December 22, 2008 Daily Highlights

December 23, 2008 at 3:18 am Leave a comment

MARKET REVIEW

KLCI Update
The KL Composite Index had previously gained more than 28 points for the week-todate. Positively, the selling pressure appears well absorbed. The benchmark index was in negative territory for the better part of the day but losses were fairly limited. The KLCI ended the day down by just about four points at 876.4. In all, it had a pretty good week, gaining some 2.8%. Market breadth was also in the red throughout the day, improving somewhat towards the end. At the close, the number of losing stocks was just marginally ahead of gaining ones. Some of the big losers were Shell, Sime Darby, Tenaga Nasional and Telekom Malaysia. Market volume contracted from the previous day’s level to about 387 million shares. KNM was the most actively traded stock for the day. Other actives include Resorts World, MRCB and Lion Industries. Lafarge Malayan Cement, Tanjong plc and MISC were among the top gainers on Friday.

Regional Update
China’s stocks fell for the first time in six days, led by financial companies, on concern investors will flood the market with previously untraded shares as lock-up periods expire. China Pacific Insurance (Group) Co., the country’s third- largest insurer, sank 5.1 percent after saying the amount of shares available for trade will more than double on Dec. 25. Investors will be allowed to sell shares in Chinese listed companies worth about 3.46 trillion yuan ($506 billion) next year, Beijing Youth Daily reported today. That’s about a quarter of the nation’s current market capitalization. China Oilfield Services Ltd. retreated 5.8 percent after the price of crude lost 27 percent last week.

US Stocks
U.S. stocks posted the first back-to- back weekly gains in three months as the Federal Reserve reduced interest rates to a record low and President George W. Bush granted emergency loans to General Motors Corp. XL Capital Ltd. and Macy’s Inc. surged more than 24 percent as the central bank cut the main U.S. rate to as low as zero and pledged to “employ all available tools” to end the yearlong recession. GM jumped 23 percent yesterday as Bush gave the automaker and Chrysler LLC up to $17.4 billion and said the companies must restructure. The Standard & Poor’s 500 Index rose 0.9 percent to 887.88. The measure, which has increased 18 percent since its 11-year low on Nov. 20, is still down 40 percent in 2008. The Dow Jones Industrial Average slipped 0.6 percent to 8,579.11 this week.

MEDIA HIGHLIGHTS

Positive outlook for bond market, says BPA Malaysia
Malaysia will see a sustained pace of bond issuances next year with a possible increase in Malaysian Government Securities (MGS) issuances if the government persist with large development projects, said Bond Pricing Agency Malaysia Sdn Bhd’s (BPA Malaysia) head of market development Mohd Shaharul Zain. “A lot of bond issuances for major infrastructure arose out of government policy-making with regards to privatisation and national infrastructure. “If the government is going to pump prime with big projects, they will have to come to the market for funding,” Shaharul said, adding that government-backed projects typically have higher ratings. Credit quality was a key concern for investors looking to buy issuances with good ratings including MGS, corporate and government bonds, Shaharul told reporters at the launch of BPA Malaysia’s Bond Index Series, Fiix, on Friday.

BOJ cuts key interest rate to 0.1% from 0.3%
Bank of Japan cut its key policy rate to 0.1% on Friday and took other steps to ease corporate credit strains, as sharp yen rises and crumbling global demand hit an economy already in recession. The decision, which follows Tuesday’s dramatic rate cut by the Federal Reserve, was made by a vote of 7-1. Board member Tadao Noda voted against the rate decision, which takes effect immediately. BOJ Governor Masaaki Shirakawa will hold an embargoed news conference later in the day, with his comments expected to come some time after 4.15pm (0715 GMT). Japan, like the United States, is already in recession as companies such as carmakers Toyota and Honda slash output as customers close their wallets worldwide. The Fed’s rate cut, which brought down US rates to 0%-0.25%, and the yen’s rise to a 13-year high against the dollar have heightened calls from within the government and markets for the BOJ to further ease credit to help the economy.

Drop in building material prices benefits contractors and Govt
THE slump in building material prices will not only benefit contractors but also save the Government a significant amount of money. In the middle of this year, the Government agreed to include the variation of price (VOP) clause into design-andbuild projects on a 50:50 basis instead of limiting it to conventional contracts. The list of claimable items was expanded to 11 from five previously due to the escalating prices of building materials. Since then, these prices have declined significantly. Master Builders Association Malaysia president Ng Kee Leen said the VOP clause allowed either party to claim back any cost savings or shared any cost increases.
“The Government can claim back from contractors if the building material prices had fallen below the base price as at Jan 1, 2008,” he told StarBiz. “It is only fair that the Government gets compensated when prices come down (below base) and vice versa for the contractors.” Profit margins were little impacted as these were accounted for in the project bids and contracts, he added.

Banks remain stringent despite cut in reserve requirement
Although the recent 50-basis-point cut in the statutory reserve requirement (SRR) is designed to lower the cost of funds, banks are still stringent and selective in their lending activities. RHB Research Institute head Lim Chee Sing said whether banks would lend more depended on the risk appetite and quality of potential borrowers. “The cut in SRR does not necessarily mean more lending. This is particularly the case when the banking system is still liquid with a loan-deposit ratio of 75.3% as at end-October,” he said in an email reply to StarBiz. “In terms of lending activities, we at RHB are still active but are more selective in terms of our risk taking. In other words, the additional amount released from this SRR cut can be used to lend out to industries that are still doing relatively well or to lower-risk consumer lending like mortgages.’’ OCBC Bank (M) Bhd head of treasury Gan Kok Kim said the cut in the SRR would mean more funds were now free to be used by banks for their business activities.

Aid to Homeowners May Double Under Bush-Backed Loan Initiative
The mortgage-industry effort to stem foreclosures aims to double the number of borrowers getting help next year, as Democrats call for using taxpayer money to address the crisis. The Hope Now Alliance, a group created at the behest of Treasury Secretary Henry Paulson last year, expects to modify about 2 million mortgages next year, according to a report to be released today in Washington.

Lowest Treasury Yields Lure FAF Advisors, Hoisington (Update1)
The world’s biggest bond investors can’t stop buying Treasuries even though yields are approaching zero and the government is preparing to sell a record amount of debt to pay for the swelling budget deficit. The worst economy since World War II, creditmarket losses exceeding $1 trillion and the biggest drop in the Standard & Poor’s 500 Index since 1931 mean yields may continue to decline as investors flee all but the safest securities. Investors were willing to lend money to the Treasury at zero percent interest this month to safeguard their principal from wider losses.

MEDIA HIGHLIGHTS

Yen Weakens as Carmaker Loans Revive Confidence in Carry Trades The yen weakened against the euro and the dollar as Japanese exports tumbled and U.S. government aid to General Motors Corp. and Chrysler LLC increased demand for so-called carry trades. The Japanese currency dropped to the lowest level versus the dollar in almost a week after Bank of Japan Governor Masaaki Shirakawa expressed concern over the yen’s gains as exports plunged by a record in November. The dollar weakened against the euro before data this week that may show U.S. consumer spending, home sales and durable goods orders declined.

DBS Plans S$4 Billion Rights Offering at 45% Discount (Update3)
DBS Group Holdings Ltd., Southeast Asia’s biggest bank, is seeking S$4 billion ($2.76 billion) in a rights offering to weather a credit crisis that’s forced it to cut jobs for the first time since 2001. DBS will issue one new share for every two held by existing investors at S$5.42 apiece, according to a statement today. That’s a 45 percent discount to Dec. 19’s closing price of S$9.85. DBS tumbled as much as 11 percent in Singapore trading to a 5 1/2-year low after a share suspension was lifted.

ECONOMY HIGHLIGHTS

German Import Prices Drop, Led by Decline in Oil Cost (Update1) German import prices fell in November by the most in almost five years on energy products, adding to evidence that cost pressures in the euro area’s largest economy are easing. Prices dropped 1.3 percent in November from a year earlier after rising 2.9 percent in October, the Federal Statistics Office in Wiesbaden said today. Economists expected a drop of 0.2 percent from last year, a Bloomberg News survey of 14 analysts showed. In the month, prices fell 3.4 percent, the second biggest drop on record after last month’s 3.6 percent decrease.

Holiday Shoppers in U.S. Focus on Bargains, Limit Gifts to Kids
Cash-strapped shoppers were searching for bargains in the final weekend before Christmas and some were limiting their gift-giving to children in what may have been a make-or-break two-day period for U.S. retailers. “We’re buying less stuff for each other and just overall,” Dennis Decker, a 47-year-old landscape architect, said Dec. 20 outside a Kohl’s in Douglasville, Georgia. “Usually I buy stuff for my sisters. This year I’m just going to make them some Christmas ornaments.” Sales figures for the weekend will be released later this week. Consumers who waited for deeper discounts probably were rewarded as retailers sought to clear inventory and salvage what may be the worst holiday season in 40 years, even though their fourth-quarter profits may suffer as a result.

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Malaysia Economic Flash – Further Moderation in November CPI Inflation Increases Chance of At Least Another 50bps Rate Cut in 1Q09 23 December 2008 Newz Bits

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