Written by Chong Jin Hun
Thursday, 20 May 2010 07:56
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KUALA LUMPUR: The key 1,300 psychological level for the FBM KLCI will have to hold on Thursday, May 20, in the face of continued weakness in US markets and Europe. Falling below the 1,300 level could spark off more selling pressure and spread to mid-cap and lower-liner stocks.
A total of RM26.27 billion in market capitalization was erased over four days up to Wednesday. This comes despite the stronger on-year earnings reported by most companies but investors could bargain hunt for oversold stocks and have a longer term fundamental view.
On Wall Street, stocks fell on Wednesday as Germany's unilateral action to ban specific trades on some stocks and bonds sparked a fresh wave of uncertainty and risk aversion among anxious investors, according to Reuters.
The Dow Jones industrial average slid 66.58 points, or 0.63 percent, to 10,444.37. The Standard & Poor's 500 Index fell 5.75 points, or 0.51 percent, to 1,115.05. The Nasdaq Composite Index lost 18.89 points, or 0.82 percent, to 2,298.37.
On the outlook for Bursa Malaysia, analysts took a longer term view, believe the FBM KLCI had peaked at 1,349.92 and the risk-reward ratio in the local stockmarket is high (for risk) and low (for reward).
"Weakness in the mid-cap and the lower-liner market may not augur well for investors in the long run. Artificial “holding up” of the FBM KLCI on some selective components may be eventually futile as the broader market caves in from global volatility.
"Remain vigilant of a potential burgeoning and sustained bear trend in the coming weeks," Maybank Investment Bank Bhd head of retail research Lee Cheng Hooi wrote in a note to clients.
Stocks to watch are PPB GROUP BHD [], which saw nearly RM1 billion wiped off from its market capitalization after Wilmar International’s Indonesian operations faced allegations of tax fraud.
Others are PETRA PERDANA BHD [], MEDIA PRIMA BHD [], KENCANA PETROLEUM BHD [], KKB ENGINEERING BHD [], and Tradewinds Corp Bhd.
Wilmar International Ltd refuted claims that it colluded with Indonesian tax officials to obtain tax breaks worth 3.6 trillion rupiah (RM1.24 billion), with its major shareholder, PPB Group stating that the claims which were made by politicians, were still uncertain as investigations by Wilmar had yet to be concluded.
The differences among shareholders in Petra Perdana flared up again. The only difference is that the battle has now shifted to its 29.6% associate company, PETRA ENERGY BHD [].
Meanwhile, Kencana said its planned collaboration with US-based Global Offshore Malaysia Sdn Bhd was called off as both parties could not arrive at mutually agreed terms.
News reports earlier this year had indicated that Kencana would acquire a 45% stake in Global Offshore which was anticipated to clinch a RM350 million job from Petroliam Nasional Bhd.
Media Prima Bhd posted a first quarter net profit of RM45.57 million versus a net loss of RM23.23 million a year earlier, as its top line rose significantly after consolidating the entire revenue of subsidiary The New Straits Times Press Malaysia Bhd (NSTP).
KKB Engineering Bhd was appointed as a sub-contrator to undertake some RM20 million worth of structural steel works for the MEMC Merdeka Project within the Sama Jaya Free Industrial Zone in Kuching.
Sarawak-based KKB said it had received a notice-to-proceed letter from CH2M HILL Malaysia Sdn Bhd for the job.
Diversified Tradewinds Corp Bhd's first quarter net profit surged to RM16.82 million from RM3.93 million a year earlier, boosted by higher revenue, besides a larger contribution from its associate companies.
Tradewinds’ revenue in the quarter ended March rose 12.8% to RM125.24 million from RM110.99 million, helped mainly by its financial services and hotel operations.
RHB CAPITAL BHD [] (RHBCap) has set another record profit target of RM1.4 billion for the financial year ending Dec 31, 2010 (FY10) after maintaining the over-RM1 billion mark in FY09 despite operating in a tougher economic environment.
Cash-rich GENERAL CORPORATION BHD [] (GCorp) has entered into a formal agreement with its major shareholders, Tan Sri Low Keng Huat and his son Datuk Marco Low Peng Kiat, for them to acquire the group's entire business and undertaking for RM505.04 million, representing RM1.70 per share.