Business & Markets 2012
Written by Surin Murugiah of theedgemalaysia.com
Saturday, 09 June 2012 11:48
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KUALA LUMPUR (June 9): The FBM KLCI is likely to remain on tenterhooks next week as global uncertainties would keep sapping investors' confidence and appetite for riskier assets.
This despite the US stock market ending last Friday's session with its best weekly gains of the year in a rally late, according to Reuters.
The US markets recovered on speculation that Spain was expected to ask the eurozone on Saturday for money to bail out its banks.
Affin Investment Bank Bhd vice president and head of retail research Dr Nazri Khan said that going forward, he expects the FBM KLCI to trend lower following China unexpected cut of interest rates to shore up its economy and the USA Federal Reserve remained silent about the prospect of new monetary stimulus. "We believe [that] China's 25 basis-point cut in the lending rate (first time in for four years) has been taken by investors as greater headwinds for the second largest global economy," he said.
Further, US President Barack Obama stressed last Friday the US economy was "not doing fine", seeking to clarify his earlier comments about the health of the private sector that Republicans pounced on to try to paint him as out of touch, according to a Reuters report.
Meanwhile, Moody’s Investors Service said that as Spain moved closer to the need for direct external support from its European partners, the increased risk to its creditors may prompt further actions on the country’s ratings. Moody’s said last Friday that while Spain’s banking problem was not likely to be a major source of contagion to other euro area countries, the increasing risk of Greece’s withdrawal from the euro could have rating implications throughout the region. Furthermore, Spain's credit rating was slashed by three notches last Thursday by Fitch, which signalled it could make further cuts as the cost of restructuring the country's troubled banking system spiralled and Greece's crisis deepened.
Among the stocks that could be in focus next week are GENTING BHD , Yung Kong Galvanised Industries Bhd (YKGI), ESTHETICS INTERNATIONAL GROUP  Bhd (EIG) and DIJAYA CORPORATION BHD .
Reuters reported that gaming operator Genting said it had taken a stake in Australian casino operator Echo Entertainment, just as Echo's chairman unexpectedly resigned to avoid a damaging vote called by billionaire rival James Packer. Analysts speculated that Genting was preparing for an acquisition, having built up a war chest of S$3.9 billion (RM9.6 billion), and said Echo's casinos were in cities where Genting had attempted to win licences in the past, it said.
YKGI has entered into a Memorandum of Understanding (MoU) with Becker Industrial Coatings (M) Sdn Bhd (Beckers) with the aim of establishing a long-term strategic business partnership. In a filing to Bursa Malaysia last Friday, YKGI said the MoU between both the parties was towards implementation of sustainable solutions for the new colour coating line of YKGI.
EIG's 49.9%-owned associated company EIG Dermal Wellness (Thai) Co Ltd (EIGHT) has signed a distribution agreement with Davines. In a filing last Friday, EIG said the agreement grants to EIGTH the exclusive rights to distribute Davines hair care products in Thailand. It said the term of the agreement was for a period of ten (10) years and six (6) months, commencing from July 1, 2012 to Dec 31, 2022.
Meanwhile, Dijaya Corp’s unit Advent Nexus Sdn Bhd is acquiring freehold land with a building in Kuala Lumpur for RM54 million cash from MULTI-PURPOSE HOLDINGS BHD . The company in a filing last Friday said its unit had entered into a sale with MPHB to acquire the land and building in Section 19 in Kuala Lumpur.
On the rationale for the acquisition, Dijaya said it was in line with its direction of increasing its investment property portfolio that would provide it with long term stable and sustainable income stream. "With the prime location of the property, the group believes the property will be invaluable for the group to improve its profitability and thus shareholder value. This will in turn lead to greater prospective investors’ interest in the company thus enhance the liquidity of its shares," it said.