Business & Markets 2013
Written by Surin Murugiah of theedgemalaysia.com
Saturday, 02 March 2013 11:56
KUALA LUMPUR (March 2): The FBM KLCI could be in a for a volatile ride next week against the backdrop of a variety of issues, both foreign and domestic, likely to have an impact on investor sentiment.
News that President Barack Obama last Friday signed an order that starts putting into effect across-the-board budget cuts known as the "sequester" after he and congressional leaders failed to find an alternative budget plan resulting in hefty spending cuts could be a negative for Wall Street and global markets, unless employment data due out next week in the US lifts sentiment.
On the local front, the February reporting season was another big letdown, according to CIMB Research’s Terence Wong.
In a report last Friday, Wong said not only did the revision ratio deteriorate further but FY12 EPS also ended at only 3.6%.
This means corporate Malaysia's EPS growth has been in single digits for 2 straight years. FY13 EPS growth is estimated at 9%, he said.
“As a result, we lower our end-2013 KLCI target from 1,670pts to 1,640pts even though our P/E target is raised slightly from 13.3 times to 13.5 times, based on an unchanged 5% discount to the 3-year moving average P/E.
“Maintain Neutral on Malaysia. Election risks remain our key concern. We continue to prefer the defensive high-yielding brewery, REIT and utilities sectors in the pre-election period,” said Wong.
Among the stocks that could be in focus next week are AFFIN HOLDINGS BHD [], DRB-HICOM BHD [], Bumi Armada Bhd, Yinson Holdings, Perisai Petroleum, HONG LEONG BANK BHD [] and PLANTATION []-related counters.
The Edge Weekly in its latest edition reported that Affin Holdings Bhd and the shareholders of Bank Muamalat Malaysia Bhd have not been able to come to an agreement on the acquisition of a stake in the latter.
Citing an executive, the Edge said “talks on the deal will likely be extended, with the worst case scenario being to call it off”.
It quoted another executive as saying that the talks were “heading nowhere”, because the parties were not able to agree on the size of the stake as well as the price.
“Affin is keen on a controlling stake.. .but DRB-Hicom [Bhd] still wants to hold a meaningful stake in the Islamic bank as well,” it quoted the executive as saying.
The Edge also reported that Bumi Armada’s recent floating, production, storage and offloading (FPSO) contract win in India and its hunger for more show that demand for FPSO vessels is still strong despite the entry of new players such as Yinson and Perisai Petroleum.
The Edge said key FPSO players such as Bumi Armada and Yinson have been successful overseas, despite not getting long-term charter hire contracts in Malaysia.
Hong Leong bank Bhd (HLB) has established a commercial- banking unit in Cambodia. The move will see the Malaysian entity starting operations in the Indochina country within the first half of this year.
In a statement to Bursa Malaysia Friday, HLB said it had yesterday (February 28) obtained the certificate of incorporation for its wholly-owned subsidiary Hong Leong Bank (Cambodia) PLC (HLBCAM) from Cambodia's Commerce Ministry.
Meanwhile, plantation-related stocks could come under the spotlight after Malaysian palm oil futures inched lower on Friday, extending losses into an eighth straight session as weak exports continued to weigh and
Focus is also shifting to Bursa Malaysia's annual palm oil conference next week, where leading industry analysts including Dorab Mistry and James Fry will present their price outlooks.