in the Dongguan Intermediate People’s Court, Guangdong Province.Goldstar is seeking about one billion yuan (RM520mil) in compensation from the lawsuit, according to a court notice here.Under the joint venture that was then proposed, a plant was to be set up in Humen of Dongguan.Proton said in a statement to StarBiz yesterday that Goldstar failed to obtain a licence for the joint venture, frustrating Proton’s initiatives to start manufacturing cars in China.Goldstar’s lawsuit contravenes “the agreed
arbitration process,” Proton added.Both Proton and Goldstar had agreed to arbitration which is expected to be held in Singapore in March.

MPHB to sell Magnum non-gaming assets
Multi-Purpose Holdings Bhd (MPHB) will acquire the non-gaming assets of Magnum Corp Sdn Bhd for a purchase price of RM550mil.In a three-step corporate exercise, MPHB will buy Magnum’s non-gaming assets, keeping commercial properties or land bank in strategic locations in Kuala Lumpur. It will then sell the assets it does not want to Lawrence Lim Swee Lin, a director of Magnum.It allows MPHB “to cherry pick certain non-gaming assets” from the Magnum group,” MPHB told Bursa Malaysia yesterday.MPHB had on June 17 completed the privatisation of Magnum Corp via a selective capital repayment. Upon completion of the privatisation, MPHB
transferred its entire equity interest in Magnum Corp to Magnum Holdings, a joint venture company established by Magnum Corp and Asia 4D Holdings Ltd.

Fed Cuts Rate to as Low as Zero, Shifts Policy Focus
The Federal Reserve cut the main U.S. interest rate to as low as zero for the first time and shifted its focus to the amount and type of debt it buys, seeking to revive credit and end the longest slump in a quarter- century. The Fed “will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Federal Open Market Committee said today in a statement in Washington. “Weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”

Treasuries Fall as Asian Stocks Extend Global Gains on
Treasuries fell, pushing up yields from record lows, as stocks rallied following the Federal Reserve’s cut in its benchmark interest rate to as low as zero for the first time.
Thirty-year bonds led the decline after the Fed said it may purchase lower-rated securities to help ease the credit crunch and expand a planned program to buy mortgage-backed debt of government agencies. The Fed said it will target a federal funds rate of between zero and 0.25 percent and also lowered the rate on direct loans to banks and securities dealers to 0.5 percent. “The rise in Asian equities is spurring some selling of Treasuries,” said Kenichiro Ikezawa, who oversees about $3 billion as a fund manager at Daiwa SB Investments Ltd. in Tokyo. “This selling may be temporary as the short-term outlook for U.S. debt is still bullish, given the Fed’s
quantitative easing stance.”

Bank of Japan Rate-Cut Speculation Surges as Recession Deepens
Expectations that the Bank of Japan will cut interest rates doubled yesterday after the government urged the central bank to do more to support the ailing economy.
Investors saw a 40 percent chance that the policy board will reduce the overnight call rate from 0.3 percent at this week’s meeting, according to calculations made by JPMorgan Chase & Co. based on interest-rate swaps trading, up from 20 percent earlier in the day. The meeting ends on Dec. 19. Governor Masaaki Shirakawa has indicated he is reluctant to lower the rate again after cutting it for the first time in seven years in October.

Hong Kong Monetary Authority Cuts Base Rate to 0.5%
The Hong Kong Monetary Authority lowered its base rate to 0.5 percent from 1.5 percent after the U.S. Federal Reserve reduced its benchmark interest rate to as low as zero. The “HKMA hopes Hong Kong lenders can make use of the loose monetary policy to help support the economy,” Joseph Yam, HKMA’s chief executive, told reporters in Hong Kong today. The impact of U.S. rate cuts is diminishing as rates are close to zero, he said. The Fed cut its benchmark interest rate to a target range of zero to 0.25 percent and said it will buy debt as the next step in combating the longest recession in a quarter-century and reviving credit. The HKMA in October narrowed the
gap between its base rate and the U.S. Federal Funds Target Rate to help boost liquidity in the financial system. The base rate is 50 basis points above the Fed’s rate, compared with 150 basis points previously. The city’s central bank has added liquidity into the market by buying U.S. dollars with Hong Kong dollars. The injections have also prevented the city’s currency from strengthening beyond its fixed exchange rate.

U.S. Economy: Consumer Prices, Housing Starts Slide
Consumer prices tumbled the most on record in November, and builders broke ground on the fewest new homes in at least half a century, as a deepening economic contraction raised the risk of deflation. The cost of living dropped 1.7 percent last month, more than economists had forecast, a Labor Department report showed in Washington. Excluding food and energy, so-called core prices were unchanged from a month earlier. Housing starts last month fell 18.9 percent to an annual rate of 625,000, the Commerce Department said. Worsening residential construction means the economy will likely shrink by 6 percent or more this quarter, the most since the early 1980s, some analysts said. The figures helped cement the case for the Federal Reserve to lower its key interest-rate target to a record low today and signal willingness to use all “available tools” to restore growth and avert a depression.

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17 December 2008 Newz Bits 18 December 2008 Newz Bits

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