Written by Surin Murugiah
Thursday, 20 August 2009 07:39
KUALA LUMPUR: Investors will continue to be cautious on Thursday, Aug 20 despite the better closing on Wall Street as they focus on the China markets, where the Shanghai Composite Index tumbled 4.3% the previous day.
Overnight, Wall Street closed higher shaking off a slide in China's equity market, as investors responded favourably to a surprising drop in crude oil stockpiles that might suggest an improving demand outlook.
The Dow Jones industrial average ended up 0.66% to end at 9,279.16. The Standard & Poor's 500 Index rose just 0.69% to 996.46. The Nasdaq Composite Index added 0.68% to 1,969.24.
On Bursa Malaysia, investors would look for directions from China. Worries that stocks might have run ahead of fundamentals have re-emerged in recent days, leading to the high volatility at global equity markets.
Investors would likely stay on the sidelines and there could also be some extended profit taking, though at a smaller scale, as the local market had run up less than its regional counterparts.
The local economic landscape is still cautious despite the second consecutive month in the decline in the consumer price index wile manufacturing sales and jobs creation in the manufacturing sector have shown some recovery on a on-month basis.
Stocks to watch include steel manufacturers Perwaja and Kinsteel, Transmile and Mah Sing.
Kinsteel and Perwaja both reported net losses in their 2Q ended June 30, 2009. Kinsteel had a net loss of RM7.89 million compared to net profit RM103.32 million a year ago. Perwaja posted net loss of RM84.91 million in 2Q09 from net profit of RM147.4 million a year ago.
Losses were mainly due to sharp contraction in steel demand and prices which contributed to the sever margin squeeze. However, both companies are cautiously optimistic for the current financial year despite uncertainties in the economic climate, as implementation of government spending under the stimulus package commences.
Improvement in steel demand would depend on the effects of government stimulus package, continuous stabilisation of financial systems and return of consumers’ confidence.
Mah Sing Group achieved RM543 million sales in just seven and a half months this year, exceeding its full year target of RM453 million by 1.2 times. Strong sales indicated that the local property market was resilient, adding that low interest rates, a buoyant stock market and better consumer sentiments have combined to boost demand for PROPERTIES [ PROPERTIES 769.690 -16.040 (-2.041%) Stock Summary
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It also said the property market was gaining momentum for a likely up cycle in the second half of 2010.
Malaysian Airline System's aircraft maintenance unit proposed to buy Transmile Group’s engineering unit. MAS said the projected 15% increase in additional capacity to its unit, Malaysian Aerospace Engineering Sdn Bhd (MAE) would contribute towards MAE’s growth plans and give it better economies of scale.
”The additional capacity will also serve MAE well as it actively pursues third party Maintenance, Repair and Overhaul (MRO) businesses with target revenue of RM500 million this year,” it said.
Carmaker Tan Chong’s net profit for 2Q09 fell 50% to RM34.59 million from RM68.14 million a year ago, in line with the tough operating environment for the automotive industry.
However, the company said orders for CKD (completely knocked-down) units had returned to normal since June to meet deliveries in October-November.
“Negative production variances in Q109 and Q209 are likely to reverse in Q409 once production has increased significantly to meet bookings. In the meantime, it would be challenging to meet deliveries in Q3 due to the higher bookings,” it said.