Written by Joseph Chin
Tuesday, 25 May 2010 06:38
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KUALA LUMPUR: With the overnight fall on Wall Street, key regional markets will not be spared on Tuesday, May 25 and investors can expect volatile trade with heavy downside pressure.
With the FBM KLCI just a hair breadth away from dipping into the red year-to-date on Monday, barely 0.07% higher when it closed at 1,273.69 on Monday, chances are that it could slip into the negative zone on Tuesday.
MIDF Research head Zulkifli Hamzah said concomitant with the decline in the FBM KLCI, the ringgit had depreciated and the yield on risk-free government papers surged. This means that portfolio funds are exiting the country and taking profit on the currency gain, he said.
“How much of the outflow is due to the liquidation in the stock market cannot be ascertained, but the bottomline is Malaysia is a “net sell” market as far as the foreign funds are concerned. This trend could persist over the next few weeks. That means it is still too early to load up in an aggressive way,” he said.
On Wall Street, stocks slid on Monday, May 24 driving the Dow to its lowest level since Feb 10 as fresh signs of Europe's banking problems emerged, according to Reuters.
Concerns about Europe's banking system continued to weigh on markets, after the Bank of Spain took over a small savings bank, CajaSur, over the weekend, increasing anxiety among investors worried about debt problems spreading throughout financial markets, according to Reuters.
The Dow Jones industrial average dropped 126.82 points, or 1.24%, to 10,066.57. The Standard & Poor's 500 Index slipped 14.04 points, or 1.29%, to 1,073.65. The Nasdaq Composite Index fell 15.49 points, or 0.69%, to 2,213.55.
At Bursa, stocks to watch include SIME DARBY BHD [], HONG LEONG BANK BHD [], banks, PPB GROUP BHD [], UNIMECH GROUP BHD [] and Star Publications (Malaysia) Bhd’s
Sime Darby hit a 10-month low of RM7.81 on Monday and saw RM1.62 billion erased from its market capitalisation yesterday as investors sold on worries about more provisioning in its energy and utilities (E&U) division.
CIMB Equities Research had maintained its trading sell recommendation on Sime Darby with a target price of RM8.35, which factored in an unchanged 20% discount to the group’s sum-of-parts value.
Banks may come under some selling pressure following concerns about the weaker equities market. Analysts said investors could sell banks as they are the proxy to the market sentiment, despite the firm economic fundamentals and stronger corporate earnings.
Hong Leong Bank Bhd posted net profit of RM227.95 million, up 10.4% from RM206.5 million a year ago due to higher net interest income, a bigger share of profit from Bank of Chengdu and higher net income from its Islamic banking business.
HONG LEONG FINANCIAL GROUP BHD [] (HLFG) posted net profit of RM141.92 million in the third quarter ended March 31, up 7.5% from RM131.99 million a year ago, boosted by its investment banking division.
Revenue rose 3.1% to RM542.36 million while earnings per share were 13.7 sen. It declared a second interim dividend of eight sen per share less income tax and six sen per share tax-exempt.
PPB Group posted net profit of RM1.12 billion in the first quarter ended March 31, 2010, as earnings were boosted by the completion of disposal of the group's sugar-related assets compared with RM271.83 million a year ago.
The completion of disposal of the group's sugar-related assets in early January 2010 resulted in a gain of RM838 million recognised in the first quarter under review.
Unimech has set a dividend policy to distribute 30% of the group’s net profits to shareholders for the financial year ending Dec 31, 2010.
It said it had maintained a dividend paying practice since its listing on Bursa Malaysia in 2000, stressing the board of directors had taken into consideration the group’s future earnings growth and capital expenditure requirements for the upcoming years when setting the policy.
Star Publications (Malaysia) Bhd’s earnings doubled to RM37.82 million in the first quarter ended March 31, 2010, from RM18.26 million a year ago, underpinned by strong growth in advertising expenditure.
Pre-tax profit doubled to RM53.5 million while revenue rose 27% to RM230.58 million. However, when compared with the preceding quarter ended Dec 31, 2009, revenue declined by 26.7% to RM230.58 million from RM314.54 million. Pre-tax profit slipped 31.3% to RM53.5 million from RM77.86 million.
On its capital commitments, it said the contracted amount was RM14.96 million which included RM10 million relating to the balance subscription for the investment in a jointly controlled entity.
“The amount was supposed to be paid on or before May 16 but it has been deferred indefinitely pending review by the company and joint-venture partner,” Star Publications said.
MBM RESOURCES BHD [], a distributor and dealer of international vehicle brands in Malaysia, plans to spend a total of RM100 million on capital expenditure for the next three years to 2012 to expand its distribution network, said its managing director Looi Kok Loon.
Singapore's second-largest utility firm PowerSeraya Ltd, together with Malaysian parent YTL POWER INTERNATIONAL BHD [], is seeking to expand its operations, which could include selling utilities, fuel trading, and oil storage, in the region.