Business & Markets 2013
Written by Surin Murugiah of theedgemalaysia.com
Saturday, 05 January 2013 12:15
KUALA LUMPUR (Jan 5): The FBM KLCI could stage a recovery next week to climb to a fresh record high on the back of most global markets ending last Friday positively on improved economic data from the US.
World shares rose on Friday and the S&P 500 index marked its highest close in five years after data on the services sector and labor market data signaled the U.S. economy continues its steady but slow recovery, while the yen hit a 2-1/2-year low against the dollar, according to Reuters.
European equities rose, partly on signs that Europe may be through the worst of its economic slump, while growth in the world's private sector businesses hit a nine-month high at the end of last year according to a JPMorgan gauge, it said.
Affin Investment Bank Bhd vice president and head of retail research Dr Nazri Khan said that Local equity markets were expected to remain firm driven by resolution of USA fiscal cliff economic uncertainties, improving economic backdrop in Japan and China.
He said although the USA fiscal cliff concern had subsided and focus was now turning to the USA early debt ceiling battle, any selling was likely to be corrective, modest, temporary and thinly traded.
“Having said that, we admit the last straight six week rally of more than 100 points has made FBMKLCI technically overbought and vulnerable to short term profit-taking, should they be first sign of bearish factors which is unlikely at this moment as market can remain overbought for longer period of time.
Nazri said that as for stock picks, the market will mostly be on the lookout for consumer stocks ahead of the holiday shopping activity in Chinese New Year and Thaipusam.
“Hence, we feature UMW, Tan Chong, Oriental, Zhulian and Old Town as our Top Five Picks for next week,” he said.
Among the stocks that could be in focus next week are ADVENTA BHD [], Genting Malaysia Bhd, Lion group of companies and TENAGA NASIONAL BHD [].
Adventa Bhd was queried by Bursa Malaysia Securities over the unusual market activity in the trading of the company’s shares last Friday.
Bursa said that the query was regarding the sharp rise in the price and volume of the shares of the company.
The Edge weekly in its latest edition reported that New York governor Andrew M Cuomo’s State of the State address this Wednesday could have s significant impact on Genting Malaysia, which has been expanding its presence in the US.
It said this time last year, Cuomo named the Genting group as the state’s partner to build a US$4 billion integrated convention centre, which will be the nation’s largest, at the Aqueduct Racetrack in Queens.
This address to members of the New York Senate, state assembly and the general public also marks the start of the new legislative session in New York
Last year, the state legislature passed a constitutional amendment to allow as many as seven commercial casinos in New York, but the bill must be passed again in the upcoming legislative session, and thereafter approved in a public referendum, according to the American media, said the Edge.
The Edge weekly also reported that the proposed restructuring at the Lion group of companies, aimed at reducing debts and streamlining of the conglomerate’s diversified business interests, was a prelude to a separate reorganization ahead of the group’s planned partial divestment of its steel business.
“This is the first phase and the next move will be to put the entire steel business into a special purpose vehicle to make way for a strategic investor,” the Edge cited a financial executive with long ties to the group as saying.
Tenaga could benefit from China's decision to remove tariffs on crude coal exports as oversupply in the market may push coal prices lower, analysts said.
Effective Jan 1, China's National Development and Reform Comission -- the country's economic planner -- ended its one-year control on thermal coal prices in a bid to boost coal and power market reforms. The move was also a means of solving the ongoing confrontation between coal suppliers and power producers in China.
"The removal of the tariff could result in a surge in China's coal exports and drag down global coal prices," an official at Shanxi Coal Imports and Exports Group Co told the China.org.cn news portal last week.
According to a report titled No Matter Watt by MIDF Research last Friday, should the current downtrend in coal prices persist, TNB will be able to enjoy substantial cost savings going forward.
"Based on our sensitivity analysis, every US$10 per MT drop in the average coal price translates into 7%-8% savings in TNB's fuel costs, vice versa," the report said.
TNB estimates that the average coal price for its FY13 is at US$100 per metric tonne (MT) which was higher than the coal reference price of US$85 per MT.