Saturday, February 5, 2011

US STOCKS-S&P 500 posts best week in nine, tech leads

NEW YORK: The S&P 500 posted its best week in nine on Friday, Feb 4 ''as the market defied calls for a pullback, and investors rotated into defensive and lagging sectors in a move that could intensify in coming weeks.

Signs of improvement in the economy and strong corporate earnings have propelled stock prices, but tapering volume, meager gains and declining numbers of advancing stocks pointed to waning buying interest at the end of the week.

January's employment data had a limited impact as job creation was weak but the unemployment rate fell, leaving many investors unsure how to interpret the report.

Sectors that have posted strong gains recently, such as energy, materials and industrials, showed signs of profit-taking as investors shifted to consumer discretionary and TECHNOLOGY [] shares.

"The market has been getting more selective and the rotation is important," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. "I'm not sure people have it completely figured out yet."

Networking shares were among the leaders after JDS Uniphase posted strong earnings. Its stock rose almost 30 percent and bolstered hopes for strong results from Cisco Systems next week.

The Dow Jones industrial average rose 29.89 points, or 0.25 percent, at 12,092.15. The Standard & Poor's 500 Index added 3.77 points, or 0.29 percent, at 1,310.87. The Nasdaq Composite Index climbed 15.42 points, or 0.56 percent, at 2,769.30.

For the week the Dow rose 2.3 percent the S&P 500 rose 2.7 percent and the Nasdaq gained 3.1 percent.

The S&P's energy sector, which has gained the most this year, was among the biggest losers on the day, falling 0.3 percent. Dow component Chevron Corp dropped 0.2 percent to $97.11.

Consumer discretionary shares rose 0.7 percent after recent signs of life in the consumer. Shares in online retailer Inc climbed 1.3 percent to $175.93. Consumer shares have lagged the rally since the start of the year.

Strength in technology helped push the Nasdaq to new 3-year highs after the index posted its best week since mid-September, but the move was not broad-based as declining stocks came in just ahead of advancers.

A jump in Treasury debt yields could favor companies with stronger balance sheets as investors start to worry about funding costs. The yield on the 10-year note rose to 3.64 percent, the highest it has been since May 2010.

"The sharp increase in the 10-year yield is concerning, and investors may be starting to focus on businesses with better balance sheets," said Eric Cinnamond, a fund manager at River Road Asset Management in Louisville, Kentucky. "Technology obviously fits that mold."

Shares of JDS Uniphase and other optical component makers jumped a day after the company posted solid quarterly results, helped by ever-increasing demand for higher bandwidth in smart phones, tablets and other applications.

JDS Uniphase shares rose 26.9 percent to $22.76.

"The strength in the technology sector today and strong earnings from JDS Uniphase potentially have people bulled up on the prospects of a positive earnings surprise from Cisco next Wednesday," said Steve Claussen, chief investment strategist at online brokerage OptionsHouse LLC.

Cisco is set to report earnings on Wednesday. The stock rose 0.6 percent to $22.05.

Both the Dow and the S&P 500 made new 2 1/2-year highs.

"From a short-term perspective, the Dow has resistance at the 12,050 level and support at the key 12,000 region," said Joseph Hargett, analyst at Schaeffer's Investment Research in Cincinnati, Ohio.

Health insurer Aetna Inc forecast 2011 profit well above of Wall Street's target on Friday and increased its dividend, sending its shares 12.5 percent higher to $37.42.

Tyson Foods Inc advanced 5.7 percent to $18.56 after the company said quarterly earnings surged 86 percent.

U.S. employment rose by a meager 36,000 jobs in January, far less than expected, but the unemployment rate fell to 9.0 percent, its lowest level since April 2009. - Reuters

#Stocks to watch:* Plantations, oil and gas, SP Setia

KUALA LUMPUR: Blue chips could start off the new week on Monday, Feb 7 on a strong note following the firmer close on Wall Street on Friday, but investors' anxiety over the unrest in Egypt could restraint aggressive buying of stocks which were sold down in January.

On Wall Street, the Standard & Poor's 500 posted its best week in nine on Friday as the market defied calls for a pullback, and investors rotated into defensive and lagging sectors in a move that could intensify in coming weeks.

Reuters reported signs of improvement in the economy and strong corporate earnings have propelled stock prices, but tapering volume, meager gains and declining numbers of advancing stocks pointed to waning buying interest at the end of the week.

The Dow Jones industrial average rose 29.89 points, or 0.25%, at 12,092.15. The Standard & Poor's 500 Index added 3.77 points, or 0.29%, at 1,310.87. The Nasdaq Composite Index climbed 15.42 points, or 0.56%, at 2,769.30. For the week the Dow rose 2.3%, the S&P 500 added 2.7% and the Nasdaq gained 3.1%.

On the outlook for the Malaysian stock market, OSK Research expects the FBM KLCI to rebound in February with a better than expected fourth quarter 2010 results season. It expects banking and consumption related sectors such as aviation, retail and media to attract interest. It also sees the O&G sector continuing to enjoy good newsflow.

'For February, we recommend rebound plays (SP SETIA BHD [] and KENCANA PETROLEUM BHD []), strong results (CIMB Group Holdings Bhd and AIRASIA BHD []) and laggards (KPJ HEALTHCARE BHD []),' it said in a recent research note.

Maybank Investment Bank Research meanwhile said with Petroliam Naskional Bhd launching the marginal'' field development, it said there are many positives and re-rating catalysts'' from Kencana and SAPURACREST PETROLEUM BHD []'s win on the Berantai risk service contract RSC project, (for example elevation up the O&G value chain, order book enhancement and earnings expansion).

'Our preliminary estimate is a'' 2.0 sen to 3.0'' sen'' (+14% to 18%)'' impact on Kencana's'' and SapCrest's'' FY12 EPS'' respectively. With nine other'' RSC's'' in the pipeline,'' Kencana and SapCrest could be in the running for more in the future, while Dialog'' is a possible participant, in our view. We are Buyers of'' Kencana (TP: RM3.10), SapCrest (TP: RM3.80) and Dialog (TP: RM2.60),' it said.

Investors should also keep an eye on PLANTATION [] and food-related stocks as food inflation becomes more acute.

The United Nation's Food and Agriculture Organisation World said food prices surged to a new historic peak in January, for the seventh consecutive month. It warned high prices are likely to persist in the months to come.

The FAO said its updated FAO food price index -- a commodity basket that regularly tracks monthly changes in global food prices ' averaged 231 points in January and was up 3.4% from December 2010.

Meanwhile, plantation stocks could be in focus following reports that the cooking ingredient becomes the next target for emerging markets seeking to buy big and dampen adverse effects of booming world food prices.

Reuters reports palm oil output and stocks, already lagging robust demand due to rains in top Southeast Asia producers, could be made worse should the cooking ingredient become the next target for emerging markets seeking to buy big and dampen adverse effects of booming world food prices.

As governments from India and Thailand to Egypt act to quell soaring food inflation and public anger, world cooking oil supplies look uncertain as the impact of dry weather and social unrest in the Argentine soy crushing sector lingers.

ANALYSIS-Cheap Egypt assets attractive but not yet, say funds

LONDON: Cairo financial markets, reopening from a prolonged closure and a steep selloff, cannot look forward to much support from overseas portfolio managers who want more clarity on Egypt's economic and corporate outlook before venturing back to the country's newly-cheap securities, according to Reuters on Friday, Feb 4.

Seven out of 10 fund managers interviewed by Reuters for this article said they will not buy Egyptian securities just yet despite steep falls that have brought stock valuations to among the most attractive levels in the emerging market asset class.

The assets are cheap for a reason, most investors argue.

With Cairo and much of Egypt roiled in political tension and protesters demanding an immediate end to President Hosni Mubarak's 30-year rule, the country has ground to a standstill.

Economic growth and investment projects in North Africa's biggest economy will almost certainly take a hit. And as turmoil also engulfs neighbouring states, there are big question marks on how investor-friendly future government policy will be.

"Valuations look attractive if you are a short-term trader. But we are long-term investors and need to look ahead and see how all this will impact companies' results, their cash flow generation and financing needs," said Dilek Capanoglu, CIO, emerging equities at Allianz RCM in Frankfurt.

"You need to assess the danger to the overall economy, which has come to a standstill over the past two weeks."

Egyptian shares fell 21 percent in January, after rising 15 percent last year and 35 percent in 2009. Yields on its $1 billion global bond maturing 2020 rose over 100 basis points. And debt insurance costs have jumped. It now costs $400,000 to insure exposure to $10 million of Egyptian debt, $150,000 more than at the start of 2011.

The mood now, almost two weeks into the mass demonstrations, is far worse than at the start of the week when hopes had grown for a peaceful and speedy transition of power.

That tempted some foreign investors to buy offshore-listed assets, pushing up London-listed global depositary receipts (GDRs) issued by Egyptian firms and an Egypt exchange traded fund listed on the New York stock exchange. But since then, violence has broken out. Gains in the GDRs and ETF have stalled though they are well off recent troughs.

"A few days ago I was positive, now I am reassessing that," said Sven Richter, head of frontier markets at Renaissance Asset Managers, which has a big underweight on Egypt.

Egypt's finance minister offered little comfort, admitting economic loses from the unrest were "huge".



Despite accounting for under 1 percent of the MSCI emerging index, Egypt's bourse lured a disproportionate volume of inflows as investors saw its young, 80 million population as a sure fire bet on consumer demand.

Egyptian firms such as Orascom and EFG have a regionwide presence and earnings growth -- expected at 34 percent in 2012 -- was the highest in emerging Europe and the Middle East. The economy has been growing at 5 percent annually in recent years.

Foreigners held some $25 billion in Egyptian securities before the crisis, according to estimates by Barclays Capital.

But the extreme positioning meant Egypt was ripe for a reversal even before it started feeling the political heat.

And now with investors having been trapped into a closed market, another round of panic selling is likely when trading resumes on Monday.

"The markets did not give us a fair chance to exit and we did not want to add to the panic selling last week," said Nadi Burgatti, head of asset management at Shuaa Capital in Dubai.

Some argue the shares are a steal at these prices. They trade at 8 times 2011 earnings, among the cheapest in emerging markets and a record discount to their own 5-year average.

HSBC equity analysts for instance this week moved Egypt to double overweight in their model portfolio, noting the army's conciliatory response to the protests and the West's interest in maintaining calm in Egypt, a key geo-political partner.

"It is likely that the market is over-pricing the tail risks," they told clients in a note.

One fund manager who asked not to be named said he had been underweight Egypt but last week used the market decline to add exposure and is now at benchmark weight.

"In the longer term you have to be positive about the economy and the companies that operate in it," he added.



Egyptian external bonds may fare better than the shares. Many argue the debt is trading cheap relative to the country's credit ratings, given gross external sovereign debt is extremely low at just 17 percent of gross domestic product.

"We are currently trying to increase exposure to external debt ... from an external debt perspective, it's difficult to see Egypt default whether Mubarak stays or goes," said Sergei Strigo, head of emerging debt at Amundi Asset Management.

He was less optimistic about local debt especially as the Egyptian pound's recent fall to six-year lows is likely to exacerbate double-digit inflation.

One thing all investors agree on is that political reform in Egypt is overdue. But the worry is what policies the government will adopt once the protesters disperse. Monetary and fiscal tightening are crucial to stem inflation but will certainly depress consumption and corporate margins at least short-term.

"Whichever government comes in will have to address poverty, inflation, job creation," Capanoglu of Allianz said. "The worry is they could be tempted to favour populist policies."

Friday, February 4, 2011

ANALYSIS-Food price boom puts palm oil on emerging markets' radar

JAKARTA/KUALA LUMPUR: Palm oil output and stocks, already lagging robust demand due to rains in top Southeast Asia producers, could be made worse should the cooking ingredient become the next target for emerging markets seeking to buy big and dampen adverse effects of booming world food prices.

As governments from India and Thailand to Egypt act to quell soaring food inflation and public anger, world cooking oil supplies look uncertain as the impact of dry weather and social unrest in the Argentine soy crushing sector lingers, according to a Reuters report on Friday, Feb 4.

A scramble for palm oil may see world consumption outpace production, going beyond a supply deficit of 246,000 tonnes as seen in U.S. Department of Agriculture data in the current marketing year to September.

This scenario is set to further boost benchmark Malaysian palm oil futures that hit a three-year high on Wednesday and might bring the market well above the 4,000 ringgit level soon.

"The increase in CPO (crude palm oil) prices is real. It is inline with the increase in rice and any other food price," said Leonardo Gavaza, analyst at Bahana Securities.

"The Egyptian demonstrations will make some countries think about the kind of initiative to buy directly all commodities, to maintain their own inflation. The government of Indonesia is already pushing PLANTATION [] companies to increase production."

Global food prices hit a record high in January, the U.N. Food and Agriculture Organisation said on Thursday, adding that prices, already above the 2008 levels which sparked riots, were likely to rise further.

Concerns of a food supply squeeze spread to cooking oil when rains this week triggered floods in Malaysia, the world's No.2 palm oil producer, submerging estates and cutting off roads that slowed deliveries.

In the same week, Thailand, usually self-sufficient, announced plans to buy 120,000 tonnes of crude palm oil to ease a domestic cooking oil shortage, a move that may spur other bigger importers to stock up.

"The demand that we're seeing is food-driven, not fuel or speculation like we saw back in (the highs of) 2008," said a palm oil analyst, referring to when the vegetable oil hit a record 4,486 ringgit per tonne along with other commodities.

Egypt, a palm oil importer, was also rocked by civil unrest related to soaring food prices and top trader Cargill reported of more food stockpiling in the region.

"We are bullish and at the cross roads," said Abah Ofon, a Singapore-based analyst with Standard Chartered bank. "We have social tensions in Argentina affecting oilseed imports and there is the threat of floods hanging over Malaysia and Indonesia."

"Such news will trigger higher prices and if not handled carefully, it can cause a voter backlash to various governments of big importing countries."


Traders will focus on the next moves by India and China as the world's top two palm oil buyers use monetary policy tools and food cost measures to rein in rising inflation.

"Consumption of vegetable oils appears to still grow strongly in India and China, although there can be no doubt that poor consumers in these and other countries are hurt severely by the current prices," Thomas Mielke, editor of OilWorld, said in a note.

China, the No. 2 buyer, could rely on a cheaper, bumper Brazilian soy crop and order more U.S. soy to process into cooking oil, limiting its edible oil imports and inflation that a Reuters poll pegged at 30-month high in January.

Although Indian officials expect a strong rapeseed crop to cut palm oil imports, the world's top buyer could import more as the government has pledged to continue duty-free imports of crude edible oils ahead of elections in key states this year.

"India will hold off buying for the next three weeks or so, since we are covered for January and most of February," said Sandeep Bajoria, chief executive of Mumbai-based trading firm Sunvin Group.

"But if the prices continue to go higher for a longer time, we will be forced to buy," he said, adding that South Asian country imports half a million tonnes monthly from mostly Indonesia.

India's food inflation has remained in double digits for most of last year but analysts say it is rooted in factors like bad weather damaging food staples and soaring global prices that cannot be remedied by raising interest rates.


Floods in palm oil producing Malaysia is the latest in a string of weather events, starting from Russia's drought last summer to recent floods in Australia that curbed wheat supplies and fed a buying frenzy for food staples.

The floods are starting to recede, government officials say, but planters are concerned that palm fruits' prolonged exposure to moisture will affect yield quality.

Planters say Malaysian stocks may fall by 10-15 percent in January and by an extra 5-8 percent in February.

Inventories slipped to a five-month low of 1.6 million tonnes, data from a Malaysian industry regulator showed.

Tight stocks have prompted buyers to shift to top producer Indonesia where higher maturing acreage can offset the impact of heavier rains on yields although supply will get tight.

"There is a sustained level of support for prices because we still see a lot of production short-fall," said one palm oil analyst.

"The weather problems are going to persist, especially in Malaysia."

Extreme weather has lingered in South America. The impact of drought on Argentina, the No.1 soyoil producer, has prompted the country's biggest grains exchange to cut its forecasts on the soy crop despite recent widespread rains.

The government ordering Argentine grain workers to suspend their week long strike, which paralysed crushing plants and shipments, may give relief but some disagree.

"Argentina is a wild card and strike action can go on for days, weeks," said a regional vegetable oil trader in Singapore.

"What has changed is everything is happening at the same time, including palm oil. It's a battle to get the cheapest price now.' - Reuters


Australia cenbank looks past floods to mining boom

SYDNEY: Australia's central bank said on Friday, Feb 4 it would look past the impact of recent floods when setting interest rates and stay focused on the medium term outlook for strong economic growth, booming mining investment and gradually rising prices.

The local dollar climbed to one-month peaks at $1.0194 after the Reserve Bank of Australia (RBA) gave its upbeat outlook for the domestic and global economies, leading investors to price in higher interest rates ahead.

"The RBA has remained bullish and its assessment is very positive," said Michael Workman, a senior economist at Commonwealth Bank.

"We still think market pricing for interest rate hikes is too low given this scenario of strong economic growth, high commodity prices and massive mining investment," he added.

CBA expects three hikes of 25 basis points (bps) this year taking the cash rate to 5.5 percent, with the first move by June.

In contrast, interbank futures <0#YIB:> imply only a modest chance of a rise this side of July and just 35 bps of tightening in the next 12 months .

Still, that was up from only 20 bps early this week when Cyclone Yasi was bearing down on Queensland. In the end, Yasi did less damage than feared and the rebuilding task will only add to growth going forward.

Indeed, the RBA estimated that while the recent floods in Queensland would trim gross domestic product (GDP) growth by around 0.5 percentage points this quarter, rebuilding would then lift annual growth to a rapid 4.25 percent by year-end.


"The recent floods will have a material effect on the near-term profile of GDP, with growth in the December and March quarters notably lower than would otherwise be the case, followed by a strong recovery in the June quarter as coal production picks up and the rebuilding effort gets underway," RBA Governor Glenn Stevens wrote in the introduction to the 63-page outlook for the economy.

"In setting monetary policy over the period ahead, the board will, as on past occasions when natural disasters have occurred, look through the estimated short-term effects on output and prices," said Stevens.

The central bank left its cash rate unchanged at 4.75 percent at its February board meeting this week, having previously hiked by 175 bps since October 2009.

It also forecast GDP growth of 4 percent for both 2012 and 2013, levels well above the historic trend of around 3.25-3.5 percent. As a result, it expected employment growth to remain solid, with the jobless rate falling to around 4.5 percent by mid-2013 from the current 5.0 percent.

Damage to farms would temporarily add around 0.25 percentage points to consumer price inflation this quarter, while annual underlying inflation would rise to 2.75 percent at the end of the year and run at 3 percent in both 2012 and 2013.

The central bank aims to keep inflation in a 2 to 3 percent band over the long run.

"The medium-term outlook for the economy is broadly unchanged from the time of the November statement, with strong growth in mining investment and higher commodity prices boosting national income and demand," said the central bank.

Indeed, the RBA said it was now more confident that the expected boom in mining investment would materialise as a number of very large resource projects had recently got the go-ahead, particularly in the liquefied natural gas sector.

"Overall, the profile for mining investment has been revised slightly higher since the November statement," the RBA said.

Global growth had been stronger than expected and helped lift prices for Australia's key commodity exports, leading the RBA to revise up the outlook for the terms of trade.

The boost from trade and investment would stretch the economy's spare capacity over time, though a more cautious consumer and a high Australian dollar were helping to restrain inflation in the near term.

"With GDP growth expected to be above trend over much of the forecast horizon, pressures on capacity are likely to emerge in parts of the economy as the structural adjustment to the large change in relative prices takes place," said Stevens. - Reuters

FAO: World food prices reach new historic peak, to persist in months to come

KUALA LUMPUR:'' World food prices surged to a new historic peak in January, for the seventh consecutive month, the United Nation's Food and Agriculture Organisation said, and warned high prices are likely to persist in the months to come.

The FAO said its updated FAO food price index -- a commodity basket that regularly tracks monthly changes in global food prices ' averaged 231 points in January and was up 3.4% from December 2010.

In its report released on Thursday, Feb 3, the UN agency said this was the highest level (both in real and nominal terms) since FAO started measuring food prices in 1990. Prices of all monitored commodity groups registered strong gains in January, except for meat, which remained unchanged.

"The new figures clearly show that the upward pressure on world food prices is not abating," said FAO economist and grains expert Abdolreza Abbassian in the report released in Rome.

"These high prices are likely to persist in the months to come. High food prices are of major concern especially for low-income food deficit countries that may face problems in financing food imports and for poor households which spend a large share of their income on food."

Abbassian added the only encouraging factor so far stems from a number of countries, where - due to good harvests - domestic prices of some of the food staples remain low compared to world prices.

FAO emphasised that the Food Price Index has been revised, largely reflecting adjustments to its meat price index. The revision, which is retroactive, has produced new figures for all the indices but the overall trends measured since 1990 remain unchanged.

FAO Cereal Price Index

The FAO Cereal Price Index averaged 245 points in January, up 3% from December and the highest since July 2008, but still 11% below its peak in April 2008.

The increase in January mostly reflected continuing increases in international prices of wheat and maize, amid tightening supplies, while rice prices fell slightly, as the timing coincides with the harvesting of main crops in major exporting countries.

Oils/Fats Price Index

The Oils/Fats Price Index rose by 5.6% to 278 points, nearing the June 2008 record level, reflecting an increasingly tight supply and demand balance across the oilseeds complex.

Dairy Price Index

The Dairy Price Index averaged 221 points in January, up 6.2%'' from December, but still 17 percent below its peak in November 2007. A firm global demand for dairy products, against the backdrop of a normal seasonal decline of production in the southern hemisphere, continued to underpin dairy prices.

Sugar Price Index

The Sugar Price Index averaged 420 points in January, up 5.4% from December. International sugar prices remain high, driven by tight global supplies.

FAO Meat Price Index

By contrast, the FAO Meat Price Index was steady at around 166 points, as declining meat prices in Europe, caused by a fall in consumer confidence following a feed contamination scandal, was compensated for by a slight increase in export prices from Brazil and the United ''States.

U.S. data, M&A lifts stocks; job report, Egypt eyed

HONG KONG: Japanese shares rose on Friday, Feb 4, lifted by news of a mega merger in the steel sector, while a rebounding dollar put a slight dent in a commodities rally that saw copper hit a record $10,000 a tonne in the previous session.

Tough competition from steelmakers in China and India, shrinking demand from domestic automakers and rising prices for raw materials such as coal and iron ore prompted Japan's Nippon Steel and Sumitomo Metal Industries to merge to create the world's second-largest steelmaker.

Shares of Nippon Steel and Sumitomo Metal rallied sharply, rising 9 percent and 16 percent, respectively, lifting Japan's Nikkei up 1.1 percent.

"The news will likely raise expectations that more Japanese companies will seriously try to increase their competitive edge in the global market," said Shinichiro Matsushita, a senior market analyst at Daiwa Securities.

"On top of last week's NEC-Lenovo deal, these deals will boost investor sentiment towards Japanese stocks."

The Nikkei has risen 3.1 percent so far this year and is Asia's top performing market as investors continue to favour developed markets over emerging markets that are battling with high inflation and political risk. The MSCI Asia ex-Japan index is up just 0.6 percent.

Australia's key stock index rose 0.9 percent as heavyweighted commodity-related stocks rallied. Most other markets in Asia remained shut for the Lunar New Year holuday and will reopen on Monday.

Many traders were also on the sidelines awaiting U.S. jobs data later in the day and eyeing developments in Egypt after the White House said the United States is discussing with Egyptians a variety of ways of moving to a peaceful transition of power.

Spurred by further signs that the global economy was gaining momentum and speculative buying, copper hit $10,000 a tonne for the first time in London overnight, before easing.

London's Brent oil rose 0.3 percent to around $102 well after hitting a 28-month high above $103 a barrel on Tuesday as violence escalated in Egypt. For more stories, click

Sugar retreated as well after spiking to 30-year tops on Wednesday as a killer cyclone battered Australia's sugar cane fields. Wheat rebounded after a brief decline, staying near the 2008 highs seen in the last session after a snowstorm that paralyzed the U.S. grain belt.

Surging food prices have come back into the spotlight after they helped fuel the discontent that toppled Tunisia's president in January and spilled over to Egypt and Jordan.

Global food prices tracked by a U.N. agency hit their highest level on record in January.

Markets fear many central banks may have to take more aggressive action to contain growing inflationary pressures, which could dampen global growth.

Weighing on commodity prices on Friday was a rebound in the U.S. dollar as stronger-than-expected growth in the U.S. services sector showed a resilient economy.

Rising service-sector activity, improved jobless claims figures and stronger-than-expected retail figures in the U.S. have raised confidence ahead of Friday's payrolls report that is expected to show the economy adding 145,000 jobs in January.

A strong jobs report could help the dollar extend gains against the euro.

The euro was on the defensive after its more than 1 percent drop overnight after European Central Bank President Jean-Claude Trichet threw cold water on expectations of a rise in euro zone interest rates.

The single currency was trading at $1.3634 by late morning in Asia, moving further away from a 12-week high of $1.3862 set on Wednesday. - Reuters

Potential tie-ups drive premiums in oil, gas sector

Extracts of a report by OSK Research

:'' The share prices of oil and gas (O&G) stocks are undergoing a re-rating, largely fuelled by positive market sentiment and strong news flow.

Going forward, we think that partnerships or actual contract awards will be the main 'push' factor for further share price upside and the lucky companies will continue to outperform those which lack news flow.

Our average sector PER valuation is raised from 13.2 times to 16.6 times. Maintain Overweight on the sector, with our top picks being Kencana Petroleum, Alam Maritim, Petra Perdana and Petra Energy.

Sector undergoing a re-rating. Recently, the share prices of most O&G stocks have been on an uptrend, fuelled by a wave of positive news, including:

i) the Government's efforts to promote the development of marginal oil fields; ii) expectations of new O&G contracts being announced soon; iii) oil price having broken past US$70-US$80/barrel, and iv) the sector being 'ripe' for a re-rating after a 13-month consolidation.

JVs the next 'push' factor. We believe that any bigger companies resulting from M&As or partnerships will garner valuations that are higher by 20%-50%, depending on their combined size and the potential synergy to be derived from the mergers.

Our educated guess for potential partnerships include: i) Kencana Petroleum with Petrofac; ii) Alam Maritim with Coastal Contracts; iii) SapuraCrest Petroleum with Petra Perdana and Alam; iv) Coastal with Ramunia; v) Tanjung Offshore with oil majors, and vi) Wah Seong with KNM.

Note that these are purely conjecture on our part, and are based on potential synergy or market rumours, rather than any indication from company management.

The strong shall prevail, the weak will fall. We believe that the re-rated share prices of O&G stocks will consolidate at current levels. Any further upside would depend on actual contract awards and the flow of potential JV news, whereby the stocks involved would have their earnings re-rated upwards.

However, the share prices of companies that lack such catalysts may fall back. Hence, investors should be selective in their stock picks.

Maintain Overweight. We believe there is more upside potential for most O&G stocks despite the recent upswing in their share prices. We also think that the days of dishing out massive contracts are back.

Given the positive sentiment and potential for more news flow inthe sector, we raise our PER valuation for a number of companies under coverage.

Our average PER valuation (ex Dialog) is raised from 13.2 times to 16.6 times. We also upgrade our calls on a number of companies including Alam Maritim, Dialog Group, Petra Perdana and Petra Energy. On the flip side, companies with rather loftier valuations have been downgraded to Trading Buys including Kencana Petroleum and MMHE.

Nonetheless, Kencana Petroleum remains our top pick. Aside from Kencana, we now include Alam Maritim, Petra Perdana and Petra Energy as our other top buys.

Government promoting marginal oilfield developments. This move is in line with Petroliam Nasional Bhd's objective of increasing oil output in the immediate term.

Examples of government support take the form of: i) giving encouragement and support for potential tie-ups between local O&G service providers with international oil majors, and ii) giving attractive tax incentives to attract efforts and new investment into these fields.

Some of the recently announced tax incentives include: i) a 60%-100% investment tax allowance on capex spent on capital intensive-projects such as enhancing oil recovery etc, ii) a lower tax rate of 25% (from 38% previously); iii) accelerated capital allowance to 5 years (from 10 years previously) to improve project viability, and iv) a waiver of export duty on oil produced and exported from marginal oil field developments to improve a project's commercial value.

Other factors are that more O&G contracts to be announced soon while crude oil price has successfully broken above the US$70-US$80/barrel consolidation band since 4Q10, with the quarterly average at US$85 a barrel.

We believe that crude oil price will continue to go up before consolidating at US$80-US$90 a barrel for 2011 and USD90-USD100/barrel for 2012. Also, we think that these higher levels are likely to be sustainable given the recovery in the global economy, which will spur oil demand.

Potential joint ventures

It's purely conjecture. Firstly, note that our guesstimates stem from our view of the potential synergy or market rumours rather than based on direct information from management. Having said that, it is the guessing game that keeps the news flow interesting and the momentum of share prices going, as we believe the situation would likely be one of 'buy on rumour and take profit on fact', unless there is a material synergistic earnings re-rating for the combined entities.

New contracts just around the corner.

Some of the potential new O&G contracts in the pipeline are:

(i) the RM1.0bn hook-up and commissioning contracts from Petronas and its PSC contractors; (ii) RM2.0bn maintenance contracts from Petronas and its PSC contractors; iii) ExxonMobil's USD3.0bn spending in new O&G assets to rejuvenate mature facilities and enhance oil recovery in the Tapis field starting 2013; iv) Shell's USD1.6bn to upgrade and build facilities in the upstream, midstream and downstream segments, including the expansion of Shell MDS' wax plant in Bintulu, a new diesel processing unit at Shell Refinery in Port Dickson and Gemusut deepwater development offshore

Sabah; v) Kebabangan and Malikai deepwater development projects; vi) Tapis, Sepat, Berantai and a few other marginal oilfields development projects, and vii) vessel contracts to support marginal oilfield developments.


Valuations and recommendations

Maintain Overweight. Despite the recent strong run-up in the prices of most O&G shares, we believe there is still more upside potential and hence are maintaining our Overweight call on the sector. We are also re-rating upwards our PER valuations for most of the O&G stocks under our coverage. As we mentioned earlier in this report, we believe there may be a pullback in the short term after the recent price surge. However, we view such share price retracement as a good opportunity to buy and going forward, we believe that the actual awarding of the contracts and the emergence of news related to

JVs among the local players or with overseas players would add fuel to the rally.

Are the laggards worth investing in?

Given the recent run-up in O&G stocks, we believe this sector

is now being closely watched by the investment community. Hence, the likely next step of action is to go for laggards but will they perform in the coming months?

On the surface, we have 2 schools of thoughts on this: i) if a mass of new O&G contracts are awarded in the coming weeks, we think it would be a good strategy to invest in the laggards as there has been speculation that many companies would benefit since such huge ''contracts cannot be handled by a single company. The sentiment on the sector as a whole would improve rather than just on specific stocks, as seen in 2009 and 2010; ii) otherwise, we think the laggards will continue to be laggards while the performers will continue to outperform as they are likely to get more new O&G contracts to spur a re-rating of their earnings.

O&G stock picking strategy. We believe that the new O&G contracts to be awarded by Petronas and its PSC contractors this time would be to the mass market, rather than simply to one company, although we do not discount the possibility that the award of the main contractor package will continue to be selective as we gather from industry sources that this is will be Petronas' future approach to empowerment, where it also imposes on the selected company the responsibility of expanding and managing other O&G supporting companies. We also think that the days of awarding mass contracts are back, as can be seen from the RM400m hook-up and commissioning contract awarded to Petra Energy, which we understand is part of a contract worth RM1.5bn. Hence, we think there is still a

piece of the pie left for peers like Dayang and Kencana but again, we hope this would be the beginning of Petronas giving out a mass of contracts, compared with the past 2 years when the notable huge jobs like the Sabah O&G Terminal (SOGT) worth RM2.4bn and offshore installation works worth over RM4.0bn were awarded to only a few parties. Amid this scenario, we are adding a few more companies to our stock picks this time.

Kencana remains our favorite sector pick. Despite its strong share price rally since 2H10, we believe there is still upside potential for Kencana once the highly anticipated job to develop marginal oil fields, which it is tipped to undertake together with its strategic partners, is finalised.

This will provide even better earnings visibility for the company and not only boost its earnings going forward but also transform the company into a bigger O&G service provider from just a traditional fabricator.

However, given the recent strong share price surge without an actual contract materialising, we are ''downgrading our call from Buy to Trading Buy although we have raised our target price to RM3.37 based on a higher PER of 23x FY12 EPS (previously RM2.93 based on a PER of 20x FY12 EPS). We will probably upgrade our call back to Buy once Kencana confirms its participation in marginal oilfield developments, and when management is able to provide better future earnings guidance.


Introducing 3 new picks: Alam, Petra Perdana and Petra Energy

Since mid-2010, we have been promoting Kencana as our one and only pick for the O&G sector and the company's earnings and share price have indeed performed up to our expectations.

We are now starting to introduce more stock picks since sentiment in the sector is positive and based on our prediction on the potential flow

of new contract awards, we believe that Petronas and its PSC contractors would next be looking at the hook-up and commissioning works as well as maintenance, which should benefit players like Petra Energy. Of course, when this happens, the full support of vessel operators would be needed to assist in carrying the fabricated structure, workers, food, water, chemicals and so on, which should benefit players like Alam and Petra Perdana.


Re-rating the sector valuation upwards. Given the number of positive indicators such as:

i) positive sentiment on the local O&G stocks among the local and foreign investors; ii) continuous support from our government to develop the industry such as by providing various tax incentives; iii) potential new contracts from Petronas and its PSC contractors, and iv) finally, potential partnerships, either among themselves or with foreign O&G operators to bring them up to the next level, we believe all these would in combination shore up sentiment on O&G stocks.

As such, we are raising our average sector PER valuation (ex Dialog) from 13.2x to 16.6x and upgrading a number of our calls including Alam, Dialog, Petra Energy, Petra Perdana and Tanjung Offshore. On the other hand, rather lofty valuations lead us to downgrade Kencana and MMHE to a Trading Buy.

Alam (Buy, TP: RM1.50). We are upgrading Alam to a Buy from Neutral. We downgraded Alam to Neutral in 2010 when we found out that there is a potential provision for doubtful debts from Vastalux of about RM30m.

However, we noted that investors have recently chosen to ignore this fact as they look towards new O&G contracts which could potentially increase the demand for Alam's vessels, which are only about 30% utilized, and also fetch higher charter rates of above USD1.70/bhp. That said, we are now looking on the brighter side as we expect, other than higher vessel utilization and charter rates, we see the company securing some basic pipe laying jobs via its recent MoU with Yayasan Sabah Shipping SB (YSS), 100%-owned by Yayasan Sabah Group, for the Sabah Oil and Gas Terminal (SOGT) project.

Coastal (Buy, TP: RM4.41). We maintain a Buy on the company mainly due to its attractive valuation.

The company also has a good delivery track record of delivering quarter after quarter. Its orderbook is also still strong at close to RM1bn, which should keep the company busy for at least the next 12 months. However, we note that Coastal will continue to trade at a discount to its peers as investors still see the company as a shipbuilder, rather than a pure O&G player. However, we are monitoring closely its developments such as the potential JV with Ramunia, to turn the company into a fabricator,

or even with Alam, which could enhance its presence in the O&G market in Sabah, although it already owns a shipbuilding yard in Sandakan.


Dialog (Buy, TP: RM2.51). We are upgrading Dialog to a Buy from Neutral. We impute the potential earnings contribution from its Pengerang CTF of about 1.5m cubic meter for Phase 1. Going forward, we think the 2 catalysts to move the share price further would be the commencement of

CONSTRUCTION [] on the Pengerang CTF, and the second one (based on market rumour), could potentially arise due to its involvement in marginal oilfield development, for which talk has it that a consortium could be formed among Dialog, SapuraCrest, Kencana and Petrofac. Nevertheless, we continue to like Dialog's its stable business model, which provides the company with good recurring income, even without news flow on the marginal oilfield.

Kencana (Trading Buy, TP: RM3.37). We are downgrading the stock to Trading Buy from Buy, simply because its recent strong share price rally and the still pending announcement of its involvement in marginal oilfield developments.

Nevertheless, we see ourselves upgrading the company back to a Buy once management provides further earnings guidance as we see its involvement in this oilfield as being very significant since it would transform the company from a pure fabricator to oilfield manager. Kencana would then be able to reap the benefit of high oil prices.

KNM (Trading Buy, TP: RM3.95). We are keeping our Trading Buy call unchanged for the company.

We believe this is one company which would not be left out whenever the entire O&G sector re-rates and hence we have also increased our target price based on a higher PER valuation. However, going forward, we are looking forward for its orderbook replenishment and also closely track the recovery of the global O&G industry, especially on the US and Europe side, as KNM is a global O&G player with earnings contributions from across the globe.

Also, rising oil price is a good thing for KNM since this would induce the global oil majors to spend more capex, which will create new process equipment jobs for KNM. The company is still supported by a strong orderbok of above RM4.0bn, which should keep it busy for the next 2 years. Also, its tenderbook now exceeds RM16bn.

MMHE Holdings Bhd (Trading Buy, TP: RM6.68). We continue to like the company for being the top fabricator in Malaysia and it is also indirectly owned by Petronas. Hence, we believe the company would be one of the main beneficiaries of new contract awards from Petronas and its PSC contractors.

Finally, we also think that it could potentially get a slice of the action in marginal oilfield developments, given its capability in converting VLCCs, Aframax tankers and offshore rigs into floating structures such as FPSOs, FSOs and MOPUs for the marginal oilfield use.

Petronas Chemicals (Neutral, TP: RM6.20). We maintain Neutral on the company as we believe investors should take advantage of the positive sentiment in the O&G industry by looking at other O&G companies which may be in for exciting news.

As for Petronas Chemicals, we understand from Nexant's market research report that the petrochemical industry is to remain under pressure as further capacity is forecast in the immediate term and will only peak in 2015, although it is now seeing a gradual recovery in terms of utilization rates and margins. Hence, we think it would be time to look at this company when the other O&G companies are fully re-rated since they have been consolidating given the trickling news flow in the past 12 months.

Petra Energy (Buy, TP: RM2.16). We are upgrading the stock to a Buy from Neutral. With Petronas' emphasis on rapidly increasing Malaysia's oil production, we think the refurbishment of existing platforms would a key emphasis besides extracting oil from marginal oilfields. Petra Energy would benefit from these 2 developments since its core business is in the provision of brownfield services. It has a fleet size of 5 vessels comprising 3 work barges and 2 workboats to participate in these activities.

Petra Perdana (Buy, TP: RM1.57). We are upgrading to Buy from Trading Buy as we believe its low vessel utilization rate would soon be addressed with the new contract awards coming out soon.

To recap, earlier we had strongly promoted the stock with a Trading Buy call despite the company

falling into the red in 3QFY10 as we noted that the share price had been consolidating at between RM0.735 and RM0.83 and back then, we were expecting a breakout anytime, which was later proven right. Now, we think there will be further re-rating in its share price soon arising from its projected improved vessel utilization (to above 50%) and charter rates (to above breakeven level of USD1.30/brake horse power (bhp) for its 10-12k bhp AHTS) and of course, the potential M&A angle.

Tanjung Offshore (Trading Buy; TP: RM2.18). We are upgrading to Trading Buy from Neutral as we believe Tanjung Offshore may not be left out from the marginal oilfield development since its core businesses and assets are suitable for this development; its vessels are mostly 5k bhp without dynamic positioning (DP) TECHNOLOGY [] and hence are suitable for marginal oilfield use while its has experience in managing rigs, for which it gets an agency fee.

However, we do not have a convincing buy call because we are still concerned over the possible loss from its UK subsidiary, Citech Energy

Recovery Systems UK Ltd, which could erode its 16 vessel earnings. Having said that, we are positive on the entry of the private equity fund for bumiputras, Ekuiti Nasional Berhad (Ekuinas), who has emerged as a substantial shareholder of the company with an equity stake of about 24%. This could also potentially open up new business opportunities or even M&As with common shareholder.

Wah Seong (Neutral; TP: RM2.29). We maintain Neutral on the company, for which we think it would be business as usual. Its earnings may probably improve due to a higher percentage of coating the Gorgon pipes (50%-60% expected in 2011 versus 10%-20% in 2010). Also, we expect some recovery

in its gas compressor business. Other than that, the company could also benefit from the re-coating of old pipelines off the coast of Terengganu.

US STOCKS-Retailers lead market gains ahead of jobs data

NEW YORK: U.S. stocks ended near the session's highs on Thursday, Feb 3, with investors favoring shares of retailers after encouraging chain-store sales raised confidence ahead of Friday's jobs report.

The Morgan Stanley retail index rose 2.8 percent, driven by companies such as Sears Holdings Corp, up almost 8 percent, and Ross Stores Inc, up 6 percent and at a new high.

U.S. chain-store sales climbed 4.8 percent in January. Along with rising service-sector activity and improved jobless claims figures, the stronger-than-expected retail figures added to growing evidence of an economic rebound.

"The strength in the retail sector is probably the standout feature today," said Nick Kalivas, an analyst at MF Global in Chicago. "You have generally a profit-taking, consolidative market after a couple of days of big run-ups (and) in front of the employment report tomorrow."

The wider market had come under pressure for most of the day as some investors said stocks were extended after weeks of gains, while a stronger dollar weighed on the natural resource sector.

Kalivas said the material and energy sectors were ripe for profit-taking while retail stocks had lagged the rally since the beginning of the year over concerns about the strength of consumer spending.

The Dow Jones industrial average gained 20.29 points, or 0.17 percent, to 12,062.26. The Standard & Poor's 500 Index rose 3.07 points, or 0.24 percent, to 1,307.10. The Nasdaq Composite Index added 4.32 points, or 0.16 percent, to 2,753.88.

The S&P 500 has rallied more than 10 percent since breaking out of a trading range at the start of December and is up 21 percent since the end of August.

Data showed the U.S. services sector grew in January at its fastest pace since August 2005, and initial claims in the latest week for state unemployment benefits fell more than expected.

The S&P's energy sector has been the top gainer this year, rallying 9.4 percent, while industrials and TECHNOLOGY [] each have rallied 6 percent. Over that time the Morgan Stanley retail index has fallen 2.5 percent.

The strong performance in retail shares comes ahead of Friday's employment report that is expected to show the U.S. economy added 145,000 jobs in January.

Also in the retail sector BJ's Wholesale Club Inc said it may put itself up for sale. Shares of BJ's, which is under pressure from a private equity firm that may make a hostile bid, jumped 12.2 percent to $48.25.

Clashes continued in Egypt, adding to concern that has pressured equities recently.

Merck & Co fell 2.7 percent to $32.90 and was the top drag on the Dow after the drugmaker forecast 2011 earnings below Wall Street forecasts and withdrew its longer-term profit view. - Reuters

JPMorgan ignored suspicions about Madoff -lawsuit

NEW YORK: JPMorgan Chase & Co executives stood by silently as their client Bernard Madoff ran his epic Ponzi scheme, hoping to protect the bank's investments and continue doing business with him, a newly released $6.4 billion lawsuit claims.

Irving Picard, a court-appointed trustee seeking to recover money for former Madoff clients, made the accusation in his complaint against the second-largest U.S. bank, an edited version of which was made public on Thursday, Feb 3.

"While numerous financial institutions enabled Madoff's fraud, JPMorgan Chase was at the very center of that fraud, and thoroughly complicit in it," the complaint filed with the U.S. bankruptcy court in Manhattan said.

The complaint shows for the first time how Picard believes JPMorgan put its own interests in preserving a decades-long relationship with Madoff ahead of trying to stop his long-suspected fraud, which was revealed on Dec. 11, 2008.

"For whatever it's worth, I am sitting at lunch with (a bank employee) who just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a (P)onzi scheme," the complaint quotes from a June 15, 2007 email by an investment bank risk officer.


The complaint also quoted a JPMorgan employee who had in February 2006 urged that JPMorgan "assess quality and detail" of reports from Madoff's firm, noting potential "significant" penalties if statements proved "fraudulent or inaccurate."

Jennifer Zuccarelli, a JPMorgan spokeswoman, in an emailed statement said the New York-based bank will defend against Picard's "unfounded" claims.

"JPMorgan did not know about or in any way become a party to the fraud orchestrated by Bernard Madoff," she said.

"Madoff's firm was not an important or significant customer in the context of JPMorgan's commercial banking business, and the revenues earned from Madoff's bank account were modest and entirely consistent with conventional market rates and fees.

"The trustee makes no attempt to substantiate or support his unfounded claim that JPMorgan earned extraordinary sums from the Madoff account, and that claim is demonstrably false," she added.


Picard originally filed his complaint under seal. The edited version leaves out the names of various employees believed to have been suspicious of Madoff's activities.

JPMorgan was the principal banker for Madoff's firm, Bernard L. Madoff Investment Securities LLC, for more than 20 years. Picard has been liquidating the firm since Madoff's estimated $65 billion Ponzi scheme was uncovered.

"The bank's top executives were warned in blunt terms about speculation that Madoff was running a Ponzi scheme, yet the bank appears to have been concerned only with protecting its own investments" in Madoff feeder funds, Deborah Renner, one of Picard's lawyers, said in a statement.

Renner said the bank had a "palpable concern that Madoff was a fraud for years," but waited until October 2008, just two months before Madoff's firm collapsed, before reporting its concern to British government officials.

Picard and Renner are partners at law firm Baker & Hostetler LLP.

Regulators including the U.S. Securities and Exchange Commission have also been faulted by investors and politicians for missing red flags about Madoff's misconduct, which surfaced in the midst of a global financial crisis.

JPMorgan Chief Executive Jamie Dimon last week complained at the World Economic Forum in Davos, Switzerland about persistent criticism of banks' activities, calling it "unproductive and unfair."


Picard has recovered roughly $10 billion from various parties to repay former Madoff clients.

He has filed more than $50 billion of lawsuits against various individuals and businesses, including HSBC Holdings Plc , UBS AG and Fred Wilpon, whose family owns the New York Mets baseball team. Wilpon said he may sell part of the Mets as a result of Picard's litigation.

Picard is seeking to recover from JPMorgan nearly $1 billion in fees and profits, plus $5.4 billion in damages.

Madoff admitted in his March 2009 guilty plea that the essence of his scheme was to deposit client money into a Chase account, rather than invest it and generate returns as clients had believed. The 72-year-old is now serving a 150-year sentence in a North Carolina federal prison.

JPMorgan shares closed up 1 cent at $45.46 in Thursday trading on the New York Stock Exchange.

Microsoft sells $2.25 bln of debt at low rates

NEW YORK/SEATTLE: Microsoft Corp on Thursday, Feb 3 sold $2.25 billion of bonds at relatively low borrowing levels as it looks for cheap ways of raising cash to fund its operations and reward shareholders.

The world's largest software company, making its third trip to the US corporate bond market in two years, has $41 billion in cash and short-term investments on its balance sheet, but likes to borrow as the most of that cash is locked up overseas.

The proceeds of the debt sale are for general corporate purposes, including working capital, expenditures, stock buybacks and acquisitions, according to the company's filing with securities regulators.

With a stagnant stock price over the past 10 years, Microsoft has focused on using cash to reward shareholders, spending more than $170 billion on dividends and share repurchases in that time.

In its latest offering, Microsoft sold $750 million of five-year notes at a yield spread of 38 basis points over comparable Treasuries, a relatively tight spread reflecting Microsoft's financial stability.

The notes repay interest, known as the coupon, of 2.5 percent per year, which is relatively low but not close to the record set last year when benchmark interest rates were at multi-year lows. The lowest coupon on record for five-year bonds is 1.375 percent set by Colgate-Palmolive Co in October, according to data from Thomson Reuters/IFR.

Microsoft's second tranche comprised $500 million of 10-year notes, at 48 basis points over Treasuries, for a coupon of 4 percent, and the third tranche was $1 billion of 30-year bonds at 68 basis points over Treasuries for a coupon of 5.3 percent.

The company first went to the corporate debt market in May 2009, and followed that last September with a $4.75 billion offering, part of which hit the lowest U.S. corporate borrowing rate on record at that time.

Thursday's debt sale was one of the more tightly priced bonds this year, but the slight payout did not deter investors, which have flooded the bond market this year looking to diversify out of financials, snapping up recent debt from Anheuser-Busch InBev Worldwide and Kimberly-Clark Corp.

Microsoft's debt offering was massively oversubscribed, with $6 billion of orders placed, according to market sources.

The company's shares fell less than 1 percent as the tech-heavy Nasdaq rose slightly.


With AAA ratings from Standard & Poor's and Moody's, Microsoft is one of the strongest U.S. companies, with its $41 billion cash pile and a mere $8.5 billion in outstanding senior unsecured debt.

The majority of that cash is held overseas -- as most of Microsoft's revenue comes from outside the United States -- so the company likes to raise cash from bond investors rather than pay high tax rates to repatriate cash.

With a stock trading at the same level as 10 years ago, Microsoft is a major buyer of its own shares, repurchasing $5 billion worth alone in the last quarter, out of a $40 billion repurchase program that expires in 2013.

Last September, the company hiked its quarterly dividend 23 percent to 16 cents per share, declaring $1.3 billion in dividends in the last quarter.

Microsoft only started paying a dividend in 2003, and surprised the market with a special dividend of $3 per share the year after, dispersing more than $30 billion to investors in one go.

Microsoft generally makes dozens of small acquisitions per year, but has not made a large deal since its $6 billion purchase of web ad firm aQuantive in 2007, which was not a success.

Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC, Morgan Stanley and RBS are lead managers on the sale.

Last week Microsoft reported record quarterly revenue of $19.95 billion and net profit of $6.63 billion, boosted by strong sales of its Windows operating system and its new Kinect hands-free gaming system. - Reuters

Las Vegas Sands revenue misses estimates, shares fall

LOS ANGELES: Las Vegas Sands Corp, the casino operator run by billionaire Sheldon Adelson, posted sharply higher quarterly revenue, but the total fell short of estimates, and the stock dropped nearly 7 percent on Thursday, Feb 3.

The company, which earns most of its money in Asia, had booming business in Macau and at its new resort in Singapore -- its single most profitable casino -- but the results fell short of some investors' lofty expectations.

Singapore profits were boosted by above-normal table game winnings for the casino. Adjusting for a normal "hold" rate (rates normally revert to a normal level over time), the property would have had earnings before interest, tax, depreciation and amortization (EBITDA) of around $290 million, rather than the reported $306 million, according to UBS analyst Robin Farley.

Rolling chip volume, or business from VIP tables, at the $5.7 billion Singapore casino resort, which began operating in April 2010, fell 21 percent to just over $8 billion compared with the previous quarter.

In Macau, the world's largest gambling market, the government said last month that gambling revenue rose more than 66 percent year-over-year in December.

That includes revenue at newer PROPERTIES [] such as Wynn Resorts Ltd's Encore Macau, which opened last April.

"We have seen strong trends out of Macau, but that didn't translate into significantly higher numbers for Sands versus where we were three months ago," said ITG Investment Research analyst Matthew Jacob.

Sands said quarterly revenue at its majority-owned Sands China subsidiary rose 13.1 percent to $1.09 billion, while adjusted EBITDA rose 36.7 percent to $332.8 million.

The company said it had some bad gaming table luck at its Four Seasons Macau casino, where profit margins fell to around 13 percent from 21 percent a year earlier.

Overall net revenue for the quarter rose 57 percent to $2.02 billion, which fell short of the $2.07 billion expected by analysts.

The company reported a quarterly net profit of $273 million, or 34 cents a share, compared with a loss of $113.9 million, or 17 cents a share, a year earlier.

Excluding one-time items, Sands earned 42 cents a share in the quarter, better than analysts' average estimate of 39 cents a share, according to Thomson Reuters I/B/E/S.

"It looked like a pretty good quarter," said Jefferies and Co analyst David Katz. "This is one of those stocks that people sort of set up for volatility."

Adelson, speaking on a conference call, said EBITDA in Singapore totaled more than $110 million in January.

In Las Vegas, Sands' EBITDA rose to $80.6 million in the fourth quarter from $56.9 million a year earlier.

"While we do see peaks and valleys in our business on a monthly or short-term basis, we have enjoyed a very predictable growth trajectory," Adelson said. "There is no reason to believe any fundamentals of our business are changing, so we have every expectation that this growth trajectory will continue."

He said Sands continues to seek expansion opportunities in the United States, Europe and Asia, with the first phase of its next Macau casino project slated to begin opening by the end of this year.

Sands has three casinos in Macau and is working on two other resorts, but that CONSTRUCTION [] work has been delayed, first by the financial crisis and more recently by government restrictions on immigrant labor.

Shares of Sands, which have more than tripled over the last 12 months and closed at $50.28 on the New York Stock Exchange on Thursday, were lower at $46.94 after-hours. - Reuters

Euro down sharply on rate outlook, copper surges

NEW YORK: The euro tumbled on Thursday, Feb 3 as odds for a near-term interest rate rise diminished, while violence in Egypt and upbeat economic data combined to push oil above $103 a barrel and copper to a record $10,000 a tonne.

Fighting between demonstrators and those loyal to Egyptian President Hosni Mubarak diminished risk appetite for stock investors who are weighing whether it is time to lock in profits after a 29-month rally.

Global food prices measured by the U.N. Food and Agriculture Organisation hit their highest level since records began in 1990. Rising food costs have been a key driver of the turmoil in Egypt and Tunisia that is threatening to spill over to other countries.

The European Central Bank held interest rates unchanged at 1 percent, as expected. However, ECB President Jean-Claude Trichet signaled that even with rising inflation, there is no threat to medium-term price stability.

"The underlying message is that there is no need for a rate hike any time soon," said Boris Schlossberg, director of currency research at GFT in New York.

The euro dropped 1.22 percent to $1.3634 and 0.90 percent to 111.59 against the yen. The greenback rose 0.34 percent against the yen to 81.83.

U.S. economic data, including better-than-expected weekly jobless claims, higher worker productivity and new orders received by U.S. factories helped drive copper and tin prices to record highs. A recent Reuters poll also points to a supply deficit in copper for the coming year.

After briefly touching $10,000 on the London Metal Exchange on Thursday, copper traded down to $9,907 a tonne at 1530 GMT, against $9,945 at Wednesday's close. Trading was muted due to the week-long Lunar New Year holiday in China.

Brent crude rose above $103 a barrel before dropping back to trade at $101.80, off 0.53 percent on the day. Crude traded in New York fell 0.56 percent to $90.35 a barrel.

In U.S. stocks, prices fell from the start, unable to capitalize on the positive economic data.

The Dow Jones industrial average fell 39.46 points, or 0.33 percent, to 12,002.51. The Standard & Poor's 500 Index lost 6.32 points, or 0.48 percent, to 1,297.71. The Nasdaq Composite Index dropped 16.08 points, or 0.58 percent, at 2,733.48.

"Egypt is slowly coming back to the front burner. People thought it could be resolved peacefully and quickly, but that doesn't seem to be the case. That's troubling from an equity perspective, since the country is important, especially for oil prices," said Nicholas Colas, chief market strategist at The Convergex Group in New York.

In Europe, the FTSEurofirst 300 index of leading shares fell 0.16 percent at 1,162.39 points.

The MSCI All-Country World index fell 0.56 percent from Wednesday's 29-month peak.

Benchmark 10-year U.S. Treasury yields rose to a seven week high of 3.55 percent. However, by mid-morning, the 10-year note fell 9/32 of a point in price, leaving the yield to 3.52 percent.

Spot gold prices fell $7.75, or 0.58 percent, to $1328.60 an ounce. - Reuters

Thursday, February 3, 2011

Oil jumps on deadly Egypt clashes, inflation worries grow

HONG KONG: Oil prices surged past $103 on Thursday, Feb 3 as pro-democracy protests in Egypt turned violent, while commodities markets raced even higher, adding to worries of mounting inflationary pressures that could threaten the global economic recovery.

North Sea Brent crude futures rose nearly a dollar to $103.27 per barrel, the highest in 28 months, after supporters of Egyptian President Hosni Mubarak opened fire on protesters, in what many saw as an official crackdown on anti-government demonstrations.

Fears that unrest in Egypt and Tunisia will spread to other countries in the Middle East and threaten the region's oil exports overshadowed the bearish effect of soaring gasoline inventories in the United States, prompting investors to move to safer assets, or the sidelines.

In currency markets, the euro paused below a 12-week peak, though tough talk on the inflation from the European Central Bank after its monthly meeting later in the day could give it fresh impetus to test resistance around $1.3950.

Higher energy prices along with copper, sugar and cocoa prices at or near record highs have put a sharp dent in appetite for riskier assets such as emerging market equities as investors fear price pressures will get out of control.

In fast growing countries such as Brazil, India and China, worries have grown that policymakers will need to tighten monetary policy aggressively to tame rising consumer prices, which could put a dampener on a key driver of the global economy.

"The current strong pace of activity is clearly not compatible with comfortable and stable levels of inflation, underscoring the urgency of continued monetary policy tightening," said Leif Eskesen, chief economist for India & ASEAN at HSBC, in a report on India's services sector.

The report showed business activity in the country's services sector grew at a faster pace in January than the month before, but the input price index hit a 30-month high.

Higher prices for raw materials are already squeezing corporate profit margins. While many firms appear able to pass those costs on for now, sharp spikes will eventually force consumers to cut back on spending.

U.S. candy maker Hershey Co reported overnight that it was seeing "meaningfully higher" costs for ingredients such as cocoa and sugar, while Australia's Qantas announced a round of fuel surcharges on Thursday.


Japan's Nikkei fell 0.3 percent, easing slightly after posting its biggest jump in two months the day, as investors took a more cautious stance and awaited key earnings results and Friday's U.S. payrolls data.

Shares of Panasonic Corp fell 3.2 percent after it posted a worse-than-expected drop in quarterly profit as tough price competition and a stronger yen offset help from Japan's incentive scheme for eco-friendly appliances.

Overall, foreigners remained net buyers of Japanese stocks for a 13th straight week on optimism that the U.S. and global economies are gathering momentum.

Developed market shares are likely to outperform those in emerging markets over the next six months, until it is clear inflation is under control, said Shane Oliver, chief investment strategist at AMP Capital Investors.

U.S. private employers added more jobs than expected in January, the 12th consecutive month that companies took on staff, adding to hopes that the American labour market is slowly recovering and bolstering hopes for the more comprehensive U.S. jobs report on Friday.

Elsewhere in Asia, Australia's main share benchmark rose 0.5 percent as strong metals prices continued to support shares of resources firms. Mining giants BHP and Rio Tinto both rose more as copper prices stayed just shy of $10,000 a tonne, with supplies tight against strong demand.

But regional trading was thin overall, with markets in Greater China, South Korea and much of Southeast Asia closed for Lunar New Year holidays. - Reuters

Wall Street stalls on signs rally is played out

NEW YORK: U.S. stocks stalled on Wednesday, Feb 2 as technical measures suggested a five-month rally was growing long in the tooth.

Investors were reluctant to make big bets even though a report showed U.S. private employers added more jobs than expected in January.

The S&P 500 started to look overbought again after reaching 2 1/2-year highs on Tuesday. A key measure of the rally's strength suggests stocks are vulnerable to a correction, analysts said.

The PHLX Semiconductor Index was running into resistance around 450 after back-to-back closes above that level for the first time since November 2007. Chips are considered a leading indicator for the broader market.

"If the market looks like it's ready for a 5 percent or more correction, what's one of the sectors at the top of my list to be out of? For sure it's the semiconductors," said Vinny Catalano, chief investment strategist at Blue Marble Research in New York.

The Dow closed on Tuesday above the milestone 12,000 level for the first time since June 2008, and the S&P closed above the 1,300 level for the first time since August 2008.

Investors on Wednesday kept an eye on protests in Egypt as violent street clashes erupted. Concerns that protests could spread to other countries in the region have pressured equities in recent sessions.

The Market Vectors Egypt Index ETF, which consists of shares of companies in Egypt, fell 3.7 percent after rising for two consecutive days.

The Dow Jones industrial average rose 1.81 points, or 0.02 percent, at 12,041.97. The Standard & Poor's 500 Index was down 3.56 points, or 0.27 percent, at 1,304.03. The Nasdaq Composite Index was down 1.63 points, or 0.06 percent, at 2,749.56.

Joseph Hargett, a strategist at Schaeffer's Investment Research, said the Dow needs to stay above 12,000 firmly as a show of short-term support. "The resistance now resides in the 12,100-12,200 area."

After a pullback late last week, the S&P 500 has started to look overbought by some measures. The index is more than one standard deviation above its 50-day moving average and the weekly relative strength index is above 70.

Trading volumes were not seriously affected by a harsh winter storm that brought parts of the U.S. Midwest to a standstill.

The story was different for futures traders in Chicago, which took much of the brunt of the storm.

"It's definitely light downtown here. Pit trading opened late too. ... We're about half-staffed," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago, where over 20 inches of snow had fallen.

Volume on the NYSE, Amex and Nasdaq reached 7.26 billion shares compared to last year's daily average of about 8.47 billion.

Overall U.S.-listed option volume approaching the close was about 15.3 million contracts, slightly below the recent average daily volume, according to option analytics firm Trade Alert.

The PHLX semiconductor index closed up 0.5 percent at 453.91. The 450 area coincides with the 23.6 percent retracement of the slide from the index's historic highs in 2000 to the low hit in November 2008.

The 23.6 percent retracement has been a breaking point in the index's trading at least five times in the past decade.

Appliance maker Whirlpool Corp dropped 2.1 percent to $83.60 after its profit missed estimates.

Time Warner Inc and Mattel Inc rallied after both companies reported stronger-than-expected quarterly profits. Media group Time Warner gained 8.6 percent to $35.10 while toymaker Mattel was up 0.9 percent to $24.37.

Malaysia ranks 8th in global ICT exports, up 19pct

KUALA LUMPUR: Malaysia exported US$57 billion of information and communication TECHNOLOGY [] (ICT) products in 2009 as it took eighth spot among global economies, according to a United Nations report.

Malaysia's exports of ICT products accounted for 36.5% of its total exports in 2009, said the United Nations Conference on Trade and Development (UNCTAD) which was released in Geneva on Wednesday, Feb 2.

In terms of imports, ICT products totalled US$37 billion or 30.1% of Malaysia's total imports.

The UNCTAD data showed Asian economies in 2009 accounted for 66.3% of global exports of information and communication technology (ICT) goods, up from 63.8% in 2008.

'That supports recent findings that the global financial crisis has led to significant shifts in world trade of ICT goods towards Asia. More than one third of world ICT goods exports now originate in China and Hong Kong (China),' it said.

Global ICT exports, which accounted for 12% of world merchandise trade in 2009, are increasingly dominated by Asia. Seven of the top ten exporters are Asian economies.

China is the largest exporter of ICT goods at US$356 billion in 2009, with Hong Kong (China) (US$142 billion), and the US (US$113 billion).

What the data showed was that ICT goods are of great significance for many developing economies, especially in Asia.

Reliance on ICT products is most pronounced in the case of Hong Kong (China), where such items represent more than 43% of all merchandise exports.

Meanwhile, ICT goods make up 30% or more of exports include China, Singapore, South Korea, Taiwan and the Philippines.

The UNCTAD report revealed also that while exports from Asian countries, there was a marked decrease by most major exporters in 2009, mainly due to'' the financial crisis.

ICT exports dropped by more than half in Portugal and Finland, by 36% in Ireland, and by more than 20% in the Czech Republic, France, Germany, and Sweden. Japan and the US also recorded sharp declines.

However, a few economies reported increases with India's exports surging 244% and Malaysia by 18%.

'Moreover, declines in exports experienced by China, Hong Kong, the Philippines, the Republic of Korea, and Thailand were relatively modest,' it said.

In terms of ICT goods imports, the US tops the list, followed by China and Hong Kong. Among major importers, declines of more than 35% were registered in 2009 by Finland, Ireland, Portugal, Russia and Spain.

UNCTAD said that for India, on the other hand, experienced a rapid increase in ICT goods imports, moving from 28th to 17th in the global ranking of importers.

Data for 2008 and 2009 on trade in ICT goods can be accessed free of charge at

Wednesday, February 2, 2011

TM: KPMG Corporate Services to continue probe into Alcatel issue

KUALA LUMPUR: TELEKOM MALAYSIA BHD [] said KPMG Corporate Services Sdn Bhd (KPMG) will undertake the investigations and forensic audit to identify employees involved in the alleged improper payments from Alcatel-Lucent S.A.

TM said on Wednesday, Feb 2 the probe by KPMG would be under the supervision of TM's special affairs unit (under the group's internal audit division) which would report to the board audit committee (BAC). It said this was in line with the group's efforts to strengthen its internal control processes.

TM also said the board sub-committee of the BAC was dissolved on Feb 2 since the primary objective to form the panel had been achieved. Hence, the probe and forensic audit would be continued by KPMG.

'In line with good corporate governance practice, the report of the findings to date will be handed over to the Malaysian Anti-Corruption Commission (MACC) by end of February 2011. TM will also continue to cooperate with MACC in their investigations relating to this case,' it said.

To recap, the US Securities and Exchange Commission had charged the Paris-based Alcatel-Lucent with violating the Foreign Corrupt Practices Act (FCPA) by paying bribes to foreign government officials to illicitly win business in Latin America and Asia.

TM had on Dec 29 warned it would take appropriate action against any of its employees, if they had received such payments.

The SEC alleged Alcatel's subsidiaries used consultants who performed little or no legitimate work to funnel more than US$8 million in bribes to government officials in order to obtain or retain lucrative telecommunications contracts and other contracts.

Alcatel agreed to pay more than US$45 million to settle the SEC's charges, and pay an additional US$92 million to settle criminal charges announced today by the US Department of Justice.

The settlement covered activities in several countries in Africa, Latin America, Asia, including Malaysia.

The investigation in Malaysia covers events that occurred between October 2004 and February 2006, and involve alleged improper payments to TM's employees.

GLOBAL MARKETS-World stocks rise to new 29-month highs

LONDON: World stocks hit fresh 29-month highs on Wednesday, Feb 2, lifted by strong data pointing to sustained economic recovery and continuing positive company earnings.

MSCI's all-country world stock index, one of the broadest gauges of global equity health, was up 0.6 percent at levels last seen in August 2008.

Its developed market counterpart gained 0.5 percent to come close to a high last seen in early September 2008.

Emerging markets were up 0.8 percent on the day, but remain down more than 1 percent for the year, reflecting a recent shift by investors from emerging to developed markets.

Stock investors were cheered on Tuesday by strong factory data worldwide, which led to U.S. benchmark stock indexes to close at their highest levels since June 2008. - Reuters

Esmart extends closing date for DFZ offer to March 1

KUALA LUMPUR: Esmart Holdings Ltd has extended the closing date for its acquisition of the remaining DFZ CAPITAL BHD [] shares from 5pm on Feb 8 to 5pm on March 1.

It said on Wednesday, Feb 2 that it held 91.2% or 191.489 million DFZ shares as at Jan 31. This comprised of 74.71% shares which Esmart and its parties acting in concert held at the time of the posting of the offer document on Jan 18.

The offer shares which they had received up to 5pm on Jan 1 were 16.49%.

Esmart said the offer shares for which acceptances had been received but subject to verification were 5.41%.

Asian stocks rise on strong data, dollar slips

SINGAPORE: Asian stocks jumped on Wednesday, Feb 2 and the dollar sank as a surge in U.S. manufacturing and strong company earnings convinced investors to pile back into riskier assets despite turmoil in Egypt.

Commodities prices remained firm, bolstering shares of resources firms, on signs that the global economy is gathering strength. Copper surged to record peaks near $10,000 a tonne, while Brent crude remained above $101 a barrel -- its highest since October 2008.

After a million people took to the streets in Egypt on Tuesday, Egyptian President Hosni Mubarak said he would surrender power in September, but that was not enough for many protesters who demanded an immediate end to his 30-year rule.

Much now appears to depend on whether the army can ensure a peaceful leadership transition.

"The easing of the crisis in Egypt helped investors to concentrate on positive economic data from the U.S., boosting their appetite for equities," said Hideyuki Ishiguro of Ikasan Securities.

Japan's Nikkei index rose 1.8 percent -- its biggest daily advance in around two months -- as the latest in a string of bullish U.S. economic data pushed Wall Street to its highest levels in 2-1/2 years.

The MSCI index of Asian shares outside of Japan advanced 1 percent, though activity was thin ahead of the long Lunar New Year holidays in much of Asia.

Hong Kong's Hang Seng Index climbed 1.8 percent in a shortened session while Australia's main benchmark gained 0.9 percent despite the approach of Cyclone Yasi, said by forecasters to be the strongest ever to strike the country.

Global mining giants BHP Billiton and Rio Tinto both rose more than 2 percent as metals prices continued to rally.

The dollar was stuck near its lowest level in three months against the euro as robust economic data eased concerns over Egypt and coaxed investors out of safe-haven assets. The euro rose to $1.3853 on trading platform EBS, a touch higher than late U.S. levels.

"When investors' risk appetite grows, the dollar becomes a funding currency," said Junya Tanase, a strategist at J.P. Morgan Chase bank.

The U.S. manufacturing sector grew at its fastest pace in nearly seven years, data showed on Tuesday, but factories' costs are also rising and are being passed on to consumers, raising fears of both a spike in inflation and a slowdown in sales as buyers baulk at higher prices.

On Wall Street, investors capitalised on last week's pullback, sending the Dow to close over the psychologically important level of 12,000 for the first time since June 2008 and the S&P 500 to close above 1,300 for the first time since August 2008.

Markets considered the crisis in Egypt contained for now, with little risk of spreading elsewhere through the oil-rich region after Mubarak said he would surrender power soon -- although opposition leaders dismissed his speech, protesters stayed put and and U.S. President Barack Obama called for faster change.

Commodity prices remained strong, with London copper futures rallying to a record high of $9,980 -- bolstered by positive manufacturing data from China and the United States and speculative interest in physical commodities.

North Sea Brent crude oil futures eased 0.3 percent to $101.44 as traders continued to watch if the unrest in Egypt would curb its oil shipments, while U.S. crude futures slipped closer to $90. - Reuters

HWGB sees CAGR rate of 20pct in tin output over 3 years

KUALA LUMPUR:'' HO WAH GENTING BHD [] []'s subsidiary is targeting its tin ore mining business to record a compounded annual growth rate (CAGR) of 20% in output over the next three years.

In a query to Bursa Malaysia, HWGB said on Wednesday, Feb 2 its subsidiary HWG Tin Mining Sdn Bhd's foray into the tin mining business would enable it to derive an additional source of revenue for financial year ending Dec 31, 2011. This was in addition to its existing wire and cable business.

HWGB added it was targeting to start the tin mining operations in Pengkalan Hulu after the Chinese New Year holidays.

Banks in Segamat, Labis opened, yet to revert to full-fledged ops

KUALA LUMPUR: Most of the branches of the Association of Banks in Malaysia (ABM) member banks in Segamat and Labis, Johor have opened on Wednesday, Feb 2.

However, it said these branches might not be able to revert to full-fledged operations as a result of damage suffered in the floods.

'Members of the banking public are advised to visit branches in Air Itam or Batu Pahat or Yong Peng, if any, in the alternative,' it said.

ABM said it would continue to monitor the situation and advised the public to obtain updates at ABM's toll free number, ABMConnect 1-300-88-9980.

The toll free number is opened from Mondays to Fridays (except for public holidays), 9am to 5.30pm.

FBM KLCI ends Year of the Bull on firm note

KUALA LUMPUR: The FBM KLCI climbed on Wednesday, Feb 2, the final trading day of the year of the Bull, in tandem with the overnight jump at Wall Street and the surge at some of the key regional markets.

At 12.30pm, the FBM KLCI was up 0.78% to 1,531.82, lifted by gains at blue chips including at Genting, Sime Darby, KLK, Public Bank and Maybank.

Gainers led losers by 674 to 137, while 173 counters traded unchanged. Volume was 1.53 billion shares valued at RM1.70 billion.

The ringgit strengthened 0.31% to 3.0425; crude palm oil jumped RM90 per tonne to RM3,850, crude oil slipped 3 cents to US$90.74 and gold added US$3.13 per troy ounce to US$1,341.23.

At the regional markets, Japan's Nikkei 225 surged 1.85% to 10,465.00, Hong Kong's Hang Seng Index jumped 1.79% to 23,903.10 and Singapore's Straits Times Index advanced 0.90% to 3,213.31.

The China and Taiwan stock markets have already closed for the Chinese New Year celebrations; the Malaysian, Hong Kong and Singapore stock exchanges will be closed for the second half of the day.

OSK Research in its February Strategy report , said it had misjudged the market in January as the profit taking in the second half overwhelmed its expectations of a strong first month.

'Nonetheless, we expect the market to rebound in February as fundamentals remain intact and the 4Q2010 results reporting season should see analysts upgrading their earnings again.

'We like the banks, oil & gas and consumption related sectors for February. Our top buys centre on companies anticipated to display strong profitability (CIMB, AirAsia), laggards (KPJ) and rebounding stocks,' it said.

On Bursa Malaysia, Genting led the major gainers and was up 68 sen to RM11.34; Sime Darby added 10 sen to RM9.29, KLK up 26 sen to RM21.60, Nestle RM1.10 to RM45.80, BAT 82 sen to RM48 and Guan Chong 47 sen to RM3.40.

Other gainers were Batu Kawan and HPI, adding'' 34 sen each to RM16.74 and RM2.65, Tradewinds PLANTATION []s 32 sen to RM3.33, DFZ Capital 31 sen to RM3.89 .

Among banks, Hong Leong Bank added 11 sen to RM9.36, Public Bank six sen to RM13.44 and Maybank added three sen to RM8.73.

MTDFCapital was the top loser and fell 23 sen to RM9.95 after the run-up on Monday. Other decliners included Knusford, DiGi, Dutch Lady, Ibraco, HELP, Perstima and Pos.

Ho Wah Genting was the most active with 83 million shares traded. The stock added 18 sen to 90.5 sen. Other actives included SAAG, Olympia, Daya Materials, Tanco and Karambunai.

Asean Exchanges complete tech study of trading link

KUALA LUMPUR: Four Asean Exchanges -- Bursa Malaysia, the Philippine Stock Exchange, Singapore Exchange and the Stock Exchange of Thailand (SET) ' said the design study of the TECHNOLOGY [] framework for the Asean Trading Link has been completed.

They said in a joint statement issued on Wednesday, Feb 2 shortlisted vendors able to provide the infrastructure have been invited to tender.

The Asean Trading Link aims to electronically interconnect the participating markets and allow cross border order trading seamlessly.

'Depending on the selected vendor, it is expected that the link will go live toward the end of 2011,' the statement said.

Jerneh Asia still looking into revamp plan

KUALA LUMPUR: JERNEH ASIA BHD [] is still looking into the formulating a regularisation plan to regularise its financial condition.

The company said on Wednesday, Feb 2 it has about 10 months to submit its regularisation plan to the relevant authorities for approval.

Jerneh Asia had disposed of its 80% stake in Jerneh Insurance Bhd to ACE INA International Holdings Ltd for cash consideration of RM523.2 million.

Following the disposal, it had on Dec 1 considered an affected listed issuer pursuant to Practice Note 17 of the Listing Requirements.

Under the requirements, Jerneh Asia is an affected listed issuer after it had suspended or ceased its major business or operations as a result of the disposal of its major business.

Genting surges, leads KLCI up 16pts

KUALA LUMPUR: GENTING BHD [] shares surged in morning trade on Wednesday, Feb 2, giving the FBM KLCI a massive push which saw the index racking up gains of more than 16 points.

At 11.55am, Genting was up 94 sen to RM11.60 with 7.49 million shares done.

The FBM KLCI jumped 16.02 points to 1,535.96. Turnover was 1.24 billion shares valued at RM1.35 billion. Advancers beat decliners 614 to 141 while 189 stocks were unchanged.

Other gainers were DiGi, up 30 sen to RM25.90, KLK 30 sen also to RM21.64 while MMHE added 24 sen to RM6.07.

Blue chips start off February on firm note

KUALA LUMPUR: Blue chips on Bursa Malaysia started on a firm note on Wednesday, Feb 2, opening higher as sentiment was galvanised by the strong overnight performance on Wall Street.

At 9.07am, the FBM KLCI was up 6.45 points to 1,526.39. Turnover was 73.57 million shares valued at RM79 million. There were 198 gainers, 23 losers and 85 stocks unchanged.

Genting was the top gainer, up 28 sen to RM10.94, BAT also 28 sen higher at RM47.46, Petronas Dagangan 20 sen to RM12.28 and Public Bank 12 sen to RM13.50.

Guan Chong's stellar earnings saw the share price advance 22 sen to RM3.15 while low profile IGB climbed 12 sen to RM2.24. National car maker Proton added 14 sen to RM4.36.

RHB Research ups Axiata fair value to RM5.75 from RM5.52

KUALA LUMPUR: RHB Research Institute said Axiata's 67%-subsidiary, XL Axiata (XL) full year FY10 core net profit of Rp 3,035 billion (+>100% on-year) came in within its but above consensus full-year estimates at 104% and 107% respectively.

It said on Wednesday, Feb 2 the 4Q revenue grew 4.7% on-quarter mainly driven by strong data & VAS revenue (+18% qoq) and SMS (+10% qoq) growth. EBITDA margin rose 40bp to 53.3% due to continuous lean cost management.

XL added 1.9m prepaid subscribers in 4Q (3Q: +3.3m).'' Revenue growth moderating for XL with FY11 revenue growth guidance of in line or above the industry (which management estimates at 8%), compared to the 27% increase achieved in FY10. XL will commit to a minimum payout of 30% of normalised net profit of the previous year, with the intention to increase progressively the payout ratio in the future.

'Axiata's FY11-12 net profit forecasts raised by around 2% after revising XL's EBITDA margin assumptions upward from 50% to 52%. We revise our SOP fair value to RM5.75 (previously RM5.52) after: 1) upgrading earnings forecasts for XL; and 2) updating our valuation parameters (e.g. latest market prices and exchange rates),' it added.

HDBSVR downgrades Green Packet to Hold, cuts TP to 80c from RM1.40

KUALA LUMPUR: Hwang DBS Vickers Research said the recovery for Green Packet has been delayed and it expects weak 4Q2010 results.

The research house said on Wednesday, Feb 2 it had slashed the earnings before interest, tax and amortisation (EBITDA) for Green Packet by 56% to 78%.

'Higher sales and marketing costs and declining average revenue per user could postpone EBITDA turnaround to later this year.'' Downgrade to Hold, TP cut to 80 sen (from RM1.40) based on sume of the parts,' said Hwang DBS Vickers Research.