#Stocks to watch:* NV Multi, WCT, Tanjung Offshore, IJM Land

KUALA LUMPUR: Key Asian markets are expected to open higher on Monday, Oct 11, after the Dow Jones Industrial Average closed above the psychological important 11,000 mark last Friday.

The Dow Jones industrial average gained 57.90 points, or 0.53%, to close at 11,006.48. The Standard & Poor's 500 Index rose 7.09 points, or 0.61%, to 1,165.15. The Nasdaq Composite Index climbed 18.24 points, or 0.77%, to 2,401.91.

It was the first time the Dow closed above 11,000 since May 3.

However, investors have to be cautious as the higher close on Wall Street was due to positive economic news but investors pinned their hopes on anticipation the Federal Reserve could roll out for more stimulus.

Reuters reported while a loss of 95,000 jobs normally might be expected to hurt stocks, the market's desire for cheap money trumped concerns about the slow economy.

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Stocks to watch on Bursa Malaysia include WCT BHD [], TANJUNG OFFSHORE BHD [], glove makers and IJM Land.

WCT Bhd has secured a contract from Malaysia Airports Holdings Bhd (MAHB) to develop the new low cost carrier terminal (KLIA2) integrated complex, which will be undertaken on build-operate-transfer concession.The CONSTRUCTION [] cost of the integrated complex is estimated at approximately RM486 million.

WCT said the concession is for 25 years and may be extended for 10 years upon expiry. The development of the complex would be undertaken by a special purpose vehicle (SPV) in which WCT and MAHB will hold 70:30 equity interest.

Tanjung Offshore's unit Tanjung Kapal Services Sdn Bhd has been served with a notice of claim from Newfield Peninsula Malaysia Inc amounting to US$15.90 million.

The notice of claim was for damages to pipeline allegedly caused by one of Tanjung Kapal's vessels at the East Belumut Field, PM 323, offshore Malaysia.

The strengthening ringgit, rising latex prices and overcapacity in the industry are expected to translate into thinner margins for Malaysian rubber glove manufacturers.

IJM Corporation is evaluating various options about the liquidity of the shares of its 62.5%-subsidiary IJM Land Bhd.

The company said it was only in May 2009 it had placed out shares to fulfill the shareholding spread requirements of IJM Land.

Creditors face losses in U.S. financial breakups

WASHINGTON: Creditors would face substantial losses in future government dismantlings of firms like AIG and Lehman Brothers, according to a U.S. regulatory proposal.

A Reuters report on Friday, Oct 8 said this "resolution authority" is a main plank in U.S. financial reform law enacted in July and is designed to avoid government bailouts of big financial companies.

Uncertainty over companies like AIG and Lehman at the height of the financial crisis in 2008 fueled a panic that almost froze global credit markets. Anger over the bailouts of companies the government deemed "too big to fail" continues to agitate voters going into midterm elections next month.

The Federal Deposit Insurance Corp's proposal, expected to be made public in coming days, will make clear that all creditors of big, non-bank financial companies should expect losses in a failure, according to a source familiar with the rule.

It is also expected to say that, in some cases, certain short-term creditors could expect additional payments, the source said.

Banks and financial firms are closely watching how the FDIC will treat creditors under the liquidation power granted by the financial reform legislation.

Chester Salomon, a bankruptcy lawyer with Becker Glynn in New York, said the rule would be very worrying for an investor.

"It provides a disincentive for investments in longer-term debt, which encourages banks to issue more short term debt," he said.

REGULATORY WORRIES

The FDIC's work on the rule has also caused concern among other regulators starting to implement the Wall Street reform law, which was enacted in July in the wake of the 2007-2009 financial crisis.

Treasury Department officials are concerned the rule could give incentives to some creditors to pull out of financial firms when they hit hard times -- creating a "run" -- if they believe the FDIC will hit them harder than others during a liquidation, the Wall Street Journal reported.

FDIC Chairman Sheila Bair sought to calm fears last week saying that how creditors are treated under the new resolution authority would closely match how they are treated under bankruptcy proceedings.

"The authority to differentiate among creditors will be used rarely and only where such additional payments are essential to the implementation of the receivership or any bridge financial company," she said.

The reform law, the Dodd-Frank Act, allows the FDIC to move certain parts of failing institutions' business into a separate entity so that they can be sold at a later date.

FDIC officials have said subordinated debt, long-term bondholders and shareholders would not be allowed to be moved into this entity under the rule.

The officials said the agency hoped this would clear up industry questions about the issue and eliminate the perception that some institutions are "too big to fail." - Reuters

Jobs data cements view Fed will act, stocks rise

NEW YORK: The U.S. dollar slid to a 15-year low versus the yen on Friday, Oct 8 after a weak U.S. jobs report while Wall Street stocks rose to 5-1/2 month highs on speculation the data will push the Federal Reserve to launch another round of economic stimulus.

Currency tops the agenda in Washington where finance ministers and central bankers are attending the International Monetary Fund and World Bank weekend meeting and are expected to seek avoidance of a full-blown currency war.

The U.S. Labor Department reported on Friday a modest increase in private sector employment, but an overall loss of 95,000 jobs.

In the report's wake, short-term U.S. government debt prices rose modestly while longer-dated issues slipped from earlier highs as the prospect of easier Fed monetary policy made riskier assets like stocks more alluring.

"It was almost as if the market was cheering for a bad report to try to solidify that the Fed would engage in quantitative easing," said Scott Marcouiller, chief technical market strategist at Wells Fargo Advisors in St. Louis

Investors, however, find themselves caught in the cross-fire as policymakers work to soothe trade tensions and avoid scuttling a nascent global economic recovery with protectionist trade measures.

The weaker greenback spurred spot gold to a fourth consecutive week of gains. Gold rose but not enough to match Thursday's record $1,364.60 per ounce. Oil prices also rose.

The Dow closed above the 11,000 mark for the first time in five months. The blue chip average rose 57.90 points, or 0.53 percent, at 11,006.48. The Standard & Poor's 500 Index gained 7.09 points, or 0.61 percent, at 1,165.15. The Nasdaq Composite Index climbed 18.24 points, or 0.77 percent, at 2,401.91.

Shares of aluminum producer Alcoa Inc rose 5.65 percent to $12.89 after reporting quarterly profit above analysts' forecast late Thursday and saying global markets were strengthening.

Freeport-McMoRan Copper & Gold Inc gained 4.4 percent to $95.51, while the S&P Materials index shot up 2.02 percent.

Mining stocks helped lift European shares to close the week on a positive note. The FTSEurofirst 300 index of top European shares just managed a 0.01 percent rise to 1,070.67.

Heavyweight miners such as Rio Tinto and BHP Billiton climbed 1.9-2.0 percent, rising along with commodity prices on expectations that the Fed will pump more money into the system.

Banking stocks, however, resumed their four-week pullback, with Barclays losing 2.3 percent after a key investor cut his stake in the bank.

MSCI's All-Country World index was 0.22 percent higher while the Thomson Reuters global stock index rose 1.04 percent.

Japan's Nikkei stock index fell 0.99 percent.

CURRENCY COUNTDOWN

The start of the Washington meetings has been dominated by the policymakers talking about how to avoid a knock-down trade protectionist brawl.

At the heart of the matter is long hoped-for global economic rebalancing and the ugly underside of 'beggar-thy-neighbor' tactics governments can employ to protect their export economies by keeping their currencies weak.

Japan, whose export-led but stagnant economy, has said it will continue to intervene to curb a strong yen if necessary. China has rebuffed calls from the West to let its currency rise faster but allowed it to firm on Friday to its highest against the dollar since a revaluation in July 2005.

The U.S. dollar fell 0.56 percent to 81.87 yen, hovering just above the 15-year low of 81.71.

Jean-Claude Juncker, the chairman of euro zone finance ministers, said the euro exchange rate against the dollar was too strong at $1.4000 as the dollar did not reflect U.S. economic fundamentals. That prompted the euro to erase gains against the dollar to trade flat at $1.3931.

"Juncker has turned the market with comments about how he's not happy with the euro reaching $1.40,' said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

"This adds to concern about competitive devaluations, particularly since foreign exchange will be discussed at official IMF meetings this weekend."

Concerns that a stronger euro may weigh on the pace of Europe's economic recovery, meanwhile, were fueled by German exports falling in August for the second consecutive month and narrowing the trade balance.

Bund futures pared losses after Friday's U.S. payrolls report, rising to 131.82 from 131.64 on Thursday.

Benchmark 10-year U.S. Treasuries yielded 2.39 percent in late trade on Friday, unchanged from late Thursday. The U.S. bond market will be closed on Monday for Columbus Day.

Spot gold prices rose $13.60 to $1,346.30, while crude oil settled up 99 cents to $82.66 per barrel.

U.S. agricultural futures, including corn, soybean and wheat, rose sharply in Chicago after the government estimated this year's harvest below expectations and forecast tight supply

Soros: China must fix the global currency crisis

Comments by George Soros, which appeared in the Financial Times, Oct 8, 2010

I share the growing concern about the misalignment of currencies. Brazil's finance minister speaks of a latent currency war, and he is not far off the mark. It is in the currency markets where different economic policies and different economic and political systems interact and clash.

The prevailing exchange rate system is lopsided. China has essentially pegged its currency to the dollar while most other currencies fluctuate more or less freely. China has a two-tier system in which the capital account is strictly controlled; most other currencies don't distinguish between current and capital accounts. This makes the Chinese currency chronically undervalued and assures China of a persistent large trade surplus.

Most importantly, this arrangement allows the Chinese government to skim off a significant slice from the value of Chinese exports without interfering with the incentives that make people work so hard and make their labor so productive. It has the same effect as taxation but it works much better.

This has been the secret of China's success. It gives China the upper hand in its dealings with other countries because the government has discretion over the use of the surplus. And it protected China from the financial crisis, which shook the developed world to its core. For China the crisis was an extraneous event that was experienced mainly as a temporary decline in exports.

It is no exaggeration to say that since the financial crisis, China has been in the driver's seat. Its currency moves have had a decisive influence on exchange rates. Earlier this year when the euro got into trouble, China adopted a wait-and-see policy. Its absence as a buyer contributed to the euro's decline. When the euro hit 120 against the dollar China stepped in to preserve the euro as an international currency. Chinese buying reversed the euro's decline.

More recently, when Congressional legislation against Chinese currency manipulation emerged as a real threat, China allowed its currency to appreciate against the dollar by a couple of percentage points. Yet the rise in the euro, yen and other currencies compensated for the fall in the dollar, preserving China's advantage.

China's dominant position is now endangered by both external and internal factors. The impending global slowdown has intensified protectionist pressures. Countries such as Japan, Korea and Brazil are intervening unilaterally in currency markets.

If they started imitating China by imposing restrictions on capital transfers, China would lose some of its current advantages. Moreover, global currency markets would be disrupted and the global economy would deteriorate.

Internally, consumption as a percentage of GDP has fallen from an already low 46 per cent in 2000 to 35.6 per cent in 2009, as China expert Michael Pettis has shown. Additional investments in capital goods offer very low returns. From now on, consumption must grow much faster than GDP.

Thus both internal and external considerations cry out for allowing the renminbi to appreciate. But currency adjustments must be part of an internationally coordinated plan to reduce global imbalances.

The imbalances in the US are the mirror image of China. China is threatened by inflation, the US by deflation. At nearly 70 per cent of GDP, consumption in the US is too high. The US needs fiscal stimulus enhancing competitiveness rather than quantitative easing that puts upward pressure on all currencies other than the renminbi.

The US also needs the renminbi to rise in order to reduce the trade deficit and alleviate the burden of accumulated debt. China, in turn, could accept a higher renminbi and a lower overall growth rate as long as the share of consumption is rising and the improvement in living standards continues.

The public in China would be satisfied, only exporters would suffer and the currency surplus accruing to the Chinese government would diminish. A large rise would be disastrous, as Premier Wen says, but 10 percent a year should be tolerable.

Since the Chinese government is the direct beneficiary of the currency surplus, it would need to have remarkable foresight to accept this diminution in its power and recognize the advantages of coordinating its economic policies with the rest of the world. It needs to recognize that China cannot continue rising without paying more attention to the interests of its trading partners.

Only China is in a position to initiate a process of international cooperation because it can offer the enticement of renminbi appreciation. China has already developed an elaborate mechanism for consensus building at home. Now it must go a step further and engage in consensus building internationally. This would be rewarded by the rest of the world accepting the rise of China.

Whether it realises it or not, China has emerged as a leader of the world. If it fails to live up to the responsibilities of leadership, the global currency system is liable to break down and take the global economy with it. Either way, the Chinese trade surplus is bound to shrink but it would be much better for China if that happened as a result of rising living standards rather than a global economic decline.

The chances of a positive outcome are not good, yet we must strive for it because in the absence of international cooperation the world is heading for a period of great turbulence and disruptions.

The writer is chairman of Soros Fund Management LLC

Wall St rises on Fed hopes, agriculture sector

NEW YORK: The Dow closed above the 11,000 mark for the first time in five months on Friday, Oct 8 as a surprisingly weak jobs report strengthened the case for more stimulus from the Federal Reserve.

While a loss of 95,000 jobs normally might be expected to hurt stocks, the market's desire for cheap money trumped concerns about the slow economy.

"It was almost as if the market was cheering for a bad report to try to solidify that the Fed would engage in quantitative easing," said Scott Marcouiller, chief technical market strategist at Wells Fargo Advisors in St. Louis.

Agriculture-related shares surged in sync with U.S. corn and soybean futures after the U.S. Department of Agriculture said the corn crop is likely to be far smaller than expected. Dow component Caterpillar rose 2.1 percent to $80.37.

A CONSTRUCTION [] and farm machinery sector index rose 2.6 percent on the belief U.S. grain farmers will use some of their profits from higher crop prices to buy new tractors and harvesting equipment.

Deere & Co shares climbed 4.8 percent to $75.35 and Agco Corp jumped 3.6 percent to $40.63.

Stocks have rallied in recent weeks on expectations of further government stimulus, but earnings season will take center stage next week. Corporate results and guidance could provide confirmation for the gains or suggest investors were blindly chasing performance.

Expectations of more quantitative easing could also keep the U.S. dollar on a downtrend, which in turn signals more gains for Wall Street. An inverse correlation between the greenback and U.S. stocks has prevailed in the last three months.

The Dow Jones industrial average gained 57.90 points, or 0.53 percent, to close at 11,006.48. The Standard & Poor's 500 Index rose 7.09 points, or 0.61 percent, to 1,165.15. The Nasdaq Composite Index climbed 18.24 points, or 0.77 percent, to 2,401.91.

It was the first time the Dow closed above 11,000 since May 3.

For the week, the Dow and the S&P 500 each rose 1.6 percent, while the Nasdaq gained 1.3 percent.

Consumer discretionary companies got a boost after hedge fund manager William Ackman took large stakes in shares of retailer JC Penney Co Inc and consumer goods manufacturer Fortune Brands Inc. JC Penney rose 2.7 percent to $32.49, while Fortune jumped 7.4 percent to $55.85.

Alcoa Inc marked the unofficial start to earnings season, rising 5.7 percent to $12.89 a day after its results beat estimates and increased its outlook for global aluminum demand.

Data showed the economy shed jobs in September for a fourth straight month as government payrolls fell and private hiring slowed. Although initially taken as a negative, investors ultimately viewed the gain of 64,000 private-sector jobs as the economic cloud's silver lining, analysts said.

The expectation of further stimulus was also weighed against comments from St. Louis Fed President James Bullard, who said the Fed faces a difficult decision at next month's policy meeting on whether to offer further stimulus to a U.S. economy that is still growing but only slowly.

"I think he said it's not in the bag that we're going to do this," Marcouiller said.

As the drop in the government's non-farm payrolls report increased the likelihood of more quantitative easing by the Fed, the dollar weakened while commodity prices rose.

The Reuters Jefferies CRB index, which covers 19 mostly U.S.-traded commodities, rose 2.7 percent.

Freeport-McMoRan Copper & Gold Inc gained 4.5 percent to $95.51, while the S&P Materials index shot up 2 percent.

Options traders also remained confident about the market as the volatility index continued to slide. The CBOE Volatility index, Wall Street's favorite fear gauge, fell 3.9 percent to 20.71, the lowest since May. - Reuters

NV Multi MD, son in RM295m takeover of bereavement care company

KUALA LUMPUR: The managing director of NV Multi Corp Bhd Datuk Kong Hon Kong and his son, Kong Yew Foong and parties acting in concert have offered to acquire the bereavement care company for about RM295 million or 78 sen a share. This a premium of 21.8% above Friday, Oct 8's last traded price of 64 sen.

NV Multi said on Friday, Oct 8 that a Mutual Tactic Sdn Bhd had offered to acquire the 378.34 million shares of the company, its entire business and undertakings, including assets and liabilities. The share price closed five sen lower at 64 sen on Friday.

The offer price would be satisfied by about RM212 million cash and about RM83 million as the amount remaining owing by Mutual Tactic to NV Multi. The cash portion would be adjusted to ensure all entitled shareholders of NV Multi, except for certain shareholders.

Kong and his son, who is the executive director of NV Multi, are also directors of Mutual Tactic, which has a paid-up of RM2. The other directors of Mutual Tactic are Ng Teck Wah and Lim Chih Li @ Lin Zhili.

Mutual Tactic is a unit of Peace Ventures Ltd, which is incorporated in The Cayman Islands.

'Upon the completion of the proposed acquisition, NV Multi may be classified as a cash company,' it said.

Parties acting in concert with the Kongs are Tan Poh Hwa, Anugaris Sdn Bhd and Meridian Location Sdn Bhd, collectively the 'certain shareholders' in this corporate exercise.'' They collectively hold 106.269 million share, representing 28.09% stake in NV Multi.

Indonesia leads regional fall; most up on week

BANGKOK: Southeast Asian stock markets fell on Friday ahead of U.S. job data and contentious G7 and IMF meetings focusing on currencies, with Thai stocks pulling back from 14-year highs, but most bourses managed gains on the week.

Investors chose to lock in profits, wary of what may come out of the weekend meetings and of regional policies that may curb inflows. The bull run on equities in the region is in large part the result of hot money flowing out of developed economies.

Equities in Indonesia, Thailand and Singapore fell for a second session, finishing down 1.1 percent, 0.8 percent and 0.4 percent respectively.

Malaysia ended flat, after earlier climbing to a 32-month high, the Philippines eased 0.2 percent, coming off a record high hit in early trade, and Vietnam fell 0.6 percent after scaling a one-month high on Thursday.

"Investors are looking ahead to U.S. payrolls tonight and the outcome of the internatinal meetings this weekend. They simply sold up to reduce risk," said Warut Siwasariyanon, head of research at Finansia Syrus Securities in Bangkok.

"Late selling in Thai stocks also came after news of plans by the Thai government to unveil measures relating to the strength of the baht next week," he said.
However, these seemed likely to focus on helping businesses rather than any moves to control inflows.

Investors took profits in Asian equities and gold while also buying back some U.S. dollars on Friday. By 0941 GMT, the MSCI index of Asia Pacific stocks outside Japan was 0.65 percent lower after closing at a 28-month high on Thursday.

Big- and medium-caps, which had led the region's bull run in the third quarter, were among losers. Singapore casino operator Genting Singapore Plc fell 2.5 percent while Thailand's top olefins maker, PTT Chemical, dropped 2.2 percent.

Indonesia's largest automotive distributor, PT Astra International Tbk, lost 2.6 percent and the Philippines' largest property firm, Ayala Land Inc, was down 2.2 percent.

On the week, Thailand ended down 1.6 percent, Southeast Asia's worst performer. Indonesia was flat, snapping a five-week gain, but Singapore, Malaysia, Vietnam and the Philippines finished higher. Manila fared best, ending up 3.04 percent.

Indonesia set a record high early in the week, Singapore hit a 28-month high and Thailand a 14-year high.

Despite its loss on Friday, the Philippines saw a net $5 million in foreign buying on the day and $155 million on the week, while Indonesia saw $58 million outflows on the day, with $101 inflows for the week, Thomson Reuters data showed.

Thailand had $96 million in inflows on the day and $240 million on the week, stock exchange data showed. - Reuters

Tanjung Offshore served with notice of claim for US$15.9m

KUALA LUMPUR: TANJUNG OFFSHORE BHD []'s unit Tanjung Kapal Services Sdn Bhd has been served with a notice of claim from Newfield Peninsula Malaysia Inc amounting to US$15.90 million.

It said on Friday, Oct 8 the notice of claim was for damages to pipeline allegedly caused by one of Tanjung Kapal's vessels at the East Belumut Field, PM 323, offshore Malaysia

'The said notice of claim amounted to approximately USD15.90 million and includes mainly costs associated with the repair and clean up of the alleged damage to pipeline,' it said.

Tanjung Offshore said its unit's insurers had been notified of Newfield's claim and had initiated a review of the claim and to look into'' the allegation against the affected vessel.

It added if the allegation was true, it was confident the claim would be settled amicably between Newfield and Tanjung.

IJM Corp evaluating various options on IJM Land shares liquidity

KUALA LUMPUR: IJM CORPORATION BHD [] is evaluating various options about the liquidity of the shares of its 62.5%-subsidiary IJM Land Bhd.

The company said it was only in May 2009 it had placed out shares to fulfill the shareholding spread requirements of IJM Land.

'There is no definite proposal at this juncture and the company will announce to Bursa Securities accordingly if there is a definitive proposal,' it said on Friday, Oct 8.

The Edge Financial Daily reported IJM Land looked ripe for possible privatisation, citing analysts.

RHB Research reported market talk on IJM Land being a target for privatisation by IJM Corp.

RHB opined that by privatising IJM Land, it might enable the parent to be the component stock of the benchmark FBM KLCI.

'We think the most possible reason for IJM Land to be taken private is the potential addition of IJM Corp into the benchmark index, the FBM KLCI top 30 stocks, following the inclusion of GAMUDA BHD [] this past September.

'Note that IJM Corp is currently one of the FBM Mid-70 stocks and in the reserve list for the FBM KLCI. The inclusion may benefit IJM Corp as it could lead to a re-rating going forward.'' While it is still premature to confirm the deal, we believe the privatisation angle is nevertheless a strong catalyst for IJM Land,' said RHB.

According to the research house, privatising IJM Land would increase its parent's market capitalisation to RM8.2 billion from RM7.1 billion.

WCT get concession for RM486m complex at LCCT

KUALA LUMPUR: WCT BHD [] has secured a contract from Malaysia Airports Holdings Bhd (MAHB) to develop the new low cost carrier terminal (KLIA2) integrated complex on build-operate-transfer concession.

WCT said on Friday, Oct 8 the concession is for 25 years and may be extended for a further 10 years upon expiry. The development of the complex would be undertaken by a special purpose vehicle (SPV) in which WCT and MAHB will hold 70:30 equity interest.

'The CONSTRUCTION [] cost of the integrated complex is estimated at approximately RM486 million which the SPV will finance partly via internally generated funds and partly by bank borrowings. The construction of the Integrated Complex is expected to be completed by June 30, 2012,' it said.

Under the concession, WCT via the SPV will undertake the design, procurement, engineering, construction, completion, and thereafter, the operation, management and maintenance of the complex for the duration of the concession.

'As KLIA2 will be a dedicated terminal for low-cost carriers and in view of the expected increase in demand for low cost air travel, the prospects of the SPV are expected to be positive,' said WCT.

The integrated complex comprises of a transportation hub for taxis and buses; one building with net lettable area of approximately 437,000 sq ft and car parks with up to 6,000 parking bays.

Iskandar Investment appoints new CEO

KUALA LUMPUR: Iskandar Investment Bhd (IIB) has appointed Datuk Syed Mohamed Syed Ibrahim as its president and chief executive officer effective Nov 1, 2010.

In a statement Friday, Oct 8, IIB said Syed Mohamed will take over the helm of the company from Arlida Ariff, whose contract ends on Dec 31, 2010.

IIB is an investment holding company working in close partnership with the Iskandar Regional Development Authority to drive investment into Iskandar Malaysia.

The shareholders of IIB are Khazanah Nasional Bhd, the Employees Provident Fund and Kumpulan Prasarana Rakyat Johor Sdn Bhd.

IIB said Syed Mohamed, a native of Johor, had spent many years in property development, hospitality and leisure, CONSTRUCTION [] and facility management industry.

"This experience will be particularly valued in the next stage of development of IIB's projects, as developments move towards project completion and become operational," it said.

Syed Mohamed is currently group director of the property and infrastructure division of DRB-HICOM BHD [].

He had previously served as the chief executive officer of TH PROPERTIES [] Sdn Bhd, general manager of Sime Darby Land Sdn Bhd and the head of corporate planning division of the Johor State Economic & Development Corporation.

"Syed Mohamed's experience in both State and Federal Government-linked companies would serve IIB well given its unique nature as a catalyst developer.

"He also spent some time working abroad as the chief operating officer of Knowledge Economic City Developers Company Limited in Jeddah, Saudi Arabia," it said.

Penny property stocks advance in active trade

KUALA LUMPUR: Property stocks rose in very active in late afternoon on Friday, Oct 8, despite the cautious broader market, with shares below RM1 seeing active trade.

At 3.57pm, Talam was the most active with 40.42 million shares done and it was unchanged at 9.5 sen.

Malton added 3.5 sen to 59.5 sen, AsiaPac, L&G and Tebrau Teguh 0.5 sen higher at 10.5 sen, 50 sen and 83.5 sen respectively. UEM Land climbed four sen to RM2.43.

The FBM KLCI fell 1.56 points to 1,479.89. Turnover was 832.73 million shares valued at RM1.21 billion. There were 323 gainers, 381 losers and 286 stocks unchanged.

CIMB Economic Research sees continued capital inflows

KUALA LUMPUR: CIMB Economic Research expects continued capital inflows as the investors would still favour emerging markets given their resilient growth performance and the prospect of higher currency gains.

It said on Friday, Oct 8 that total foreign holdings of Malaysian debt securities rose to RM105.5 billion in August (RM102 billion in July), with higher inflows into Bank Negara Malaysia's (BNM) monetary note (RM25.5 billion or 24.2% of total) and the Government Securities (MGS) (RM63 billion or 59.8% of total).

'The equity market also recorded net inflows, as reflected in the KLCI which rose 2.9% or 41 points in September (versus 4.5% or 61.6 points in August),' it said.

In the latest development, it said BNM's international reserves rose strongly by US$5.5 billion to US$100.7 billion (RM310.8 billion) as at end-September (US$95.2bn at end-Aug).

This marks the highest net increase since February 2008, thanks to strong capital inflows and the central bank's intervention operations, which more than offset the quarterly adjustment for foreign exchange revaluation loss.

CIMB Economic Research said September's reserves level is sufficient to finance 8.5 months of retained imports and is 4.3 times the short-term external debt. Year-to-date, reserves rose 4.2% or US$4 billion.

It said Malaysia has benefited from the continued inflows of private capital as investors pouring more money in emerging markets on still good growth prospects relative to matured economies as well as the potential upside in regional currencies.

Year-to-date, the ringgit had strengthened by 10.8% against the US dollar, with a whopping 12.5% on-year rise in September. The ringgit hit RM3.085/US dollar on Sept 29, the highest level in more than 13 years.

The research house said domestic liquidity remains ample. The cumulative locked-in excess liquidity by BNM remained substantial at RM218.7 billion as at end-September (versus RM214.9 billion as at end-August).

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The large build-up of excess liquidity over the previous years would provide liquidity space for the central bank to recycle excess liquidity back into the system should domestic liquidity conditions tighten.

RAM Ratings puts Berjaya Infrastructure on negative Rating Watch

KUALA LUMPUR: RAM Ratings has placed the AA3 rating of Berjaya Infrastructure Sdn Bhd's (BISB) RM400 million Medium-Term Notes Programme (2008/2028) (MTN Programme) on Rating Watch, with a negative outlook.

BISB is an investment-holding company with subsidiaries that are involved in the operation, maintenance and management of water-treatment plants (WTPs) as well as the supply of treated water in Malaysia, Indonesia and China.

In a statement on Friday, Oct 8, the rating agency said the Rating Watch was premised on the poor collections of Air Utara Indah Sdn Bhd (AUI), ie BISB's main revenue contributor (FY Dec 2009: 59%).

AUI is the operation and maintenance service provider for WTPs in Kedah.

"We highlight that AUI's receivables cycle has lengthened since end-December 2009 from 7.5 months to the current level of 9 months.

"Following the establishment of Syarikat Air Darul Aman (SADA) to assume Jabatan Bekalan Air Kedah (JBAK)'s role, we understand from BISB's management that payments from January 2010 onwards are handled by SADA while outstanding payments prior to 2010 remain the responsibility of JBAK," it said.

However, administrative issues within SADA have resulted in non-payment for the 2010 invoices to AUI to date, it said.

As a result, AUI's outstanding receivables has ballooned to approximately RM40.86 million as at end-September 2010, it said.

RAM Ratings said the delayed payments would lead to liquidity stress for BISB if AUI's collections do not improve significantly by 4Q 2010.

Furthermore, BISB's liquidity risk will be heightened further if it embarks on any expansion plan to augment its overseas operations, thus potentially affecting its ability to comply with the RM11 million minimum balance requirement vis-''-vis its Debt Service Reserve Account by April 2011, it said.

"RAM Ratings will maintain close monitoring of the relevant developments including BISB's expansion plans, and make the necessary announcement within the next 2 months upon obtaining clarification from SADA.

"RAM Ratings' Rating Watch highlights a possible change in an issuer's existing debt rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under special surveillance by RAM Ratings. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest," it said.

FBM KLCI steadier, China surges

KUALA LUMPUR: The FBM KLCI clawed back into the black at the mid-day break on Friday, Oct 8 to keep its gains intact for the fourth consecutive day, while the Shanghai Composite Index surged more than 3% after Moody's Investors Service indicated that China was possibly in line for a credit upgrade.

The FBM KLCI briefly slipped into the red this morning before recovering to close the morning session 0.56 point higher at 1,482.01, lifted by gains including at Genting, Axiata, Sime Darby, Gamuda and Telekom.

Gainers led losers by 308 to 299, while 290 counters traded unchanged. Volume was 568.10 million shares valued at RM700.31 million.

The ringgit fell 0.27% to 3.0998 per US dollar; crude palm oil for the third month delivery gained RM1 per tonne to RM2,780; gold gained 85 cents per ounce to US$1,334.40 while crude oil slipped five cents to US$81.62.

Asian markets were mixed this morning ahead of the non-farm payrolls data scheduled to be released in the US later Friday.

But at the Shanghai Composite Index, investors returning after a five-day stock market close went on a buying spree following Moody's placing the Chinese government's bond rating on review for a possible upgrade.

The Shanghai Composite Index jumped 3.28% to 2,742.81, Hong Kong's Hang Seng Index up 0.74% to 23,053.71 and Singapore's Straits Times Index gained 0.04% to 3,167.88.

However, Japan's Nikkei 225 shed 0.36% to 9,650.36, Taiwan's Taiex fell 0.34% to 8,355.38 and the South Korean Kospi Index fell 0.27% to 1,895.65.

On Bursa Malaysia, among the major gainers were Genting, up eight sen to RM10.28, Axiata seven sen to RM4.57, and Sime Darby, Gamuda and Telekom two sen each to RM8.58, RM3.84 and RM3.49, respectively.

The losers included Nestle, Mudajaya, Guinness Anchor, Petronas Dagangan, Top Glove and Perstima.

Karambunai led the actives with 70 million shares traded this morning. The stock added half a sen to 12.5 sen. Other actives included Talam, Malton, Tebrau and IJM Land.

RAM Ratings reaffirms AA1/P1 ratings of Deutsche Bank Malaysia

KUALA LUMPUR: RAM Ratings has reaffirmed the respective long- and short-term financial institution ratings of Deutsche Bank (Malaysia) Bhd, at AA1 and P1; the long-term rating has a stable outlook.

In a statement on Friday, Oct 8, RAM Ratings said the ratings were premised on the bank's solid market position in the wholesale-banking sector as well as its ability to leverage on its parent's franchise, network and technical knowledge.

The bank is part of global investment bank Deutsche Bank AG.

RAM Ratings said that although Deutsche Bank Malaysia's asset base was relatively small, it had a sizeable notional off-balance-sheet exposure due to its focus on wholesale banking, particularly as a provider of treasury solutions.

"Nevertheless, we opine that the bank has a comprehensive risk-management system; its market risk is viewed to be moderate.

"The Bank's value-at-risk limit is set at a manageable level of less than 2% of its equity as at end-June 2010," it said.

The rating said that in FY December 2009, Deutsche Bank Malaysia posted a lower pre-tax profit of RM145.39 million (FY Dec 2008: RM194.68 million), mainly caused by its narrower net interest margin.

Although this persisted in 1H FY Dec 2010, more deal flows had boosted the Bank's pre-tax profit to RM103.29 million (discounting a one-off negative accounting adjustment of RM20.64 million), it said.

"Given the bank's focus on corporate banking, however, we opine that its performance is susceptible to fluctuations.

"On the other hand, this is moderated by Deutsche Bank Malaysia's strong liquidity profile and solid capital position; its liquid-asset ratio has been conservatively kept around 100% for the past 5 years (end-June 2010: 106.70%)," it said.

Elsewhere, the bank's capital position is robust, with respective overall and Tier-1 risk-weighted capital-adequacy ratios of 13.12% and 12.86% as at end-June 2010, it said.

Abu Dhabi-based Mubadala to take part in RM26b KL Intl Financial Centre

PUTRAJAYA: Abu Dhabi's Mubadala Development Co. will enter into a strategic partnership with 1Malaysia Development Bhd (1MD) to build KL International Financial Centre (KLIFC) which will cost RM26 billion.

Prime Minister Datuk Seri Najib Razak said on Friday, Oct 8 the KLIFC will provide significant stimulus for the CONSTRUCTION [] industry. It would also promote economic growth, attract investments and create jobs.

Construction of the KLIFC is expected to start in mid-2011, he said at the signing of agreement between Mubadala Development and 1MD.

Mudabala had also agreed to invest of up to US$7 billion in the development of the aluminium sector in Sarawak, with the power source from hydroelectric power.

Mudajaya slips on SC caution

KUALA LUMPUR: MUDAJAYA GROUP BHD []'s share price fell on Friday, Oct 8 after the Securities Commission (SC) cautioned the company and its board to ensure compliance with the securities laws and Bursa Malaysia in disclosing the transactions.

At 11am, Mudajaya was down 20 sen to RM4.41 with 4.1 million shares traded.

On Thursday, Mudajaya had risen 17 sen to RM4.61 before it was voluntarily suspended in late morning.

The caution was related to Mudajaya's disclosures about its investments in the independent power plant (IPP) project in India which were made prior to Aug 30, 2010, as the SC viewed these disclosures were inadequate.

It later announced plans to team up with the Laos government to undertake a 60 MW hydro power project there.

FBM KLCI extends gains for fourth day

KUALA LUMPUR: The FBM KLCI extended its gains for the fourth consecutive day on Friday, Oct 8 and rose to a fresh high, while most key regional markets were mixed ahead of the US non-farm payrolls report due later Friday.

At 10am, the 30-stock FBM KLCI was up 1.64 points to 1,483.09, its highest level since Jan 2008. Market breadth was positive with gainers leading losers by 229 to 139, while 216 counters traded unchanged. Volume was 213.13 million shares valued at RM190.87 million.

RHB Research Institute Sdn Bhd said the upside to the FBM KLCI was still intact despite short-term uncertainties.

Saved by the last-minute push-up on Thursday, FBM KLCI managed to close with a 'doji' candle to extend its attempt to stage further upside in the near term although the overall trading sentiment remained cautious, it said in a note Oct 8.

The research house said apart from the improved short-term momentum readings, the rising 10-day SMA of 1,466 should continue to buffer the current uptrend.

It said if the index overcomes the recent high of 1,483.25, it would revisit the technical gap near 1,490.5-1,497.64 and the psychological level of 1,500 soon.

"Breaching those levels will turn the sentiment even more bullish, as buyers are likely to lift the FBM KLCI towards the all-time high level of 1,524.69 next.

"However, we still expect some profit-taking activities to continue as investors remained generally cautious and unwilling to take extra risks ahead of the weekend," it said.

Among the gainers at mid-morning were Jerneh that added 13 sen to RM3.02 after the company finalised the deal to sell off its 80% stake in Jerneh Insurance Bhd (JIB) for RM532.3 million to ACE INA International Holdings.

Its chairman Datuk Lim Chee Wah said on Thursday that shareholders would enjoy parts of the proceeds in the form of a special dividend.

Other gainers were Kulim that rose 11 sen to RM9.30, Axiata and QSR Brands up nine sen each to RM4.59 and RM5.19 while IJM Land and KPJ rose seven sen each to RM2.68 and RM3.62.

Mudajaya was the top loser and fell 24 sen to RM4.37; DiGi lost 10 sen to RM24.90, Top Glove fell nine sen to RM5.14, Box-Pak and Perstima fell eight sen each to RM1.22 and RM5, Hong Leong Bank and Glenealy lost six sen each to RM9.25 and RM5.11, while Proton fell five sen to RM4.86.

Karambunai was the most actively traded counter with 46.82 million shares done. The stock added two sen to 14 sen.

Other actives included Malton, SAAG, Tebrau, Dialog, UEM Land, Iris and Mudajaya.

At the regional markets, Japan's Nikkei 225 was down 0.39% to 9,646.59, Taiwan's Taiex fell 0.46% to 8,245.70, and the South Korean Kospi down 0.53% to 1,890.73.

On the flip side, China's Shanghai Composite Index jumped 1.17% to 2,686.65 on the first day of trade this week after being closed for national holidays; Singapore's Straits Times Index rose 0.08% to 3,169.04 while Hong Kong's Hang Seng Index gained 0.2% to 22,934.41.

Profit taking precedes US payrolls, G7

HONG KONG:'' Investors took profits on Asian equities and gold while also buying back some U.S. dollars on Friday, Oct 8, squaring up before the latest U.S. employment report and potentially contentious international meetings about currencies.

Bets against the U.S. dollar have grown significantly since September because of increased expectations the Federal Reserve will print money to buy debt, and that may limit the downside if the payrolls number is a lot lower than expected.

Still, if the Fed follows suit with the Bank of Japan and gets more aggressive about easing policy than the market anticipates, the cheap money trade of selling dollars and buying gold, emerging market equities and longer-term bonds will undoubtedly spread.

Japan's Nikkei share average slipped 0.5 percent after hitting a two-month intraday high on Thursday.

The MSCI index of Asia Pacific stocks outside Japan edged 0.4 percent lower after closing at a 28-month high on Thursday. Declines were spread evenly across most sectors, though the TECHNOLOGY [] sector underperformed for a second day.

In the foreign exchange market, the euro, which has benefited from dollar weakness, was largely unchanged at $1.3917 after the currency reached an eight-month high around $1.4030 on Thursday.

The rapid increase of bets on the euro means the threshold for more dollar weakness after the U.S. payrolls figure is high.

"Positioning could limit the degree of dollar downside, particularly against the euro," Todd Elmer, currency strategist with Citi in Singapore, said in a note.

"This likely means that the bar for a dollar-positive surprise on the upside is somewhat lower and a just above consensus outcome may not be a significant spark for volatility."

The dollar was trading at 82.35 yen, above a 15-year low of 82.11 yen plumbed on Thursday.

The outcome of the Group of Seven rich nations meeting this weekend could influence views on when Japanese officials will intervene again to pull down the yen.

Japan's first intervention in six years last month sparked a heated debate globally -- what some have even called a currency war -- about what governments can do to keep their currencies from strengthening against the falling dollar.

"There's speculation that, if the G7 wants a coordinated stance to put pressure on China to raise the yuan, then it becomes more difficult for Japan to intervene," said a dealer at a Japanese brokerage house.

Gold prices slipped in the spot market, falling 0.2 percent to $1,330.30 an ounce. The precious metal traded in a wide range on Thursday, hitting an all-time high of $1,364.60 but then ending the session around $1.332.70.

The 90-day inverse correlation between gold and the U.S. dollar is the strongest it has been all year, meaning when one falls, the other is very much likely to rise based on price action over the past three months. - Reuters

Hwang DBS Vickers Research expects knee-jerk reaction to Proton recall

KUALA LUMPUR: Hwang DBS Vickers Research expects a knee jerk reaction to PROTON HOLDINGS BHD []'s voluntary recall of its Gen2 and Satria Neo cars made between 2004 and 2008 because of a clock spring malfunction.

It said on Friday, Oct 8 that this item connects switches and airbag to the radio, horn and cruise control. The problem raises potential safety concerns e.g. in extreme cases, the deployment of the driver side airbag. Proton would bear all costs of labour and parts.

'We expect a knee jerk reaction to this news. This should drive Proton to be more diligent in sourcing its parts and improve the quality of the vehicle it produces.

'Given that 16,000 vehicles are affected (over 2004-08) versus 160,000 units sold annually, we expect the financial impact on FY3/11F to be minimal at this point. Consequently, it has negligible impact on our RM6.60 TP for Proton, which is based on 0.7x CY11F NTA. We reiterate our Buy call on Proton,' it said.

FBM KLCI hits fresh high in early trade

KUALA LUMPUR: The FBM KLCI rose to a fresh high in early trade on Friday, Oct 8 lifted by gains including at Genting, Axiata and KL Kepong.

The index rose 0.77 points to 1,482.22 at 9.05am.

Among the early gainers, CYL Corp added 13.5 sen to 64 sen; Jerneh rose nine sen to RM2.98, Aliran Ihsan Resources and Genting gained six sen each to RM1.97 and RM10.26 respectively. KPJ, Dialog and IJM Land added five sen each to RM3.60, RM1.21 and RM2.66 respectively, while Axiata and KLK rose four sen each to RM4.54 and RM13.44 respectively.

Mudajaya was the top loser in early trade after it was cautioned by the Securities Commission on Thursday in relation to the company's disclosures about its investments in the independent power plant (IPP) project in India which were made prior to Aug 30, 2010, as the SC viewed these disclosures were inadequate.

Mudajaya fell 26 sen to RM4.35.

Meanwhile, Proton which announced a recall of its Gen.2 and Satria Neo models manufactured between 2004 and 2008 because of a potential'' concerns over a clock spring malfunction also fell this morning by three sen to RM4.88.

Other decliners included Maybulk, IOI Corp, SEG International, Maxis, Berjaya Sports Toto and LPI Capital.

Proton skids on Gen.2, Satria Neo recall

KUALA LUMPUR: PROTON HOLDINGS BHD []'s shares slipped in early trade on Friday, Oct 8 after the national carmaker recalled its Gen.2 and Satria Neo models made between 2004 and 2008 due to potential''concerns over a clock spring malfunction.

At 9.15am, Proton fell three sen to RM4.88.

A local newspaper reported the clock spring connects switches and airbags to the radio, horn and cruise control. The recall affects 15,911 cars of the total 660,000 produced and sold by Proton over the four year period.

Dialog up on deepwater terminal approval

KUALA LUMPUR: DIALOG GROUP BHD []'s shares advanced on Friday, Oct 8 after the company received the go-ahead from the Johor government to develop the independent deepwater petroleum terminal at Pengerang, Johor for a period of 60 years.

At 9.25am, Dialog was up four sen to RM1.20 with 3.41 million shares traded.

The approval will enable Dialog, the Johor government and Vopak to own and develop an independent deepwater petroleum terminal with harbour port, jetty and other marine facilities with water depth up to 26 meters capable of handling ultra large crude carriers.

HLG Research cautiously optimistic on market

KUALA LUMPUR: HLG Research said despite a dip on the Dow Jones Industrial Average overnight on profit taking activities, the positive Alcoa results and a drop in weekly claims in the US should provide cautious optimism to the local bourse and enable it to absorb any profit taking.

In its market outlook on Friday, Oct 8 it said barring a sluggish US job data tonight, the FBM KLCI is still capable of extending its bullish momentum amid a fresh 'buy' signal on the stochastic oscillators.

'However, the indecisive trading over the last two trading days suggests that the FBM KLCI is likely to remain in a tight range.'' Immediate resistance is 1,490 (Jan 9, 2008's intraday high).

'Stronger resistance zones are the 1,500 psychological mark and all-time high of 1,524. Key supports are situated at 1,466 (10-d SMA), 1,450 (30-d SMA) and 1,430 (40-d SMA),' it said.

''

OSK Research maintains Buy on Dialog, target price RM1.47

KUALA LUMPUR: OSK Research is maintaining its Buy call on DIALOG GROUP BHD [] and its target price is RM1.47 based on sum-of-parts valuation.

On Thursday, Oct 7, Dialog announced the Johor approved to award Dialog the exclusivity to develop an independent deepwater petroleum terminal at Pengerang, Johor for a period of 60 years.

However, this approval is subject to the outcome of a detailed feasibility and environmental impact assessment.

'We understand that the technical part of the feasibility study has been completed and this concluded that the site is suitable for land reclamation of about 500 acres and the phased CONSTRUCTION [] of approximately 5 million cubic metres of storage capacity for the proposed terminal. Nevertheless, the environmental impact assessment is still in progress,' the research house said on Friday, Oct 8.

OSK Research said it is good that Dialog had received the 'go ahead' from the Johor Government to build the independent deepwater storage terminal for oil products in Pengerang.

'This is because it will be difficult to move to the next stage of development otherwise. Hence, since the Government has given its green light, we believe it would be a matter of time for the environmental impact assessment to be completed and once done, we believe Dialog will start with the Phase 1 construction,' it added.

AmResearch maintains Buy on Tenaga, FV RM10

KUALA LUMPUR: AmResearch is maintaining its Buy call on Tenaga Nasional with an unchanged fair value of RM10 a share, based on a 10% discount to DCF of RM11.10 a share.

It said on Friday, Oct 8 that Tenaga has largely won the legal suit launched by MMC Corp's wholly-owned Prai Power Sdn Bhd which was claiming RM114 milllion for allegedly wrongfully reducing its capacity payments from June 2003-November 2006.

Essentially, the case was dismissed and Tenaga will be able to claim back a net amount of RM8 million from Prai Power.

AmResearch said the latest development was mildly positive for Tenaga as the award will not significantly increase its forecasts, which have not incorporated any provisions arising from this legal case. Hence, it maintained its forecasts.

'Valuation-wise, Tenaga trades at an attractive CY11F PE of 11x vis-vis a three-year average of 14x,' it said.

Wall St sags with commodities, wary before jobs data

NEW YORK: Weak commodities and a firmer dollar pressured U.S. stocks on Thursday, Oct 7 as investors shunned big bets before a jobs report that could determine the next move from the Fed.

The dollar reversed a long downtrend, slamming oil and gold markets, which in turn took a toll on energy and mining stocks. Newmont Mining Corp and Freeport-McMoRan Copper & Gold both fell more than 2 percent.

Investors said better-than-expected weekly jobless claims limited declines, but the spotlight was on Friday's larger non-farm payrolls report.

Friday's report is expected to show payrolls were unchanged in September, but the release has bigger implications for a market hoping that weak data will spur the Federal Reserve to take further steps to boost the economy.

"This one, unfortunately, gets into the realm of economic psychology," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

"I think the market would appreciate (a number) that's a little better, but that still allows the Fed to come in."

The euro's recent rally against the dollar stalled as investors booked profits. The dollar and equities have had an inverse relationship as investors take money out of stocks for the perceived safety of the greenback.

TAKING A SHINE TO ALCOA

Alcoa Inc kicked off the unofficial start to earnings season after the closing bell. The largest U.S. aluminum producer reported a lower third-quarter profit, but said global markets were strengthening. Its shares rose 3.2 percent to $12.59 in extended trade.

But some lackluster earnings reports weighed on the market during the regular session after PepsiCo Inc trimmed the top end of its earnings forecast, while Marriott International Inc's results failed to beat high expectations. Pepsi was down 3 percent at $66.10 and Marriott slid 5.8 percent to $35.67.

The Dow Jones industrial average dipped 19.07 points, or 0.17 percent, to 10,948.58. The Standard & Poor's 500 Index eased 1.91 points, or 0.16 percent, to 1,158.06. But the Nasdaq Composite Index added 3.01 points, or 0.13 percent, to 2,383.67.

Last month, the Fed hinted at the possibility that it might pump more cash into the U.S. economy, probably through buying bonds, in an additional round of quantitative easing to bolster the anemic recovery after the worst recession since the 1930s.

Growing conviction of further fuel from the Fed in part helped the S&P 500 rally 8.8 percent in September.

While the overall payrolls number is not expected to change, economists polled by Reuters forecast that private-sector payrolls added 75,000 jobs in September. The unemployment rate is expected to tick up to 9.7 percent from 9.6 percent in August.

BETTING ON TEEN SPIRIT

The materials sector was among the biggest drags on the S&P 500 as the price of gold retreated from a new record high and oil fell nearly 2 percent, or $1.56, to settle at $81.67 a barrel. The S&P's resource sector index lost 0.9 percent, while Newmont Mining was down 2.6 percent at $63.03 and Freeport-McMoRan declined 2.4 percent to $91.40.

On the upside, Abercrombie & Fitch Co jumped 8.9 percent to $42.03 and American Eagle Outfitters Inc climbed 8.1 percent to $16.23 as teen apparel retailers led the pack with generally stronger-than-expected U.S. same-store sales in September. - Reuters

Alcoa Q3 profit beats view, stock up on outlook

NEW YORK: Alcoa Inc's third-quarter profit beat Wall Street estimates on Thursday, Oct 7 and the largest U.S. aluminum producer said it increased its outlook for global aluminum demand as markets appear to be strengthening, sending its shares up more than 3 percent.

Alcoa increased its 2010 global aluminum consumption forecast to 13 percent from 12 percent, noting growing demand for the metal in countries such as China, Brazil, India and Russia.

Net income was $61 million, or 6 cents per share, compared with $77 million or 8 cents per share in the same quarter last year, the Pittsburgh-based company said, citing a drop in the price of aluminum and a weaker dollar.

The results included a negative impact for special items of $35 million, or 3 cents per share.

Profit from continuing operations was 9 cents per share, said Alcoa, traditionally the first of the Dow Jones industrial average <.DJI> components to issue quarterly figures.

Analysts on average were expecting earnings of 5 cents per share, according to Thomson Reuters I/B/E/S.

Revenue rose 15 percent to $5.3 billion on higher volumes in aerospace and increased market share in the building and CONSTRUCTION [] market. (Graphic http://link.reuters.com/cys47p)

"On a preliminary basis, it looks positive, which is a good start to the earnings season," said Alan Lancz, president, Alan B. Lancz & Associates Inc of Toledo, Ohio.

"I don't see anything here that would fuel the bears."

Analyst Charles Bradford of Affiliated Research Group in New York, said the results were better than expected because of cost reductions. "But the metal's price was pretty obvious. The fourth-quarter metals price ought to be a fair bit better."

Alcoa Chairman and and Chief Executive Officer Klaus Kleinfeld said the company saw strong performance in its mid- and downstream businesses.

"Despite unfavorable currency shifts and slightly lower metal prices, our upstream businesses continue to make progress.

While Alcoa shares have bounced higher, they have not kept up with the rising metal price over the past six months.

In after-hours trading on the New York Stock Exchange, Alcoa's stock rose to $12.62 from its close of $12.20. - Reuters

Fed hawks still skeptical about more easing

NORFOLK, Neb.: Two senior Federal Reserve officials raised concerns about further monetary easing on Thursday, Oct 7 but only one -- one of the Fed's most consistent policy hawks -- expressed firm opposition to a move.

Kansas City Federal Reserve Bank President Thomas Hoenig, who has dissented against the U.S. central bank's extremely easy money policies at every meeting policy-setting meeting this year, was blunt in stating distaste for further Fed help.

"There is discussion in the media, and broadly speaking, even amongst Federal Reserve policy members that we need to increase our stimulus for monetary policy. Now, I happen to disagree with that," he said.

Dallas Fed President Richard Fisher, also considered as among the most hawkish Fed officials, said the U.S. central bank stands to gain little by pumping more cash into the U.S. economy, and risks sending "confusing signals" to businesses.

However, Fisher, despite his concerns, said he remains undecided about whether to oppose another easing campaign.

"I am not making a final decision here, I'm just saying we have a lot to think about," said Fisher, who does not have a vote this year on monetary policy, but will be in 2011.

As the U.S. recovery faltered over the summer, the Fed pivoted from anticipating a withdrawal from its extraordinary support for the economy to considering how it could supplement it to support jobs and growth.

Many analysts expect the Fed to announce at its next meeting on Nov. 2-3 that it will resume purchases of Treasury securities to drive down interest rates and spur economic activity, barring a surprising rebound in employment.

Statements from Fed officials since their last meeting on Sept. 21 suggest a growing consensus building behind further easing, although Fisher and Hoenig have been steadfast in opposition.

The Fed has already slashed overnight borrowing costs to near zero and pumped about $1.7 trillion into the economy through purchases of longer-term Treasury and mortgage-related debt to lower other interest rates.

SOME SIGNS OF IMPROVEMENT

Data on Thursday hinted at some improvement in economic conditions, but analysts said it was probably not enough to undermine support for more Fed action with the jobless rate at a lofty 9.6 percent and little prospect for pulling it down soon.

New claims for jobless benefits hit almost a three-month low last week, suggesting some let-up in the labor market's distress, and sales at U.S. retail chains last month showed unexpected strength.

However, in evidence of how cautious consumers remain after the deep recession, the Fed said on Thursday that U.S. consumer credit outstanding declined for the seventh straight month in August as credit card debt continued to fall.

Speaking to a business group, Hoenig said the U.S. economic recovery is proceeding modestly and he repeated his belief that the Fed should raise benchmark rates to 1 percent and hold them there to see how the expansion unfolds.

Hoenig said that although unemployment is painfully high, the Fed must also keep an eye on its mandate to maintain long-term price stability, which could be jeopardized by leaving financial conditions so accommodative.

"With this much liquidity in the system, if it stays there as the economy continues to improve and perhaps strengthens ... then there will be this enormous liquidity and there will be tendencies for inflationary impulses to rise," he said.

Fisher, while acknowledging the recovery is subpar, reprised his argument that the responsibility to stimulate further growth lies with fiscal and regulatory authorities, not the central bank. He sees uncertainty on taxes and regulation restraining business spirits.

"I instinctively understand the impulse to put the monetary pedal to the metal to try to move the needle on employment growth," Fisher told the Economic Club of Minnesota. "And yet the efficacy of further accommodation at this point has yet to be established." - Reuters

US jobless claims hit 3-mo low as soft patch fades

WASHINGTON:'' New U.S. claims for jobless benefits hit a near three-month low last week, suggesting some let up in the labor market's distress but likely not enough to keep the Federal Reserve from easing monetary policy further.

Initial claims for state unemployment benefits dropped 11,000 to 445,000, the lowest since the July 10 week, the Labor Department said on Thursday, Oct 7. Financial markets had expected claims to edge up to 455,000.

"The fact that claims are coming down in such a way suggests the labor market has a firmer underpinning than we may know," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. Still, he added: "It would not hurt if the Fed put another log on the fire."

Sales at U.S. retail chains last month also showed unexpected strength. U.S. same-store sales rose 2.8 percent, according to Thomson Reuters data that tracks 28 top chains, beating analysts' estimates for a 2.1 percent increase.

Sales, which rose for the 13th straight month, were boosted by back-to-school buying.

U.S. stocks opened higher on the reports, but ended down. Prices for shorter-dated U.S. Treasuries rose slightly on expectations of of further monetary easing by the Fed.

The U.S. central bank's policy-setting committee meets on Nov. 2-3. The Fed, which cut overnight interest rates to near zero in December 2008, has already pumped $1.7 trillion into the economy by buying mortgage-related and government bonds.

The prospect of further bond purchases pushed the dollar down to a 15-year low against the Japanese yen and an all-time low against the Swiss franc on Thursday.

While financial markets appear to have priced in a second phase of quantitative easing, there is no consensus among policymakers on the need for more stimulus.

Kansas City Fed President Thomas Hoenig, who has consistently dissented from the U.S. central bank's easy money policies, said he opposed any additional easing. His counterpart at the Dallas Fed, Richard Fisher, said he wanted to hear all arguments before making a decision.

Financial markets will likely take a further cue from a U.S. government report on September employment on Friday.

Nonfarm payrolls were likely unchanged last month as more temporary U.S. Census jobs ended and cash-strapped state and local governments laid off workers, even as private hiring picked up, according to a Reuters survey.

The initial benefit claims data has little bearing on the closely followed monthly jobs report because it covered a week that fell outside the report's survey period.

DOWNSIDE RISK TO PAYROLLS

There is a risk employment declined again in September after an independent report on Wednesday showed private employers unexpectedly cut jobs during the month. Many analysts, however, have not changed their forecasts.

"The ADP is very reliable and as good as that is among the best of the indicators that one could possibly have, it has been off, and consistently off, this year by an average of seventy-five thousand per month," said Steven Wieting, an economist at Citigroup on New York.

Although the longest and deepest recession since the 1930s ended in June 2009, the recovery has been unusually sluggish and the economy is still far from full health.

The International Monetary Fund on Wednesday cut its forecast of U.S. economic growth for 2011 to 2.3 percent from its July projection of 2.9 percent.

The sickly economy, characterized by 9.6 percent unemployment rate expected to rise to 9.7 percent in Friday's report, is making Americans increasingly despondent about their future, a factor that could determine the outcome of midterm congressional elections on Nov. 2.

Opinion polls suggest the Democratic Party's hold on Congress will weaken, with Republicans expected to take over the House.

But the labor market is showing some improvement. The four-week average of new jobless claims, considered a better measure of underlying labor market trends, fell 3,000 to 455,750, the lowest level since the July 24 week.

The second straight week of declines in new applications for unemployment benefits pushed them further away from a nine-month high of 504,000 touched in mid-August. Claims are now in the upper end of the 400,000 to 450,000 range that analysts say is normally associated with labor market stability.

The number of people still receiving benefits after an initial week of aid dropped 48,000 to 4.46 million in the week ended Sept. 25, the lowest since June 26.

#Stocks to watch:* Mudajaya, Tenaga, Dialog, Proton

KUALA LUMPUR: Key Asian markets may open on a subdued note on Friday, Oct 8 after weak commodities and a firmer dollar pressured U.S. stocks on Thursday.

On Wall Street, the Dow Jones industrial average dipped 19.07 points, or 0.17%, to 10,948.58. The Standard & Poor's 500 Index eased 1.91 points, or 0.16%, to 1,158.06. But the Nasdaq Composite Index added 3.01 points, or 0.13%, to 2,383.67.

New U.S. claims for jobless benefits hit a near three-month low last week, suggesting some let up in the labour market's distress but likely not enough to keep the Federal Reserve from easing monetary policy further, Reuters reported.

Initial claims for state unemployment benefits dropped 11,000 to 445,000, the lowest since the July 10 week, the Labor Department said on Thursday, Oct 7. Financial markets had expected claims to edge up to 455,000.

Alcoa Inc kicked off the unofficial start to earnings season after the closing bell. The largest U.S. aluminum producer reported a lower third-quarter profit, but said global markets were strengthening. Its shares rose 3.2 percent to $12.59 in extended trade.

But some lackluster earnings reports weighed on the market during the regular session after PepsiCo Inc trimmed the top end of its earnings forecast, while Marriott International Inc's results failed to beat high expectations. Pepsi was down 3 percent at $66.10 and Marriott slid

At Bursa Malaysia, after the 30-stock FBM KLCI hit a fresh year high of 1,481.45 on late buying of BAT, the market may ease on profit taking.

Stocks to watch on Friday include MUDAJAYA GROUP BHD [], TENAGA NASIONAL BHD [], DIALOG GROUP BHD [] and PROTON HOLDINGS BHD [].

Mudajaya rose 17 sen to RM4.61 before it was voluntarily suspended in late morning. It later announced that plans to team up with the Laos government to undertake a 60 MW hydro power project there.

Meanwhile, the Securities Commission (SC) cautioned Mudajaya and its board of directors to ensure compliance with the securities laws and Bursa Malaysia in disclosing the transactions.

The caution was related to Mudajaya's disclosures about its investments in the independent power plant (IPP) project in India which were made prior to Aug 30, 2010, as the SC viewed these disclosures were inadequate.

Tenaga Nasional has been awarded RM10.16 million in its counterclaim against Prai Power Sdn. Bhd.

Tenaga said on Thursday it was notified by the Kuala Lumpur Regional Centre for Arbitration that the tribunal had dismissed Prai's claim of RM11.86 million, except for RM2.35 million which is allowed together with interest.

Dialog has received the go-ahead from the Johor government to develop the independent deepwater petroleum terminal at Pengerang, Johor for a period of 60 years.

The approval will enable Dialog, Johor government and Vopak to own and develop an independent deepwater petroleum terminal with harbour port, jetty and other marine facilities with water depth up to 26 meters capable of handling ultra large crude carriers.

Proton Holdings Bhd has announced a recall of its Gen.2 and Satria Neo models manufactured between 2004 and 2008 because of a potential'' concerns over a clock spring malfunction.

A local newspaper reported the clock spring connects switches and airbags to the radio, horn and cruise control. The recall affects 15,911 cars of the total 660,000 produced and sold by Proton over the four year period.

Tenaga wins suit, awarded RM10.1m claim

KUALA LUMPUR: TENAGA NASIONAL BHD [] has been awarded RM10.16 million in its counterclaim against Prai Power Sdn. Bhd.

Tenaga said on Thursday, Oct 7 that it was notified by the Kuala Lumpur Regional Centre for Arbitration that the tribunal had dismissed Prai's claim of RM11.86 million, except for RM2.35 million which is allowed together with interest.

The tribunal also dismissed Prai's claim of RM102.95 million and the alternative claim of RM51.58 million.

It allowed Tenaga's counterclaim amounting to RM12.70 million in substantial part and Prai would have to pay RM10.16 million together with interest.

Jerneh Asia inks deal to sell Jerneh Insurance to ACE for RM532.3m

Kuala Lumpur: After ten months of bidding process, JERNEH ASIA BHD [] (JAB) has finally inked the deal to sell off their 80% stake in Jerneh Insurance Bhd (JIB) for RM532.3 million to ACE INA International Holdings.

The sum was arrived on a willing-buyer-willing seller bass through a bidding process that also saw other potential buyers eyeing the lucrative general insurance business.

"ACE had simply offered the better price," said JAB chairman Datuk Lim Chee Wah in a media briefing on Thursday, Oct 7. However, he declined to reveal the other bidders.

The total price of the disposal is RM654 million, with JAB receiving RM523.3 million for its 80% stake. The remaining 20% stake is held by Paramount Global Assets Sdn Bhd, which would receive RM130.8 million from the sale.

Lim said that shareholders would enjoy parts of the proceeds in the form of a special dividend.

"As to the quantum, we would need to balance out how much is to be paid out as special dividends and how much is required to be kept so the company is in a good cash position to explore new core businesses," he said.

As for the potential new core businesses, he said JAB would not rush, and instead take its time to evaluate any proposals.

KLCI at fresh year high

KUALA LUMPUR: The FBM KLCI closed at a fresh year high of 1,481 on Thursday, Oct 7, nudged by gains in BAT and CIMB after languishing mostly in the red throughout the day.

The 30-stock index rose 1.84 points to 1,481.45. Turnover was 841.88 million shares valued at RM1.52 billion. However, the broader market was cautious with 410 losers and 299 gainers while 303 stocks were unchanged.

Key Asian markets were mostly lower with the Nikkei 225 down 0.07% to 9,684.81, Singapore's Straits Times index shed 0.73% to 3,166.65 and South Korea's Kospi shed 0.16% to 1,900.85. However, the Hang Seng Index managed to eke out a gain of 0.02% to end the day higher at 22,884.32.

At Bursa Malaysia, BAT rose RM2.44 to RM49.94, nudging up the KLCI by 1.12 points while CIMB added six sen to RM8.19, addining 1.07 points to the index.

Reuters reported that investors were watching the meetings of the European Central Bank and Bank of England later on Thursday for any hint that, like the Federal Reserve and Bank of Japan, policymakers are warming up to using newly printed money to buy assets.

Other blue chips which ended the day higher were YTL, up 10 sen to RM7.60, YTL Power two sen to RM2.33 while tecos Axiata and Maxis added two sen each to RM4.50 and RM5.36.

Mudajaya rose 17 sen to RM4.61 before it was voluntarily suspended in late morning. It later announced that plans to team up with the Laos government to undertake a 60 MW hydro power project there.

Meanwhile, the Securities Commission (SC) cautioned Mudajaya and its board of directors to ensure compliance with the securities laws and Bursa Malaysia in disclosing the transactions.

The caution was related to Mudajaya's disclosures about its investments in the independent power plant (IPP) project in India which were made prior to Aug 30, 2010, as the SC viewed these disclosures were inadequate.

Other gainers were Padini, up 20 sen to RM4.98 and Kulim 19 sen to RM9.19. Johor-based builder Kimlun advanced 13 sen to RM1.43.

Top Glove was the top loser, down 19 sen to Rm5.55, Supermax nine sen to RM4.17 while Latexx-WA shed eight sen to RM2.14.

Among the index-linked stocks, MUISC fell eight sen to RM8.77 and MMC six sen to RM3.07 while Public Bank shed two sen to RM12.56.

Mudajaya in Laos hydro power project

KUALA LUMPUR: MUDAJAYA GROUP BHD [] plans to team up with the Laos government to undertake a hydroelectric power project there.

The company said on Thursday, Oct 7 it had signed a memorandum of understanding with the Laos government to develop a 60 MW hydro power project.

The project company is targetted to be jointly held by the developer and the Laos government on a 75:25 equity basis.

European shares slip back; ECB, BOE eyed

LONDON: European shares edged lower in early trade on Thursday, Oct 7, giving up a little of the previous two sessions' gains, and ahead of interest rate decisions and policy indications from the Bank of England and European Central Bank.

At 0708 GMT, the FTSEurofirst 300 index of top European shares was down 0.3 percent at 1,067.95 points, after rising 0.5 percent in the previous session.

Later in the session, the BoE and the ECB are both expected to say they are keeping interest rates at record low levels, of 0.5 and 1 percent respectively.

"We're not expecting the Bank of England to do anything concrete today. The markets have been pushed up on the expectations of QE (quantitative easing), but that's generally U.S. QE. People expect the Fed to do more QE next month," said Philip Isherwood , European equities strategist at Evolution Securities.

Miners gave up some gains from the previous session, though gold hit another record high, and copper remained near recent highs. Antofagasta, Kazakhmys and Vedanta fell between 0.9 and 2.6 percent.

Renault soared 7.3 percent after the French carmaker announced the sale of a large part of its 21.7 percent stake in Swedish truck maker Volvo. Volvo shares fell 3.3 percent. - Reuters

JCY extends losses on cautious outlook

KUALA LUMPUR: JCY International Bhd's share price extended its losses in late afternoon trade on Thursday, Oct 7 as investors maintained their cautious outlook for the hard disk drive manufacturer.

At 3.34pm, JCY was down three sen to 94 sen. It was actively traded with 12.79 million shares done.

The FBM KLCI slipped 2.65 points to 1,476.96. Turnover was 515.38 million shares valued at RM887.64 million. The broader market was weaker with losers beating gainers 430 to 221 and 295 stocks unchanged.

RHB Research had in a report issued on Tuesday, Oct 5 said that in the near term, it remained cautious on the sector and reiterated its Neutral call.

It cited the risks arising from: 1) persistent weak demand for PCs; 2) Overcapacity that will put downward pressure on average selling prices and ultimately margins; and 3) weaker-than-expected consumer spending due to the austerity measures in the Euro zone and uneven economic recovery in the U.S.

The research house maintained its forecast for JCY and fair value of RM1.32.

Rank sees FY results at top end of market view

LONDON: British gaming firm Rank Group forecast its full-year performance would be around the top of analysts' forecasts after all its businesses improved during the third quarter, according to Reuters on Thursday, Oct 7.

Analysts are expecting full-year pretax profit to range from 48 million pounds to 53 million pounds ($75 million -$84 million) compared with 49 million for 2009, according to a poll by Thomson Reuters I/B/E/S.

Rank, owner of the Mecca bingo hall and Grosvenor casino chains, said like-for-like revenue for the third-quarter, which ended on Oct.2, rose 7 percent, driven by strong performances from Grosvenor and Rank Interactive, while total revenue for the period was up 8 percent.

For the year to date, like-for-like revenue was up 4 percent and total revenue 7 percent higher.

"Whilst the consumer environment is likely to remain challenging for some time to come, the group is in a strong financial position and has made considerable progress in improving the standard of its products and services," it said in a trading statement.

Rank, which plans to roll out 10 more casinos over northern and central England over the next few years, said like-for-like revenues at Grosvenor and Interactive rose 9 percent on higher customer visits and spend. Rank Interactive like-for-like revenues jumped 26 percent.

Mecca Bingo achieved like-for-like growth in revenue as spend per head improved, while Top Rank Espana maintained steady growth in a difficult economic environment, the company said.

Shares in Rank closed at 121.6 pence, valuing the company at 464.3 million pounds. - Reuters

SC cautions Mudajaya over future breaches of securities laws

KUALA LUMPUR: The Securities Commission (SC) has cautioned MUDAJAYA GROUP BHD [] and its board of directors to ensure compliance with the securities laws and Bursa Malaysia in disclosing the transactions.

The caution was related to Mudajaya's disclosures about its investments in the independent power plant (IPP) project in India which were made prior to Aug 30, 2010, as the SC viewed these disclosures were inadequate.

Mudajaya said on Thursday, Oct 6 that the SC had cautioned that it 'will not hesitate to take appropriate action against Mudajaya and its directors if they are found to have breached any provisions of the securities laws or Bursa's disclosure requirements in future'.

To recap, the SC had on Aug 12, asked for a S320 report under the Capital Markets & Services Act 2007 from the auditors of Mudajaya, Ernst & Young, whose report was dated 9 September 2010.

The SC has also reviewed all disclosures made by Mudajaya with respect to transactions related to the aforesaid project and had found that the disclosure made prior to Aug 30, 2010 by MGB pertaining to the IPP project were inadequate.

The SC then required Bursa Malaysia to direct Mudajaya to make additional disclosures on specific areas. These additional disclosures were made on Aug 30.

Mudajaya said the SC cautioned and reminded the company and its board of directors to ensure continuous compliance with Bursa's disclosure requirements and to maintain the requisite standards in fulfilling its disclosure obligations.

It said the 'SC expects the boards and senior management of public listed companies to observe high standards of corporate governance in discharging their duties and responsibilities'.

Mixed signals prompt investor to lock in gains

KUALA LUMPUR: The FBM KLCI was in the red at the mid-day break on Thursday, Oct 7 as regional markets fluctuated amidst mixed signals on the direction of the global economy.

Asian markets initially started trading in the red after TECHNOLOGY [] stocks fell overnight at Wall Street before perking up on encouraging employment data from Australia. However, as trading continued, most of the regional markets fell.

At Bursa Malaysia, the 30-stock FBM KLCI fell 0.11% or 1.59 points to 1,478.02 after having started the day at above the 1,480-point level.

Gainers trailed losers by 218 to 379, while 279 counters traded unchanged. Volume was 375.35 million shares valued at RM615.96 million.

Japan's Nikkei 225 -0.34% to 9,658.43, Hong Kong's Hang Seng Index shed 0.11% to 22,856.05, the South Korean Kospi fell 0.16% to 1,900.90, Singapore's Straits Times Index down 0.60% to 3,170.84 while Taiwan's Taiex added 0.04% to 8,287.31.

The China stock markets are closed for a national holiday.

The ringgit weakened 0.12% to 3.0963 versus the greenback; crude palm oil for the third month delivery rose RM12 per tonne to RM2,748; crude oil rose 26 cents per barrel to US$83.49 while gold jumped US$3.50 an ounce to US$1,352.55.

Among the major decliners, Nestle fell 30 sen to RM43.60, Petronas Dagangan lost 16 sen to RM10.84, Hong Leong Financial Group fell nine sen to RM9.06, Hong Leong Bank and MISC fell five sen each to RM9.25 and RM8.80, while AMMB and MMC Corp shed three sen each to RM5.94 and RM3.10.

Glove makers also fell, with Top Glove down 15 sen to RM5.45, Supermax down 11 sen to RM4.15 and Latexx seven sen to RM2.71.

Among the gainers, Mudajaya rose 17 sen to RM4.61 prior to being suspended at 11.12am today pending a material announcement.

Padini was up 16 sen to RM4.94, Dutch Lady up 14 sen to RM16.88, S P Setia and YTL Cement gained 10 sen each to RM4.90 and RM4.70, MAHB and Kimlun rose nine sen each to RM5.83 and RM1.39, while Mah Sing rose eight sen to RM1.98.

Dialog was the most actively traded counter with 9.68 million shares done. The stock added two sen to RM1.15.

Other actives included Karambunai, JCY International, Jadi Imaging, Berjaya Corp and Mulpha.

Mudajaya suspended for announcement

KUALA LUMPUR: Trading in Mudajay Group Bhd shares was suspended at 11.12am on Thursday, Oct 7 for a material announcement.

A Bursa Malaysia Securities said on Thursday, the suspension was at the company's request and it would remain suspended until 5pm.

The share price rose 17 sen to RM4.61 with 2.44 million units done before the suspension.

RAM Ratings: BAT Malaysia's ratings unaffected by excise-duty hike

KUALA LUMPUR: RAM Ratings said the recent spike in excise duty on cigarettes has no impact on the respective AAA and AAA/P1 ratings of British American Tobacco (Malaysia) Berhad's (BAT Malaysia or the Group) RM700 million Medium-Term Notes Programme (2007/2020) and RM100 million Commercial Papers/Medium-Term Notes Programme (2007/2014).

Below is the statement issued by RAM Rating Services Bhd on Thursday, Oct 7:

BAT Malaysia is involved in the manufacturing, marketing and distribution of cigarettes. Its portfolio encompasses global drive brands such as Dunhill, Pall Mall and Kent, as well as other well-established international names like Peter Stuyvesant, Rothmans and Benson & Hedges.

The Government imposed a 16% increase in the excise duty on cigarettes on 1 October 2010. Following this, the excise duty has gone up 3 sen, i.e. from 19 sen to 22 sen per stick. In response, BAT Malaysia and the other tobacco companies have elevated the retail prices of premium and value-for-money (VFM) cigarettes, by 70 sen for a 20-stick pack. This translates into a current price of RM10.00 for a 20-stick pack of premium cigarettes and RM8.50 per 20-stick pack of VFMs.

The latest steep excise-duty hike is anticipated to dampen industry volumes by 5%'10% year-on-year as we anticipate the further proliferation of illicit cigarettes. Notably, industry sales volumes have been declining in the last 6 years amid several increases in excise duty. Meanwhile, the incidences of illicit cigarettes rose to a staggering 37.5% of total consumption in 2009 (2005: 16%).

As BAT Malaysia's product mix is skewed towards premium brands, down-trading activities arising from the steep price increase may also benefit competitors that have larger exposures to the VFM segment, or even producers of extremely low-priced cigarettes.

We note that the Group re-launched Peter Stuyvesant under the VFM segment in June 2010, in a bid to retain consumers who have traded down from the premium segment; there are indications that the re-launch has already elicited encouraging response. Nonetheless, more time is required to evaluate its effectiveness in terms of market penetration.

Despite the latest 70-sen rise in selling prices that is more than sufficient to cover the excise duty hike, BAT Malaysia's margin on operating profit before depreciation, interest and tax (OPBDIT) is expected to be squeezed by heftier production cost on a 'per unit' basis, brought about by the anticipated steep decline in sales volume.

Compounded by the impact from the withdrawal of 14-stick pack (which yields higher margins) since June 2010, the Group's OPBDIT margin is expected to retrace to around 25% in FY Dec 2010 and 23% in FY Dec 2011 (FY Dec 2009: 28.3%).

'Nonetheless, we still expect BAT Malaysia's credit profile to be firmly supported by its entrenched market position, strong brand equity and superior financial profile,' notes Kevin Lim, RAM Ratings' Head of Consumer & Industrial Ratings.

'The Group remained the market leader with an overall 60.3%-share in 2009. In the meantime, BAT Malaysia's cashflow-protection metrics are expected to stay superior, with a corresponding funds from operations debt coverage ratio of about 1 time,' he adds.

''

SABMiller eyes $9.5 bln Africa Castel beer buy

LONDON: Global brewer SABMiller is in talks to buy the African beer operations of the privately-held French drinks group Castel in a deal worth 6 billion pounds (US$9.5 billion), the Times of London said on Thursday, Oct 7.

The newspaper said founder Paul Castel's reduced involvement in the company signals that the next generation may be open to offers, but added that until recently there had been no indication that the family might sell.

SABMiller is the world's second largest brewer after AB InBev and brews Peroni, Miller Lite and Grolsch.

SABMiller and Castel were not immediately reachable for comment.

As recently as August, SABMiller was speculated to be looking at the beer operations of Australia's Foster's Group which is valued at more than $10 billion.

In Africa, SABMiller has brewing and beverage operations in 14 countries, and a presence in a further 19 nations, largely in West Africa, through a strategic alliance with Castel.

The global brewing industry has seen a number of significant merger and acquisition deals in recent years.

Belgium's InBev acquired St. Louis-based Anheuser-Busch in 2008, creating the world's largest brewer with brands including Stella Artois, Beck's and Bud Light.

Japanese brewer Kirin Holdings, faced with a shrinking beer market at home, has been on an aggressive overseas expansion drive -- in July it bought a stake in beverage and property conglomerate Fraser & Neave for $953 million. - Reuters

FBM KLCI slips in the red at mid-morning

KUALA LUMPUR: The FBM KLCI slipped into negative territory at mid-morning on Thursday, Oct 7, in line with the cautious sentiment across regional markets, following the slightly weaker overnight close at Wall Street.

At 10am, the 30-stock index was down 1.14 points to 1,478.47. Losers overtook gainers by 216 to 145, while 199 counters traded unchanged. Volume was 139.54 million shares valued at RM211.35 million.

The TECHNOLOGY [] sector dragged US stocks lower yesterday after Morgan Stanley downgraded some semiconductor companies on concern about a slowdown in Asian markets and profit-taking in sectors such as cloud computing, which have posted strong gains recently, according to Reuters.

At Wall Street, while the Dow Jones Industrial Average advanced 22.93 points, or 0.21%, to 10,967.65, the Standard & Poor's 500 Index inched down 0.78 of a point, or 0.07%, to 1,159.97 and the Nasdaq Composite Index dropped 19.17 points, or 0.80%, to 2,380.66.

Some of the Asian stock markets which opened in the red this morning, however, reversed some of their losses as fresh data showed Australian employment surging past all expectations.

Australian firms hired a massive 55,800 full-time workers, reviving the risk of a hike in interest rates and lifting the local dollar toward a 27-year peak, according to Reuters.

Thursday's data showed a net 49,500 new jobs created in September, more than twice the market forecast.

The unemployment rate held steady at 5.1%, though only because the buoyant economy tempted a lot more people to look for work, said Reuters.

At the regional markets, Japan's Nikkei 225 gained 0.12% to 9,702.76, Taiwan's Taiex was up 0.19% to 8,299.63, Australia's S&P/ASX 200 Index added 0.06% to 4,689.70 while Hong Kong's Hang Seng Index opened 0.5% higher at 22,996.73.

The South Korean Kospi fell 0.28% to 1,898.69 and Singapore's Straits Times Index shed 0.395 to 3,177.55. China's stock market is closed for a national holiday.

On Bursa Malaysia, among the major decliners were MISC and Latexx Partners that fell eight sen each to RM8.77 and RM2.70, Carlsberg and Supermax down seven sen each to RM5.20 and RM4.19, Petronas Dagangan down six sen to RM10.94 while Tanjung Offshore and Top Glove fell five sen each to RM1.81 and RM5.64.

Among the gainers, Nestle rose 30 sen to RM44.20, Padini was up 22 sen to RM5, Mudajaya up nine sen, APM Automotive and Mah Sing added eight sen each to RM4.85 and RM1.98, Kulim up seven sen to RM9.07 while Mamee and Aliran Ihsan Resources gained six sen each to RM3.61 and RM1.84.

Dialog was the most actively trade counter with 5.66 million shares done. The stock added three sen to RM1.16. Other actives included Karambunai, JCY International, Takaso, Time, Berjaya Corp and Hubline.

Wafer shipments forecast to increase 39% in 2010, says US-based SEMI

KUALA LUMPUR:'' Total wafer shipments are forecast to increase 39% in 2010 to 9.14 billion sq inches from a year ago, according to the Semiconductor Equipment Manufacturers Industry (SEMI) in its annual silicon shipment forecast for the semiconductor industry.

In a statement on its website on Wednesday, Oct 6 SEMI said the forecast provides an outlook for the demand in silicon units for the period of 2010 to 2012.

Silicon wafers are the fundamental building material for semiconductors, which in'' turn, are vital components of virtually all electronics goods, including computers, telecommunications products, and consumer electronics.

The highly engineered thin round disks are produced in various diameters (from one'' inch to 12 inches) and serve as the substrate material on which more than 95% of today's semiconductor devices or "chips" are fabricated.

SEMI said the results showed polished silicon shipments totaling 9.14 billion square inches in 2010; 9.7 billion square inches in 2011 and 10.17 billion square inches in 2012.

Total wafer shipments are expected to surpass the high set in 2007 and continue to increase for the next two years, said SEMI.

SEMI president and CEO Stanley T. Myers said silicon shipments reflected the tremendous recovery experienced by the semiconductor industry this year.

'While current data suggest that growth rates are moderating, we expect that industry will continue to be positive for the next two years,' he said.

SEMI is the global industry association serving the manufacturing supply chains for the microelectronic, display and photovoltaic industries.