Wall Street fends off bear to end higher for week

NEW YORK: After nearly falling into bear-market territory, U.S. stocks on Friday, Oct 7 finished the week higher, building gains on encouraging jobs data and hopes that Europe is dealing with its debt crisis.

Wall Street's wild week began with cascading losses that brought stocks to their worst levels in 13 months. After rebounding Tuesday, the S&P 500 rose about 5 percent from its worst levels as short-sellers rushed to cover losses on new optimism about Europe. The benchmark index ended with gains of 2.1 percent for the week.

Downgrades of Spain's and Italy's credit ratings on Friday brought in sellers, causing stocks to close lower and highlighting how markets are pushed and pulled by headlines from Europe.

"The employment data was viewed as being relatively good, but this issue in Europe keeps rearing its head. We just can't seem to escape Europe's debt crisis," said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.

U.S. banks had another volatile week, falling sharply on Friday after rising earlier in the week. The KBW bank index .BKX fell 4.3 percent on Friday, while Morgan Stanley (MS.N) dropped 6.2 percent to $14.22 and shares of Bank of America (BAC.N) tumbled 6.1 percent to $5.90.

The downgrades by Fitch came prior to a European summit on Sunday that is aimed at shoring up the region's financial sector.

From a technical perspective, the S&P 500 has been caught in a range the past few months, deteriorating into lower lows. The index's wide range is about 1,100 to 1,250. Analysts see the next important resistance level near 1,180.

The Dow Jones industrial average .DJI was down 20.21 points, or 0.18 percent, at 11,103.12. The Standard & Poor's 500 Index .SPX was down 9.51 points, or 0.82 percent, at 1,155.46. The Nasdaq Composite Index .IXIC was down 27.47 points, or 1.10 percent, at 2,479.35.

For the week, the Dow rose 1.7 percent, the S&P 500 gained 2.1 percent and the Nasdaq was up 2.7 percent.

European leaders this week showed more determination to fix problem banks, with the European Central Bank offering more help to struggling banks through the purchase of covered bonds and with a renewed offer of longer-term loans to ward off a new credit crunch.

Worries about the euro zone debt crisis have hit Wall Street hard in recent months, along with concern about stalling economic growth in the United States and China.

Helping the U.S. jobs picture Friday, the U.S. Labor Department said on Friday employers last month added more jobs than analysts had expected. Nonfarm payrolls data for July and August also were revised upward.

While the U.S. unemployment rate held steady at 9.1 percent, the government's payrolls report supported other data that have lessened fears the U.S. economy was heading into another recession.

Pressuring the Nasdaq, shares of research company Illumina (ILMN.O) dropped 32 percent to $27.18.

About 8.76 billion shares were traded on the New York Stock Exchange, NYSE Amex and Nasdaq for the day, above the year's daily average so far of 8.03 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 11 to 4, while on the Nasdaq, decliners beat advancers by nearly 10 to 3. - Bernama

Five big themes ahead for global economies

LONDON: Following are five big themes likely to dominate thinking of investors and traders in the coming week, starting Monday, Oct 10:

1/ CAVEAT EMPTOR

Global and regional economic forecasts are being slashed by many investment banks and some are even talking about a hard landing in China, which has been a key engine for growth in the past years. Lower growth forecasts are in turn feeding through to estimates for company
earnings.

European and U.S. firms' earnings momentum has already suffered since the start of the year. Of course, many companies are sitting on large cash piles and some investors might view valuations as cheap.

That could explain why investors have been willing to buy equities without waiting for European policymakers to come up with concrete measures to back up their rhetoric on the urgent need to tackle the debt crisis.

Given the impact slowing economic activity will have on corporate profitability, euro zone politicians' ability to address the deepening debt crisis will be crucial if equity markets are to sustain bounces.

2/ HOPE SPRINGS ETERNAL

The root causes of the euro zone financial crisis require long-term solutions (e.g. euro bonds, closer economic governance, stricter oversight of national budgets), but there is an urgent need for fixes that can short-circuit the negative feedback loop between sovereigns and the financial sector.

These include a way to increase the firepower of the EU's bailout fund which won't sacrifice the triple-A ratings of the few euro zone sovereigns that still have them, recapitalisation of the region's banks, and a private sector involvement in Greek debt restructuring that won't compound banks'
problems.

Domestic politics is hampering efforts to produce such solutions but policymakers have made it clear they are aware of the consequences of failure.

Investors will therefore be on the lookout for any signs of co-ordinated efforts to shield the banking system from further fallout either before or at the G20 meeting of finance ministers in the coming week.

3/ PAIN AHEAD

Banks will stay in the forefront of investors' minds as the earnings season for U.S. and European banks kicks off in the coming week with JPMorgan.

Deutsche's decision to ditch its 2011 profit target -- and the share price reaction -- may be a foretaste of the pain to come.

Weakening economic activity and the sovereign debt crisis have been a difficult mix for the financial sector, and investors know U.S. banks' earnings could presage even worse numbers from European lenders, which may have to further write down their exposure to southern European sovereigns - possibly to the point of requiring recapitalisation.

Dexia, which needed a bailout from French and Belgium authorities, may be the tip of an iceberg if euro zone policymaking sputters.

4/ DOLLAR DEMAND

The European Central Bank's three-month dollar tender, which will be held in the coming week, will highlight the extent to which financial institutions have found it hard to access dollar funds but it is still unclear whether it will defuse the tensions still evident in money markets.

The prospect of three such tenders has not stopped three-month cross-currency basis swaps from widening. In fact, hefty demand for the ECB dollar loans may trigger more widening in one- and five-year cross- currency basis swaps, which are not covered by the central bank tenders.

The coming weeks will also show the extent to which the ECB's latest emergency measures are effective. In short-term euro markets, overnight Eonia rates are expected to fall below 1 percent after the ECB reintroduced one-year euro-denominated tenders to provide cash to banks struggling to access term funding.

Traders are also pushing back bets of an ECB interest rate cut to December, with a 50-50 probability it may move as soon as November, after ECB
President Jean-Claude Trichet gave little indication that lower borrowing costs were imminent.

5/ HOLDING THE LINE

The risks for the euro are seen skewed to the downside but timing is everything. Some banks are predicting a retest of its 2011 lows below
$1.29 while USB reports asset managers are selling it for yen, keeping the cross close to 10-year lows.

Still, the possibility of solo Japanese intervention is expected to increase if the yen appreciates past 100 per euro or its record high against the dollar.

While dollar/yen implied vols are the cheapest in the G-10 space (unsurprising given the 76-78 range that has prevailed since early August), any nervousness about FX rhetoric in the run-up to the coming week's G20 meeting could see short-dated volatility pick up and will limit sharp yen gains.

Speculation the SNB could raise the floor it has set for the euro/Swiss franc rate will also stop the single currency ceding too much ground on this cross for now. - Reuters

Earnings on deck as Europe eyed

NEW YORK: Investors tiring of the euro zone's debt crisis dragging the market all over the place are hoping to focus on something else next week, starting Monday, Oct 10,'' -- earnings.

But will third-quarter results be enough to drive the S&P 500 higher? Or will Europe's woes get in the way?

The unofficial start of earnings season begins on Tuesday, when Dow component Alcoa Inc reports third-quarter results after the close of trading.

The earnings and guidance that may follow could give investors some clues on the health of the global economy, including any impact the euro-zone debt crisis has had and might continue to have on profits.

But even if earnings paint a rosier picture than anticipated, stocks may face a stiff test in climbing much further, as analysts pointed to the declining 50-day moving average as a key resistance point that could limit gains. That level now sits around 1,178.

This week's sharp gains were built on improved hopes that European officials will get a handle on the euro-zone debt crisis. That fed a massive bout of short-covering as those betting against stocks were forced to buy shares to avoid losing money.

The benchmark S&P 500 index rose 2.1 percent for the week, buoyed by a 6 percent jump mid-week, as it appeared plans in the euro zone to get a grip on the debt crisis were moving forward. The region remains a wild card, which could cause any gains to quickly vanish.

"For the next three weeks, in this country, earnings will be the focus and the subplot is going to be Europe -- Europe is always going to be just under the surface," said Ken Polcari, managing director at ICAP Equities in New York.

"But if all of a sudden in the middle of next week, some catastrophe happens in Europe, the focus is immediately going to be headline driven and goes back to Europe."

Other companies expected to post quarterly results next week include PepsiCo Inc, tech giant Google Inc, JPMorgan Chase & Co and toy maker Mattel Inc.

KEEPING THE BAR LOW

Clouding the picture for profits is the fact that many earnings estimates have been trimmed by analysts in light of the turmoil in Europe, a staggering global economy and other events which resulted in a more cautious forecast.

"You've got to remember what was going on in July with the debt-ceiling crisis, credit default -- companies were not willing to go out on a limb and make any big expectations," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.

"So they were conservative going in, and we have not seen a whole lot of downward revisions, which suggests companies are probably going to be able to make those numbers."

The economic calendar for next week includes the FOMC minutes from the two-day meeting in late September, along with import prices and retail sales for September, in addition to the preliminary reading on October consumer sentiment from the Thomson Reuters/University of Michigan surveys.

Economic data of late has been better than expected, helping to quell fears that the economy was headed for a double-dip recession. Once again, that leaves the euro-zone crisis as a potential land mine to disrupt a slow move higher.

"The reason we have lifted in the past week is the rhetoric has improved and we are seeing progress, not necessarily a plan, but you are getting countries to admit to the problem, and that is a step in the right direction -- you have to seek help before you can get help," Pado said.

"That is all we really need in order to get beyond this, and start focusing on the future and focusing on our own data. We have plenty of data that suggests slow growth, but nothing that suggests waving the red flag like a crazy person saying, 'How can you not see this?'" - Reuters

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Shock and awe needed for risk rally

LONDON: After a poor start to the fourth quarter, investors' mood may be just starting to stabilize after moves by European policymakers to help fragile banks and avert a financial meltdown. But it may take a lot grander plan to truly kick start a risk rally.

The coming week -- packed again with heavy political and economic events -- may provide a key insight into what kind of initiatives policymakers are planning to implement to stave off recession and contain the effect of a possible Greek default.

The start of the third-quarter U.S. earnings season -- with Alcoa <(AA.N), JP Morgan (JPM.N) and Google GOOOG.O due to report -- also offers a health check-up on the corporate sector in an economy under threat of another recession.

World stocks, measured by MSCI, rebounded 8 percent after hitting a 15-month low earlier in the week and are on track to post their second weekly gain.

This, to an extent, bodes well as the fourth quarter has been the best period for equities since 1971, with stocks rising on average 3.7 percent in the period.

What has bolstered the market was some policy moves. The Bank of England surprised investors on Thursday by launching a second round of quantitative easing, pledging to buy a bigger-than-expected 75 billion pounds of assets with new money.

The European Central Bank followed up with aggressive liquidity measures, throwing a lifeline to cash-strained lenders. The European Union also said it would present a plan for a coordinated recapitalization of banks by member states.

For many investors, who have already moved to a defensive strategy of underweight equities and overweight bonds, it would require a "shock and awe" development to turn their mood around.

"You will probably need 2-3 trillion euros to frighten the market. We are positioned as if the euro will break up -- underweight periphery, banks and euro. We don't think it will happen but the market pain could be as hard," said Carl Astorri, global head of economics and asset strategy at Coutts.

"Sixty percent of the world GDP is deleveraging, which slows down growth. That's a long process, just as credit bubbles took time to build. We may be in the process for another 3-4 years."

Over the weekend, French President Nicholas Sarkozy is meeting head of IMF Christine Lagarde, before moving to Berlin to meet German Chancellor Angela Merkel where they are likely to discuss bank recapitalization.

The focus is also on Franco-Belgian bank Dexia (DEXI.BR), which has become the first victim of the fresh crisis after its shares fell to a record low before suspension. The board will vote on a break-up plan on Saturday.

Friday brings the Group of 20 finance ministers meeting, where investors could assess the appetite of surplus-rich BRIC emerging nations -- Brazil, Russia, India and China -- to help the euro zone.

A source told Reuters the European Commission is expected to present a proposal on bank recapitalization before the EU leaders summit on Oct 17.

Credit Suisse said it would revise its underweight position of continental European stocks if it saw an additional package worth at least 1-1.5 trillion euros, equivalent to 40 percent of outstanding debt in the peripheral euro zone countries.

Within this, Credit Suisse reckons European governments should spend 300-400 million euros to recapitalize banks.

It also said a weaker euro needs to be part of the solution of the euro zone problems, given each 10 percent decline in the euro adds 0.7 percent to European GDP growth.

EASING STRAINS

Following European steps, there is a tentative sign that strains on money markets and banks are starting to ease.

The three-month EURIBOR-OIS spread is down nearly 10 basis points this week to 74 bps, its lowest in a month.

In the FX swaps market, the premium for swapping euro LIBOR into dollar LIBOR over three months -- known as the cross currency swap -- eased to around 102 bps, off a September high around 123 bps.

Earlier in the year, European banks needing funds were forced to turn to FX forwards and swaps, causing a sharp widening of the dollar premium in FX swaps, especially in euro and yen markets.

A credit default swap index based on 25 European financials fell to 252.56 bps, down nearly 19 percent from a September peak.

JP Morgan said an issuance of unsecured bonds by Deutsche Bank and ABN Amro late in September worth 2 billion euros following a three-month freeze presented an important step for European debt markets.

"Coupled with (upcoming ECB funding operations), it is likely that bank bond issuance will improve further over the coming weeks, boosting confidence in credit markets," it said.

And confidence in the credit market is essential for a broader risk asset market.

"The key thing to watch is the corporate credit and government bond market, which is much better at judging what's going to happen than equity markets," Astorri said. - Reuters

Bank Negara foreign reserves fall US$6.1b to US$131b

KUALA LUMPUR: Bank Negara Malaysia international reserves fell US$6.1 billion to US$131 billion (RM417.2 billion) as at Sept 30 from USD137.1 billion as at Sept 15.

In a statement Friday, Oct 7, Bank Negara said the reserves level as at Sept 30, had taken into account the quarterly adjustment for foreign exchange revaluation gain, following the strengthening of some of the major currencies against the ringgit during the quarter.

The reserves position was sufficient to finance 9.7 months of retained imports and is 4.5 times the short-term external debt, it said.

U.S. stocks, euro slip after euro-zone downgrades

NEW YORK: U.S. stocks ended lower on Friday, but European and Asian equities markets mostly finished higher, after several days of gains supported by assurances that European banks would be recapitalized to help deal with a potential debt default by Greece.

After falling on Monday to the worst levels in 13 months, the three major U.S. stock indexes finished Friday's session with gains for the week -- helped by encouraging U.S. jobs data, which prompted some buying late in the day. But those gains quickly vanished as investors switched focus near the close to focus on downgrades of the credit ratings of Spain and Italy.

"The employment data was viewed as being relatively good, but this issue in Europe keeps rearing its head. We just can't seem to escape Europe's debt crisis," said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.

The Dow Jones industrial average ended Friday down just 20.21 points, or 0.18 percent, at 11,103.12. The Standard & Poor's 500 Index fell 9.51 points, or 0.82 percent, at 1,155.46. The Nasdaq Composite Index dropped 27.47 points, or 1.10 percent, at 2,479.35.

For the week, though, the Dow gained 1.7 percent, the S&P 500 rose 2.1 percent and the Nasdaq climbed 2.7 percent.

Helping the U.S. jobs picture, the U.S. Labor Department said on Friday that employers added more jobs than analysts expected last month. Non-farm payrolls data for July and August also were revised upward.

While the U.S. unemployment rate held steady at 9.1 percent, the government report supported other data that have eased fears the U.S. economy was heading into another recession.

European shares rose to a five-week closing high, with the pan-European FTSEurofirst 300 index of top shares up 0.7 percent at 947.63 -- up 2.6 percent for the week.

This week, European leaders showed more determination to fix problem banks, with the European Central Bank offering more help to struggling European banks through the purchase of covered bonds and with a renewed offer of longer-term loans to ward off a new credit crunch.

Worries about the euro zone's debt crisis have hit the market hard in recent months, along with concern about stalling economic growth in the United States and China.

World stocks measured by the MSCI All-Country World index ended the day up 0.46 percent at 285.68 and rose more than 1 percent for the week.

EURO SLIPS, BONDS SLIDE

The credit rating downgrades for Italy and Spain knocked the wind out of the euro on Friday. Traders said anxiety about Europe's economy and fragile banks will likely continue to hobble it in the weeks ahead.

The euro slipped 0.3 percent to $1.3388 but was up slightly for the week -- for the first time in three weeks.

The U.S. dollar ended up against the yen at 76.85 yen and up against the Swiss franc at 0.9258.

The euro may get a boost if euro-zone leaders can cobble together a plan on Sunday to recapitalize banks facing hefty losses.

But Brown Brothers Harriman strategist Mark McCormick said the prospect of a euro-zone recession and an interest-rate cut were gaining traction after the ECB this week unveiled new funding plans to stabilize banks and the euro-zone economy.

"That means the euro probably doesn't get much momentum even on good news," he said. "A euro-zone recession is still possible and the ECB probably cuts rates before 2012."

The prices of U.S. Treasury securities fell on Friday, as the better-than-expected job growth in September dampened the case for more Federal Reserve intervention.

"This is clearly a vote for the slow growth camp rather than the recession camp, so there is small upward pressure on rates," said Leslie Barbi, head of fixed income at RS Investments in New York, which manages $30 billion in bonds.

The benchmark 10-year note fell 23/32 points to yield 2.07 percent, up from 1.99 percent at Thursday's close. The 30-year Treasury bond tumbled 1-14/32 in price for a yield of 3.01 percent, up from 2.94 percent late Thursday.

For the week, benchmark U.S. yields saw their biggest rise in three months. Ten-year yields moved back above 2.0 percent, and 30-year yields returned to 3 percent from historic lows.

The U.S. bond market will be closed on Monday for the U.S. Columbus Day holiday.

In Europe, German government bond prices also fell on Friday though safe-haven bids could return next week if euro- zone leaders fail to produce the plans for banking recapitalizations that markets are anticipating. Ten-year German yields rose above 2.0 percent to hit 2.03 percent.

Crude oil prices edged higher on Friday after the encouraging U.S. jobs data suggested the United States may avoid a recession. U.S. November crude rose 39 cents to close at $82.98 a barrel, while Brent crude for November edged up 15 cents to settle at $105.88 a barrel.

Gold prices fell around 1.0 percent on Friday, as bullion investors raised cash to cover margin calls amid losses in the other markets. Gold still recorded its first weekly gain in a month, closing around $1,636.00 an ounce. ' Reuters

#Stocks to watch:* Construction, plantations, Parkson, Tanjung Offshore

KUALA LUMPUR: Stocks on Bursa Malaysia may get a lift in the week ahead, starting Monday, Oct 10 from the more positive development from the euro zone, steadier Wall Street and from the Budget 2012 proposals.

Reuters reported that European leaders had over the week displayed more determination to fix problem banks, with the European Central Bank offering more help to struggling banks through the purchase of covered bonds and with a renewed offer of longer-term loans to ward off a new credit crunch.

The news agency said worries about the euro zone debt crisis have hit Wall Street hard in recent months, along with concern about stalling economic growth in the United States and China.

Meanwhile, the US Labor Department said on Friday employers last month added more jobs than analysts had expected. Nonfarm payrolls data for July and August also were revised upward.

On the local front, the RM232.8 billion Budget 2012 proposals to strengthen the economy while also focusing on the lower income group were expected to provide the market a firmer start.

Affin Investment Bank head of retail research, Dr Nazri Khan said the positive surprises were the listing of Felda Global Ventures Holdings Bhd, proposals to boost the higher education sector and CONSTRUCTION [] of infrastructure projects.

He said the Budget 2012 was medium term supportive on the broad local market.

"Overall, we view the PLANTATION [], finance and construction sectors to be key''beneficiaries of Budget 2012. Despite the tough fiscal challenge, we see the budget as clearly balanced for both people and economy,' he said.

On the outlook for the FBM KLCI, he said the 30-stock index, after being hammered to a 13-month low, is finally showing some potential signs of stability to make further upside next week.

Among the stocks to watch in the week ahead are infrastructure companies like GAMUDA BHD [], IJM Corp Bhd and Sarawak-based construction players like Hock Seng Lee Corp Bhd as the government speeds up infrastructure projects.

Nazri said the income tax exemption for private schools and allowance deduction for private sector sponsored training bodes well for the education players to develop the country human capital. Among the stocks to watch are SEG INTERNATIONAL BHD [] and HELP INTERNATIONAL CORPORATION [] Bhd.

The proposed listing of Felda Global Ventures could draw renewed interest in key commodity stocks like KUALA LUMPUR KEPONG BHD [], Kulim (Malaysia) Bhd, TRADEWINDS PLANTATION BHD [], IOI CORPORATION BHD [] and also MSM Malaysia Holdings Bhd.

Nazri also said broad measures to boost Islamic banking such as more tax exemption for Islamic banking products and allocation for public private partnership (PPP) facilitation fund should be an effective complement to the ongoing KLFID Economic Transformation Programme to strengthen banking service.

'In this case, banks such as CIMB, RHBCap and BIMB with high niche in Islamic finance are likely to be the major beneficiaries,' he said.

'Further, several public projects such as rebuilding schools, upgrading hospitals, improving flood mitigation programme and constructing public houses are likely to benefit construction stocks such as KEuro, AZRB and Binapuri,' he added.

Also stocks which could see trading interest are PARKSON HOLDINGS BHD [] and TANJUNG OFFSHORE BHD [].

The Edge weekly reported that Parkson Holdings Bhd shareholders may be in for a windfall when its Asean retail arm, Parkson Asia Pte Ltd, is listed on the Singapore Exchange.

The company has informed shareholders that the shares could be offered to them at a discount of about 30% to the proposed IPO price.

The weekly also reported Tanjung Offshore is expecting better financial results in the next two financial years as it ventures overseas to grow revenue and undertakes cost-cutting measures to boost its bottom line.

Wall Street set to jump after payrolls data

NEW YORK: U.S. stocks were set to open higher on Friday, extending a three-day rally after more jobs were created than expected in September, helping to ease concerns the economy was heading back into recession.

Nonfarm payrolls rose by 103,000, while economists expected a gain of 60,000, and the unemployment rate held steady at 9.1 percent, The government report also showed 99,000 more jobs were added in July and August than initially reported.

While the report was not as strong as many investors wanted, it corroborated other mildly improved economic data that have helped to ease fears the global economy was weakening.

"This is critical, this is the most important data that we have seen this cycle," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "This is going to get people's attention."

"This confirms that most of the negativity we have seen in the market is derived from the market itself and not the data," he said.

S&P 500 futures were up 7.9 points and above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 69 points, and Nasdaq 100 futures added 10.25 points.

Investors will keep their eyes on Europe. Optimism the region was ramping up efforts to resolve its sovereign debt crisis helped drive a 6 percent rally in the S&P 500 over the last three sessions.

Germany and France were split ahead of crucial summit talks on Sunday over how to strengthen shaky European banks and fight financial market contagion to prepare for a possible Greek default, diplomats said Friday.

On Thursday. the European Central Bank said it was ready to buy bonds to provide longer-term cheap money for European lenders in need of funding.

From a technical perspective, the S&P 500 remained in a downtrend. The index has been trapped in a range in the past few months, deteriorating into lower lows. The index's wide range is seen from about 1,100 to 1,250.

Analysts see the next important resistance level for the S&P 500 at 1,180, the index's 50-day moving average. The S&P closed at 1,164.97 on Thursday.

Adding to concerns about European banks, Moody's cut its credit ratings on British banks Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc and said it expected the U.K. government would have to continue to support the country's systemically important banks. ' Reuters

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Budget 2012: Reactions from banks, Bursa

Comments from on Budget 2012 by Datuk Seri Abdul Wahid Omar, the President & CEO of Maybank and Chairman of the Association of Banks in Malaysia:

Overall, Budget 2012 Overall, Budget 2012 is most comprehensive and reflects the Government's effort to strike a balance between dealing with people, cyclical and structural issues.'' Rising living costs and income gap are the number one people issue.

The current challenging global environment and the attendant risk to external demand require domestic macroeconomic policy responses to support internal demand, especially consumer and business spending.'' At the same time, the Government needs to keep the momentum going with regards to transformation programmes, economic restructuring and policy reforms.

Budget 2012 clearly listened and responded to the concerns voiced by the Rakyat over the issue of living costs, given the plethora of measures benefiting especially the poor, lower income group, the middle class, civil service, pensioners and ex-servicemen or their families.

These include things like the allocations for welfare programme, cash handouts and one-off payments to target groups, new remuneration scheme and automatic annual increment for civil service and pensioners, as well as the abolition of school fees.

We are extremely pleased that the Government continues to give a high priority for the growth and development of the financial services sector.'' Budget 2012 is no exception given the slew of tax incentives for the setting up of MNC's treasury management centres (TMC), sukuk issuance & transactions, private retirement scheme, exchange-traded fund (ETF), Skim Amanah Rakyat 1Malaysia and the development of Kuala Lumpur International Financial District (KLFID).

This will further promote the comprehensive development of the conventional and Islamic banking, insurance and takaful, investment banking and other financial services in terms of the range and offerings of products and services.

With human capital development and attracting and retaining talent being one of the key issues facing the banking/ financial services sector, we are grateful for the tax incentives for companies providing structured internship programme and scholarships as well as participating in careers fairs abroad.

We welcome further liberalisation of the non-financial services sectors covering 17 sub-sectors such as healthcare, education, business and professional services.'' This will complement the above-mentioned measures to promote financial services sector by enhancing the country's post-industrialisation development strategy that is centered on, and driven by, services sector.

The review of Real Property Gains Tax (RPGT) is a good move to ensure macroeconomic and financial stability as well as social justice by curbing speculative activities and preventing excessive rise in property prices.'' This is also balanced with incentives and allocations for the purchases and provisions of affordable and public housing schemes. We also welcome the Government's commitment to reduce the deficit in 2012 to 4.7% of GDP compared with 5.4% in 2011.

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Datuk Seri Nazir Razak, Group Chief Executive, CIMB Group:

'A creative and responsible budget, bringing down the deficit to 4.7 per cent in 2012 and yet delivering benefits to the most deserving segments of the rakyat. I particularly like measures focussing on human capital development and those addressing concerns on rising consumer debt levels. In addition, I would like to compliment the Government for the estimated 14.9 per cent increase in its revenues for 2011, which is a reflection of overall efficiency improvement in the public sector.'

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Datuk Tajuddin Atan, Chief executive officer, Bursa Malaysia:

We welcome the Government's move to continue with focused measures to drive growth for the economy, in anticipation of the uncertain and challenging economic environment in the immediate to mid-term.'' Given the expectations of a sustained GDP growth of 5%-6%, we feel that the initiatives, as well as the ongoing Economic Transformation Programmes (ETP) implementations will help sustain growth.

With regards to the capital market, we certainly welcome and look forward to the listing of Felda Global Venture Holdings, which is expected to be listed on our Exchange mid of next year.'' This listing will create yet another blue chip in the PLANTATION [] sector and add to our niche offerings, attracting larger international portfolio funds to the Malaysian market.

This move shows the Government's focus to bring blue chip stature companies to the public domain so that institutional investors as well as the rakyat can participate in the growth of such well run entities.'' TERAJU's aim to guide over 1,000 performing Bumiputera companies to potentially list on Bursa Malaysia is also an added drive to bring more breadth and depth to our capital market offerings.

Our efforts to grow and profile our strength in the Islamic finance and investment space is bearing results with the attestation of Malaysia as the world's largest sukuk issuance centre.'' The announcement to extend exemption of income tax on non-Ringgit sukuk issuance and transaction, as well as the tax deduction on expenses for sukuk wakala issuance is a further boost towards increasing participation in our thriving sukuk market.

Boosting retail investment participation has always been at the forefront of our business agenda.'' Therefore, we welcome the extension of a concessionary tax rate of 10% on dividends to further spur our REITs market.'' The attractive tax rate of 10% on dividends received can also serve to incentivise inflow of foreign funds into our real estate sector.'' Given the current uncertain climate, the nature of REITs as a tax-managed defensive investment product will provide an alternative investment to investors.

We believe there is more to be done to galvanise the Exchange Traded Funds (ETFs) market.'' The provision of seed monies for issuance of Shariah compliant ETFs are welcomed as ETFs offer many advantages such as transparency, broad exposure to the stock market, liquidity, flexibility, diversification, as well as lower investment costs.

The growing interest in ETFs has been fuelled by the increase in the range of asset classes accessible via this product. Many investors, particularly, large institutions have included ETFs in their investment portfolio owing to its transparency and its ability to provide a means of accessing specific investment strategies or exposure.

In anticipation of the global growth and opportunities available, Bursa Malaysia has embarked on a series of structural initiatives to strengthen and build the domestic ETF market.

Focus is also being channeled towards increasing awareness via series of product centric seminars. This announcement augurs well as it will be an incentive to boost the supply of ETFs in the market.

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Dr. Nungsari Ahmad Radhi, Executive Director, Khazanah Research & Investment Strategy:

This is a finely balanced budget that has to take into consideration the variety of demands from various constituencies and the trade-offs of decisions that have to be taken in the context of prudential budget constraints.

The deteriorating external environment is particularly challenging to a small, open economy such as Malaysia which will now have to rely on domestic sources of growth.

The Budget introduced many measures that address cost of living and human capital development issues while also targeting to boost private consumption at the same time.

There is a discernible shift towards bite-sized, direct transfers that have a broad reach and direct impact on people's lives and private consumption numbers. On a longer term, there were attractive incentives for investments in the services sector, particularly in the leisure and tourism industry.

Fiscal discipline is maintained by further reducing the deficit to below 5% of GDP which suggests that the budget also seemed to have built in some reserves should the global economic environment deteriorate further. A very efficient budget that manages immediate needs in an uncertain environment.



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Roger C. Ng, Head of Fixed Income and Corporate Sales for South East Asia, Goldman Sachs:

Malaysia has made great strides in establishing itself as a leading international and regional hub of Islamic finance. This is in large part the result of the government's strategic planning and policy initiatives.

The new incentives and projects such as the Kuala Lumpur International Financial District will further strengthen Malaysia's position as an international centre for banking and finance.

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Budget 2012: Reactions from corporations

Reaction from corporations, fund management




MMC Corp managing director Datuk Hasni Harun:



Measures put in place to stimulate the domestic economy would boost domestic consumption and productivity of the economy in the long run.

The higher allocation of RM29.8 billion for the economic sector to support the needs of infrastructure would raise the level of CONSTRUCTION [] activities and in turn provide more business opportunities.

The construction sector would also receive a boost from the implementation of the ETP and the Second Rolling Plan beginning in 2012 which focus on high-impact development projects such as the Gemas-Johor Bahru double tracking project.

The economic impact of the Ipoh-Padang Besar portion of the double tracking project, of which we are involved as the contractor, has been far reaching, with RM10 billion worth of contracts awarded to more than 600 contractors.

The MMC Corp group remains committed to the ETP implementation, via nation-building initiatives such as the Klang Valley MRT (KVMRT) project, expected to be rolled-out next year.

As the Project Delivery Partner for the KVMRT project, we are excited with the project's prospects as it will provide an efficient, integrated and sustainable transport system for the Klang Valley and will serve as an economic multiplier, estimated to create 130,000 employment opportunities and generate RM3-4 billion annually in terms of gross national income (GNI).

MMC Corp's track record in building complex tunnels, such as the SMART tunnel, bodes well for its bid to undertake the KVMRT tunneling works.

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JT INTERNATIONAL BHD [] managing director Shigeyuki Nakano:

JT International is encouraged that the government has not increased the excise duty in light of the significant issue of illegal cigarettes in Malaysia.

Excessive taxation is one of the critical factors which fuel the trade of illegal cigarettes.

As such it is very heartening that the government has shown pragmatism in its cigarette taxation approach.

Coupled with the government agencies' strong and persistent enforcement efforts which we hope will culminate into the imposition of enhanced sanctions and penalties, JTI Malaysia believes the government's two-pronged approach of a prudent excise policy and enhanced enforcement is a constructive and effective strategy to fight the huge illegal cigarette trade in Malaysia today.

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BOUSTEAD HOLDINGS BHD [] deputy chairman/group managing director Tan Sri Lodin Wok Kamaruddin:



This year's National Budget has indeed become a very attractive one particularly for the masses. As for the Boustead Group, the Budget will have a particular impact from two broad areas namely property development and hospitality.

Given the fact that property prices locally have been experiencing high appreciations due to speculations, we believe the measures introduced by the Prime Minister in the 2012 Budget will temper the speculations and provide stability to property prices.

Hence with the staggered taxation schedule introduced in today's budget, as one of the premier property developers in the Klang Valley and Johor, we hope that as much as property prices reflect demand, it will not be prone to excessive speculation.

Our view is that measures such as these will provide Malaysians with an opportunity to benefit from stable property prices that will appreciate organically.

We laud the Government's initiative to promote the hospitality sector particularly with the announcement of the 70% tax exemption for five years for the building of new four-star hotels. The Boustead Group, being a key participant in this sector via our highly established and successful franchise of Royale Bintang & Royale Chulan Group of Hotels, will certainly benefit from this budget especially since we have 700 new rooms in three new four-star hotels coming up in Kuantan, Selangor and Pulau Pinang.

As the Chief Executive of Lembaga Tabung Angkatan Tentera, we are also very delighted with the Government for allocating half a billion ringgit under the Army Care programme which LTAT will be very much involved in to upgrade and maintain army camps and quarters nationwide. This will certainly help raise the morale of armed forces personnel. This will also most certainly spur strong economic interest especially for small and medium enterprises in the construction and building materials segment, throughout the nation.

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Maxis Bhd chief executive officer Sandip Das:

We can see that the budget for 2012 is a continuation of the efforts being undertaken to secure a strong future for the nation.

The Budget addresses fundamental areas of raising investment, developing human capital, uplifting rural areas, spreading economic development and raising administrative efficiency as key pillars.

In the telecommunications industry, we are keen to play a decisive role in the economic transformation programme by providing a technological plank to fast-track the process.

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Gan Eng Peng, Head of Equities of HwangDBS Investment Management Bhd:

A People-Centric Budget

The 2012 Budget is focused on people-centric with initiatives that will accelerate the nation's push to be a developed and high-income economy by 2020. Moreover, with the issue of rising cost of living on the minds of most people, the Budget 2012 has tabled incentives to ease cost pressures now being felt by the low and middle-income groups.

Malaysia is seen to be able to achieve gross domestic product (GDP) of 5 to 6 per cent in 2012. This expected GDP growth appears to be optimistic given to the current global markets that remain plagued by uncertainty and extreme volatility.

As a fund management company, we feel that the impact of the global slowdown is only starting to filter through into the real economy from late 2011.

Thus, it is unrealistic for the government to expect a pick up in growth momentum now. Malaysia remains largely an open economy.

Hence, the more realistic GDP growth figure would be approximately 2 to 3 per cent for 2012 on the back of a recessionary Europe, a very slow US economy and a tight monetary policy in China.

Construction Sector

One of the key planks of the growth engine in Malaysia is slated to be the construction sector. However, we have our doubts about key projects like the Mass Rapid Transit (MRT) and the building of a new financial district.

The tender of the MRT is already delayed, the size has been scaled back, financing has not been sorted and disputes about land acquisition are heating up. Besides that, rushed tender deadlines, slow decision-making and an abrupt change of project owners is blighting the MRT projects.

Thus, we would not be surprised if further delays occur since MRT Co, under the Ministry of Finance Incorporated is the new owner of the MRT projects, taking away from another government unit, Syarikat Prasarana Negara Bhd.

On the building of a new financial district and the 100 storey building, it would not be such a great idea when one considers that we are already heading into an oversupply situation in the commercial property space.

The oversupply situation should be considered before taking into account these projects.'' On the demand side, Kuala Lumpur does not have enough critical mass nor growth to support a new financial district.

Essentially, the overall growth forecast is a bit unrealistic to as how we are going to achieve it. We do not think that the stock market will be impressed by it since many people can see through the flaws of the mega projects. As markets do not have much expectations built into it, it will also not cause any untoward sell down.'' Furthermore, given that a few of the policies announced in the previous budget has been totally reversed, the credibility of more policy announcement here has worn thin.'' Hence, we think this budget is a non-event for the market.

Fixed Income Market

For the fixed income market, it is positive if one takes the government economic growth forecast at face value.'' Inflation is being controlled and growth is strong.'' Moreover, deficit is being reduced. Thus, this means lower issuance of papers, resulting in stronger bids and better pricing.

Real property gains tax (RPGT)

The fact that there is no drastic change to the ruling on RPGT encourages long-term ownership of property which also helps the owner with capital appreciation and wealth creation as they will hold on to the property for longer. However, the 10 per cent increase in the first two years is not an effective measure to try and curb speculation activities. Thus, if we want to curb speculation, it should be higher than 10 per cent.

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Ismet Suki, President of UMW Toyota Motor:

UMW Toyota Motor welcomes the announcement by the Prime Minister Datuk Seri Najib Tun Abdul Razak to extend the exemption of the Import Duty and Excise Duty for Hybrid Vehicles below 2000cc until 31st December 2013.

We are delighted with the announcement by the Prime Minister. This shows that the government is committed to make Hybrid vehicles affordable for more Malaysians. It would be exciting to see more Hybrid vehicles on our roads and more people would be aware about the effectiveness of Hybrid TECHNOLOGY [] as a proven alternative to lowering fuel consumption and environment friendly.

The government is moving towards the right direction in promoting a 'greener living' by reducing the CO2 emission with more hybrid vehicles on our roads. UMW Toyota Motor strongly supports this government initiative and will continue to promote hybrid vehicles.

We at UMW Toyota Motor would like to congratulate the Prime Minister on the successful budget announcement that is favorable to private companies and will definitely ease the burden of more Malaysians.

Budget 2012 reactions: 1MDB says incentives reflect govt's commitment

Budget 2012 reactions: 1MDB says incentives reflect govt's commitment

KUALA LUMPUR: The incentives for the Kuala Lumpur International Financial District (KLIFD), the KLIFD Marquee status and the KLIFD status, underscore the government's commitment in making Kuala Lumpur a global financial centre, said 1Malaysia Development Board (1MDB) chief executive officer Shahrol Halmi.

Prime Minister and Finance Minister Datuk Seri Najib Tun Razak when tabling Budget 2012 on Friday, Oct 7 had proposed a 100% income tax exemption for a period of 10 years and stamp duty exemption on loan and service agreements for KLIFD status companies.

He also proposed an industrial building allowance and accelerated capital allowance for KLIFD Marquee Status Companies; and income tax exemption of 70% for a period of 5 years for property developers in KLIFD.

Shahrol said that both incentives would cater for two different groups with different strategic intent.

Shahrol said these incentives were necessary sweeteners, and a first step towards bringing the best talent and infrastructure to the financial district.

He said KLIFD's aim to enable Malaysia to capitalise on the momentum of its international Islamic financial innovation and Shariah-based competitive advantage was further strengthened with measures in the budget to stimulate the sukuk market and provide the seed money for Shariah-compliant Exchange Traded Funds (ETF)

'Bank Negara is already spearheading the Islamic Finance initiative through Malaysia International Islamic Financial Centre (MIFC) and Islamic Financial Services Board (IFSB).

'KLIFD will complement these efforts by attracting additional strong players in financial services and its supporting industries by enabling them,'he said.

1MDB and strategic partner Mubadala Development Company will lead the development of 34.4-hectare KLIFD.

Dijaya buys prime land in KL for RM65.25m

KUALA LUMPUR: DIJAYA CORPORATION BHD [] (Dijaya) has acquired three parcels of prime land in Kuala Lumpur measuring one acre for RM65.25 million with a gross development value of RM650 million.

In a statement Friday, Oct 7, Dijaya said its 99.99%-owned subsidiary Ace Rhythm Sdn Bhd had acquired the freehold development land along Jalan Sultan Ismail in Kuala Lumpur.

The lands would be transformed into a mixed development consisting of serviced apartments and commercial lots, it said.

The company said the development projects were expected to contribute positively to its future revenue stream and financial performance.

Dijaya group chief executive officer Tan Sri Danny Tan Chee Sing said the acquisition was an opportunity for the group to introduce the 'Tropicana' brand name to an urban market in the city centre area.

'This proposed development is expected to attract much attention from both the locals as well as foreigners in the country,' he said.

Dijaya said the lands had good development potential because they were located in a strategic location in the central district of Kuala Lumpur City Centre, an area where residential and commercial PROPERTIES [] are highly sought after.

The lands could also demand premium pricing for both residential and commercial properties, as evidenced by other developments within the vicinity such as Pavilion Residence, Four Season Place, the Binjai and Regent Residence, it said.

'This acquisition, following its proposed development of W Kuala Lumpur Hotel & Residences, provides an opportunity for Dijaya to expand and strengthen the group's existing business property development portfolio within Kuala Lumpur,' it said.

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Budget 2012: Highlights

Highlights of Budget 2012 proposals announced by Prime Minister Datuk Seri Najib Tun Razak on Friday, Oct 7.

FDIs: Inflows of foreign direct investment have regained momentum. Foreign direct investment increased six-fold to RM29 billion in 2010, the highest growth in Asia. In 1H of 2011, FDI surged further by 75% to RM21.2 billion compared with RM12.1 billion for the same period in 2010. Private investment to expand 15.9% in 2012.

Expenditure: RM232.8 billion to implement all Government development plans, which include the projects and programmes. Of the amount, RM181.6 billion is for operating expenditure and RM51.2 billion for development expenditure.

Federal Government revenue expected to increase 1.9% to RM186.9 billion in 2012 compared with RM183.4 billion in 2011. Ddeficit in 2012 is expected to improve to 4.7% of GDP compared with 5.4% in 2011.

Stimulus package: RM6 billion for Special Stimulus Package through Private Financing Initiative to undertake several public projects. Projects include upgrading and maintenance of schools, including CONSTRUCTION [] of new blocks, upgrading hospitals, flood mitigation programme, upgrading basic rural infrastructure.

RM978 million to accelerate the development in five regional corridors, including building Johor Bahru-Nusa Jaya coastal highway in Iskandar, Johor; heritage tourism development in Taiping in the Northern Corridor; agropolitan scheme in Besut in the East Coast Economic Region; palm oil industrial cluster project in Lahad Datu in Sabah Development Corridor; and Samalaju water supply in the Sarawak Corridor of Renewable Energy.

Kuala Lumpur International Financial District (KLIFD): Income tax exemption of 100% for 10 years and stamp duty exemption on loan and service agreements for KLIFD status companies; Income tax exemption of 70% for 5 years for property developers in KLIFD.

Sukuk: Income tax exemption given for non-ringgit sukuk issuance and transactions is extended for another 3 years until the year of assessment 2014.

ETF: To boost Exchange Traded Funds (ETFs), Valuecap Sdn. Bhd subsidiary, I-VCAP, to provide RM200 million as seed monies for shariah-compliant ETFs. This fund will provide a matching loan subject to a maximum of RM20 million.

FELDA: FELDA Global Ventures Holding to be listed on Bursa Malaysia by mid-2012 to raise funds for the company to be a global conglomerate. Listing will create another blue chip PLANTATION [] company besides attracting international investors to Bursa Malaysia.

Rights and interests of FELDA settlers will continue to be protected by Koperasi Permodalan FELDA as the majority shareholder. FELDA settlers are expected to receive a windfall, with the amount to be announced before listing.

REITS: Govt to extend incentive for concessionary tax rate of 10% on dividends of non-corporate institutional and individual investors in Real Estate Investment Trusts (REITs) for another five years from Jan 1, 2012 to Dec 31, 2016.

SMEs: Government'' to provide RM100 million for the SME Revitalisation Fund. This scheme offers soft loans up to a maximum of RM1 million for entrepreneurs to revive their businesses. To help SMEs to commercialise research products, government to set up shariah-compliant Commercialisation Innovation Fund totalling RM500 million with an attractive profit margin.

Hybrid cars: Full exemption of import duty and excise duty on hybrid cars and electric cars will continue to be given to franchise holders. Tax exemption extended until Dec 31, 2013.

Tourism: Langkawi Five Year Tourism Development Master Plan will be launched with an allocation of RM420 million.

Property: Government proposes review of real property gains tax (RPGT) as current rate of 5% not effective in curbing real estate speculative activities. Government proposes RPGT rate be reviewed. For PROPERTIES [] held and disposed within 2 years, the RPGT rate is 10%. For properties held and disposed within a period exceeding 2 years and up to 5 years, the rate is 5%. Properties held and disposed after 5 years are not subject to RPGT.

Schools: RM1 billion for the construction, improvement and maintenance of schools, particularly to cater for the immediate needs of schools.

Civil service, bonus: Government proposes new Civil Service Remuneration Scheme or SBPA which includes an exit policy for underperforming civil servants and for those who opt to leave the service.

Annual increment of civil servants increased between RM80 and RM320 according to the grade. Also civil servants who accept SBPA will receive an annual increment between 7% and 13%.

Compulsory retirement age increased from 58 to 60 years old to optimise civil servants' contribution.

Additional bonus of half-month salary with a minimum payment of RM500 and an assistance of RM500 to government pensioners to be paid together with the December salary this year.

For 2011, this totals to one month pay with a minimum payment of RM1,000 for civil servants and RM1,000 for Government pensioners. This will benefit 1.3 million civil servants as well as 618,000 Government pensioners. The total bonus and assistance payments for this year accounts for RM4 billion.

Homes: Under My First Home Scheme for those earning below RM3,000, government to increase the limit of house prices from a maximum of RM220,000 to RM400,000.

Government will introduce Skim Amanah Rakyat 1Malaysia for households with income below RM3,000 per month, to benefit 100,000 households. Participants can apply for a RM5,000 loan with a repayment period of 5 years.

Entrepreneurs: Government will allocate RM200 million to develop Bumiputera entrepreneurs and contractors through the Ministry of Rural and Regional Development.

Venture capital: Government will establish MyCreative Venture Capital with an initial fund of RM200 million.

EPF: Tax relief up to RM6,000 for EPF and life insurance to be extended to the Private Pension Fund now known as Private Retirement Scheme. Employers' contribution be increased from 12% to 13% for contributors who earn RM5,000 and below, benefit 5.3 million EPF contributors.

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#Updated* FELDA Global Ventures to be listed by mid-2012

KUALA LUMPUR: The government plans to list Felda Global Ventures Holdings Bhd (FGV) by mid-2012 to raise funds for the company to be a global conglomerate, as well to attract international investors to Bursa Malaysia.

Prime Minister Datuk Seri Najib Tun Razak in his Budget 2012 speech on Friday, Oct 7 announced the plan, and said the listing would create another blue chip PLANTATION [] company in the country.

He also said that the rights and interests of FELDA settlers would continue to be protected by Koperasi Permodalan FELDA as the majority shareholder.

'FELDA settlers are expected to receive a windfall, with the amount to be announced before listing.'

When listed, FGV would rank as the country's biggest plantation owner, and dethrone SIME DARBY BHD [] as the world's largest listed plantation company by landbank. ''

The Felda group manages some 860,000ha in Malaysia, of which 520,000ha belongs to settlers and 320,000ha to the Federal Land Development Authority (Felda), the government agency overseeing the group. FGV has 50,000ha of its own.

It is also the largest miller of fresh fruit bunches for crude palm oil (CPO) and palm kernel in the country with 70 mills nationwide.

By comparison, Sime Darby has total planted land of more than 630,000ha in Malaysia and Indonesia.

FELDA Global Ventures to be listed by mid-2012

KUALA LUMPUR: FELDA Global Ventures Holding (FGVH) will be listed on Bursa Malaysia by mid-2012 to raise funds for the company to be a global conglomerate, said Prime Minister Datuk Seri Najib Tun Razak in his 2012 Budget speech.

He said the listing would create another blue chip PLANTATION [] company besides attracting international investors to Bursa Malaysia.

'The rights and interests of FELDA settlers will continue to be protected by Koperasi Permodalan FELDA as the majority shareholder.

'FELDA settlers are expected to receive a windfall, with the amount to be announced before listing,' he said on Friday, Oct 7.

KLCI closes above 1,400-level, extends gains for third day

KUALA LUMPUR: The FBM KLCI extended its gains for the third day on Friday, Oct 7 and closed above the 1,400-point level for the first time Sept 21, as the local bourse recovered to end the day in positive territory while Budget 2012 was being tabled.

Among the highlights of Budget 2012 was the announcement that FELDA Global Ventures Holding (FGVH) would be listed on Bursa Malaysia by mid-2012 to raise funds for the company to be a global conglomerate

Prime Minister Datuk Seri Najib Tun Razak said the listing would create another blue chip PLANTATION [] company besides attracting international investors to Bursa Malaysia.

The FBM KLCI rose 0.46% or 6.36 points to close at 1,400.05.

Gainers edged losers by 374 to 339, while 272 counters traded unchanged. Volume was 964.67 million shares valued at RM1.31 billion.

Among the gainers, KLK added 60 sen to RM20.62, Perstima 34 sen to RM3.98, Panasonic 32 sen to RM19.70, IOI Corp 27 sen to RM4.82, GAB 20 sen to RM9.90, Quality Concrete and Tenaga 16 sen each to RM1.40 and RM5.38, while LPI Capital and Southern Steel rose 14 sen each to RM11.92 and RM2.03.

MBSB's securities were actively traded, as analysts say the company stood to benefit should there be a wage adjustment in the Budget for civil servants.

MBSB rose 7 sen to RM1.54 with 39.6 million shares done while its warrants rose half a sen to 63 sen with 79.1 million units done.

Other actives included Karambunai, GPRO, MAA, Systech and Timecom.

Losers included Dutch Lady, Shell, Cepco, Supermax, MISC, SapuraCrest, MMC Corp and JT International.

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Moody's cuts RBS and Lloyds ratings

LONDON: Credit rating agency Moody's downgraded Britain's part-nationalised banks Lloyds and Royal Bank of Scotland on Friday, although Britain's finance minister said UK banks were well-placed to cope with a European debt crisis.

The cuts to RBS and Lloyds formed part of a broader downgrade of 12 British financial companies by Moody's, which had already been flagged by the agency earlier in the year.

Moody's cut RBS by two notches to A2 from Aa3, and downgraded Lloyds TSB by one notch to A1 from Aa3. It also cut its ratings on Santander UK , the Co-Operative Bank, Nationwide Building Society and seven other smaller British building societies.

Moody's did not change its rating on Barclays and HSBC , which along with RBS and Lloyds represent the "Big Four" group of lenders that dominate British banking.

"Moody's believes that the government is likely to continue to provide some level of support to systemically important financial institutions, which continue to incorporate up to three notches of uplift," it said in a statement.

"However, it is more likely now to allow smaller institutions to fail if they become financially troubled. The downgrades do not reflect a deterioration in the financial strength of the banking system or that of the government," it added.

RBS shares were down 1.8 percent in early morning trade, while Lloyds fell by 2.6 percent. The shares of both banks have consistently traded well below the level at which the British taxpayer originally acquired their RBS and Lloyds stakes following the 2008 bailouts of the companies.

"The downgrades have been well flagged, reflecting removal of government support through guaranteed liquidity schemes and low probability of future tax-payer bail-outs," Oriel Securities said in a research note.

OSBORNE SEEKS TO REASSURE

Europe's sovereign debt crisis, sparked by Greece's economic woes, has led to concerns that many banks will need further injections of capital.

Earlier this week, France and Belgium intervened to prop up European bank Dexia , whose financial strength had been eroded by the sovereign debt turmoil.

However, British finance minister George Osborne said Britain's banks remained well-capitalised and in better shape than many of their European rivals, who face bigger losses on writedowns to their holdings of Greek government debt.

In an interview with BBC radio, Osborne also said that the Bank of England's decision to pump more money into the economy and the government's deficit reduction plans would help shield Britain from the euro zone debt crisis.

Osborne said: "People ask me 'how are you going to avoid Britain and the British taxpayer bailing out banks in the future?'

"This government is taking steps to do that, and therefore credit rating agencies and others will say 'well, actually these banks have got to show that they can pay their way in the world'.

"And I am confident that British banks are well capitalised, they are liquid, they aren't experiencing the kind of problems that some of the banks in the euro zone are experiencing at the moment."

Lloyds said the Moody's downgrade would only have a "minimal" impact on its funding costs, while RBS reiterated that it remained strongly capitalised and had strengthened its credit profile. .

Britain ended up with an 83 percent stake in RBS and a 40 percent holding in rival Lloyds after rescuing both banks during the 2008 credit crisis with taxpayer bailouts.

However, the British taxpayer is currently sitting on losses of billions of pounds on their RBS and Lloyds stakes.

RBS was trading at 23.76 pence, more than 50 percent below the average 49.9 pence price at which the taxpayer acquired its stake in the lender, while Lloyds was at 35.58 pence -- again a fraction of the 63 pence price at which Britain got its stake in the bank. ' Reuters

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Europe shares halt rally ahead of U.S. jobs data

PARIS: European shares steadied on Friday, halting a two-day rally, as investors awaited to see if U.S. jobs data will signal an improvement on the macro front before adding more risky assets, while banks eased after Moody's cut some UK bank ratings.

Royal Bank of Scotland and Lloyds Banking Group fell 3.5 and 4 percent respectively after Moody's Investors Service downgraded the credit ratings of the two banks.

At 0714 GMT, the FTSEurofirst 300 index of top European shares was flat at 940.37 points.

The benchmark index has jumped 7 percent in the past two sessions and is on track to record a second consecutive weekly gain.

"European stock indexes as well as shares in a number of sectors such as banking, insurance, oil, utilities and telecoms seem to be stabilising. This is the result of extremely low valuation," Cholet Dupont strategist Vincent Guenzi said.

"This stabilisation may be a sign of a strong rebound to come if we get significant progress in the resolution of the euro zone debt crisis." ' Reuters

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Law-makers gets go-ahead to debate bill on resort casinos

KUALA LUMPUR: Malaysia's Genting Group seems a step closer to that casino licence it has set its eye on in Miami, going by the direction at which some law-makers are taking on expanding gambling in the state of Florida.

Legislation that may bring three resort casinos to South Florida's Miami-Dade and Broward counties cleared one hurdle on Thursday, Oct 6 after an appeals court said law-makers can decide to expand gambling without first seeking voters' approval, a local media reported.

The ruling, which affirmed a lower court decision, 'serves as a promising omen for the push by the world's largest gaming companies to bring resort casinos to Florida', The Miami Herald wrote Oct 6.

Two legislators ' Representative Erik Fresen and Senator Ellyn Bogdanoff -- have reportedly filed identical proposals that could make way for a beauty contest for three casino licenses where bidders will need to show they will invest at least US$2 billion in each facility.

A newly-created Florida Gaming Commission will evaluate bids and more marks will be given to proposals that create most jobs and is earlier in completing work, Bogdanoff was quoted as saying in the news report, adding that legislative lawyers will likely complete the bill by Oct 17.

Those marking standards may put Tan Sri Lim Kok Thay-led Genting Group in good stead.

When unveiling an artist impression for a US$3 billion resort that could redefine Miami's skyline on Sept 15, a Genting spokesperson had said works could be completed within three to five years, if it gets a casino license.

In fact, another spokesperson last month said Genting could open a casino with restaurants, bars and entertainment facilities as early as Fall 2012, if foreclosure of PROPERTIES [] in vicinity of the Omni Mall tied to some US$200 million worth of debt papers goes as planned.

Lim himself had reportedly said Genting expects to be ready to start site work on the land facing Biscayne Bay in Miami as early as Spring 2012, and the project could complete as early as Fall 2014. The project is expected to create up to 15,000 CONSTRUCTION [] jobs and employ 30,000 in the long-term.

Genting estimates that if two destination gambling resorts are approved for Miami, there would be a 30% growth in airline revenues ' 5.4 million more airline passengers and another US$2 billion in revenue for the airlines and US$170 million in additional fees for Miami International Airport.

In addition, the hotel industry could see a 50% gain in revenue or about US$1 billion, according to a Miami Herald report last month.

In Thursday's news report, Jessica Hoppe, general counsel for the Genting Group said 'Genting is hopeful that the legislature will act in the best interests of the Florida economy in the upcoming session.'

Among other things, the 90-plus page bill also limits each resort to only have a maximum of 10% of total square footage for gaming, and requires that gambling space be segregated from other attractions so that visitors can go about without having to see any gambling machines.

Tax for gambling operations is set at 10% on net revenues, reportedly the lowest yet for any gambling operation in Florida where slot-machine licensees pay a 35% tax rate on their slot games.

Billionaire Sheldon Adelson's Las Vegas Sands Corp Ltd too had said it was willing to invest US$3 billion in Miami.

His people, who've unveiled to select people 'comparable plans' to Genting's, have reportedly found a suitable site for what could house a Miami Sands casino-resort, if talks with owners of developer Miami Worldcenter pans out. Other big casino names that have reportedly shown interest in Miami include Caesars Entertainment and Wynn Resorts.

Meanwhile, the Seminole Tribe, currently South Florida's largest casino resorts operator, is also interested in bidding for one of the full casino licences that may soon be up for grabs, its lawyer Barry Richard was quoted by Miami Herald as saying.

The tribe, which has committed to pay the state US$1.3 billion for the first five years under an existing 20-year limited gaming compact in return for monopoly of certain casino games, is also the operator of the Hard Rock Casino in Hollywood.

Moody's downgrades nine Portuguese banks

Moody's Investors Service downgraded nine Portuguese banks on Friday due to increased asset risk as a result of the banks' holdings of Portuguese government debt and the sovereign downgrade of Portugal in July to Ba2 with a negative outlook.

"The key driver for the downgrades of most banks' debt and deposit ratings is Moody's assessment of the deterioration of their unsupported financial strength," said the ratings agency.

Moody's said it had downgraded by one or two notches the senior debt and deposit ratings of nine banks and downgraded by one or two notches the standalone ratings of six of these banks.

All of the banks' ratings carry a negative outlook with the exception of Banco Portugues de Negocios, which has a developing outlook on all of its ratings. it said.

The six banks which experienced downgrades of standalone ratings and debt and deposit ratings are: Caixa Geral de Depositos, Banco Comercial Portugues, Banco Espirito Santo, Banco BPI, Banco Santander Totta and Caixa Economica Montepio Geral.

Banco Internacional do Funchal and Banco Portugues de Negocios had their debt and deposit ratings downgraded as a consequence of the weaker Portuguese sovereign. The debt ratings downgrade of Espirito Santo Financial Group followed the lower rating of its operating company, BES.

Moody's said it expected a further deterioration of the banks' domestic asset quality due to a weak economic growth outlook and government austerity measures, and liquidity strains due to a lack access to wholesale funding.

Moody's said if recapitalisation and deleveraging plans for Portuguese banks were successful they would help restore confidence in the Portuguese banks.

"However, Moody's believes that these plans face significant implementation risks," it said.- Reuters

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Asian markets extend gains at noon, KLCI up 0.5%

KUALA LUMPUR: The FBM KLCI extended its gains for the third consecutive day on Friday, Oct 7 and was up 0.5% at the mid-day break, in line with the advance at key regional markets.

Asian stocks rose on Friday and the euro clung to gains from a 2% rally after euro zone policymakers moved to shore up struggling banks and fend off a financial crisis, according to Reuters.

The European Central Bank (ECB) announced aggressive liquidity measures on Thursday, throwing a lifeline to lenders who have seen wholesale funding drying up as market confidence ebbed, and the European Union said it would present a plan for a coordinated recapitalisation of banks by member states, it said.

The FBM KLCI added 6.96 points to 1,400.65, lifted by gains at select blue chips including Petronas Dagangan, Tenaga and Genting.

Gainers led losers by 345 to 234, while 257 counters traded unchanged. Volume was 555.38 million shares valued at RM623.38 million.

The ringgit strengthened 0.63% to 3.1575 versus the US dollar; crude palm oil futures for the third month delivery slipped RM3 per tonne to RM2,805, crude oil rose 32 cents per barrel to US$82.91 while gold jumped US$11.22 an ounce to US$1,662.65.

At the regional markets, Hong Kong's Hang Seng Index jumped 3.53% to 17,778.34, South Korea's Kospi added 2.69% to 1,756.34, Singapore's Straits Times Index gained 2.04% to 2,656.30, Japan's Nikkei 225 rose 1.44% to 8,645.01 and Taiwan's Taiex edged up 1.09% to 7,209.69.

On Bursa Malaysia, Panasonic gained 22 sen to RM19.60, GAB added 20 sen to RM9.90, LPI Capital 18 sen to RM11.96, Jaya Tiasa, Petronas Dagangan and Tenaga rose 16 sen each to RM5.18, RM16.16 and RM5.38 respectively, Petronas Gas and Genting 14 sen each to RM12.80 and RM9.24, while DRB Hicom added 13 sen to RM1.84.

Among the decliners, Dutch Lady fell 28 sen to RM18.02, JobStreet 22 sen to RM2.30, Genting PLANTATION []s 21 sen to RM1.65, Cepco 20 sen to RM1.83, IJM Corp 14 sen to RM4.86, Shell 10 sen to RM9.50 while PLB and Kretam lost nine sen each to 85 sen and RM1.91.

MBSB securities were actively traded, as analysts say the company stood to benefit should there be a wage adjustment in the Budget for civil servants.

MBSB rose 11 sen to RM1.58 with 27.7 million shares done while its warrants rose five sen to 67.5 sen with 51.2 million units done.

Other actives included GPRO, Karambunai, Systech, MAA and Malton.

BOJ keeps policy on hold, warns on overseas slowdown

TOKYO: The Bank of Japan kept monetary policy unchanged on Friday, holding off on tapping its depleted policy arsenal for now although fears of a global recession and Europe's debt crisis are clouding the outlook for the fragile economy.

The central bank said Japan's economy would resume a moderate economy but issued a slightly stronger warning about overseas growth than in its statement after last month's policy meeting.

"Overseas economic growth is expected to slow for the time being but will remain firm as a trend, led by emerging economies," the BOJ said in a statement issued after the rate decision.

As widely expected, the central bank maintained its key interest rate at a range of zero to 0.1 percent by a unanimous vote and refrained from loosening policy further via an expansion of its asset buying scheme.

The BOJ also decided to extend by six months a 1 trillion yen ($13 billion) loan scheme targeting banks operating in the area hit by Japan's devastating March 11 earthquake and tsunami. The scheme was due to expire at the end of this month.

Governor Masaaki Shirakawa will hold an embargoed news conference, with his comments expected to come out sometime after 4:15 p.m. (0715 GMT).

The central bank eased policy in August by boosting asset purchases, on the same day Tokyo intervened in the currency market to stem the yen's sharp rise. It has stood pat on policy since then. ' Reuters

KLCI toys with 1,400-point level at mid-morning, MBSB in focus

KUALA LUMPUR: The FBM KLCI toyed with the 1,400-point level on Friday, Oct 7 as the country awaits the tabling of Budget 2012 by the Prime Minister later in the evening.

Meanwhile, the securities of MALAYSIA BUILDING SOCIETY BHD [] were in focus, as analysts have said the company stood to benefit should there be a wage adjustment in the Budget for civil servants.

At 10am, the FBM KLCI was up 6.30 points to 1,399.99, lifted by gains at select blue chips.

At the regional markets, Japan's Nikkei 225 was up 1.19% to 8,623.29, Hong Kong's Hang Seng Index added 2.36% to 17,577.92, Taiwan's Taiex rose 1.22% to 7,218.71, South Korea's Kospi gained 2.55% to 1,753.99 and Singapore's Straits Times Index edged up 0.97% to 2,628.38.

China's stock markets remain closed as part of a week-long national holiday.

BIMB Securities Research in a note Oct 7 said hopes were raised yesterday from the latest meeting between the European policy makers that a more cohesive effort is in order to pump liquidity into the financial system.

As a result, investors with a clearer mind and improved vision pushed all major European bourses up and the Dow Jones Industrial Average to another impressive 183 point gain breaking the 11,000 mark again, it said.

Regionally, most markets ended up in positive territory and Malaysia was no exception, it said.

The FBM KLCI almost tested the 1,400 level yesterday before closing at 1,394, it said.

'Looking back, we may indeed be going through a mini pre-budget rally this week and hopefully today's 2012 Budget announcement would not disappoint.

'Watch out for the CONSTRUCTION [] and oil & gas stocks today as we believe more announcements could be in the offing. More upside is expected today, 1,400 here we come!' it said.

MBSB was up 10 sen to RM1.57 with 17.4 million shares done, while its warrants gained five sen to 67.5 sen with 30.8 million units done.

OSK Research in a note Oct 7 said given MBSB's roles as a provider of personal loans to civil servants, a pay hike could be very positive to its business.

'MBSB is also expanding into providing an Islamic credit card for civil servants by year end and increased disposable incomes will be good for this new business,' it said.

Other actives included GPRO, Karambunai, Systech, SP Setia, Malton and UEM Land.

Shell was the top gainer and was up 40 sen to RM10; Cycle & Carriage and Petronas Dagangan added 18 sen each to RM3.40 and RM16.18, Panasonic 16 sen to RM19.54, Genting 15 sen to RM9.52, Proton 13 sen to RM2.83, Petronas gas 12 sen to RM12.78, Landmarks and BIMB 11 sen each to RM1.07 and RM1.97, while United Malacca added 10 sen to RM6.50.

Losers included Spritzer, Berjaya Assets, Integrax, MNRB, Scomi Engineering and Amway.

CIMB Research has technical buy on Tenaga

KUALA LUMPUR: CIMB Equities Research has a technical buy on Tenaga Nasional at RM5.22,'' at which it is trading at a FY12 price-to-earnings of 13.7 times and price-to-book-value of 1.0 times.

It said on Friday, Oct 7 Tenaga seems to have broken out from its downtrend channel.

Thursday's rebound lifted prices above its downward slopping resistance trend as well as its 30-day SMA.

CIMB Research said the stronger rebound is imminent. The next upswing is likely to push prices towards RM5.37, RM5.52 and RM5.70. The 50-day SMA at RM5.49 is also a magnet for prices.

'Technical landscape is improving, suggesting that the bulls are making a comeback. MACD signal line is rising while RSI has also swung above the 50pts mark. However, always put a stop at below RM4.97,' it said.

KLCI edges past 1,400-level in early trade

KUALA LUMPUR: The FBM KLCI edged past the 1,400-point level in early trade on Friday, Oct 7, the first time it has crossed the crucial level since Sept 21.

At 9.08am, the FBM KLCI added 8.37 points to 1,402.06, lifted by gains at blue chips including Genting, Maybank and Tenaga.

Gainers led losers by 175 to 24, while 91 counters traded unchanged. Volume was 83.18 million shares valued at RM68.71 million.

Other gainers included Cycle & Carriage, IGB, Bursa, MAHB, Affin, United Malacca and Mudajaya.

HDBSVR cautious on property, KLCCP safe haven

KUALA LUMPUR: Hwang DBS Vickers Research said investors should seek shelter in the safe havens like KLCC Property as weak sentiment for the property sector could push valuations down by 23%, although sector fundamentals are stronger than in 2008.

It said on Friday, Oct 7 that property demand was weakening while tightening policy would pour oil into the fire.

'Buy investment holding companies e.g. KLCCP (upgrade to Buy) and firmed MGO targets e.g. SP Setia,' it said.

HDBSVR said it has a Buy on KLCCP at RM3.15 and target price of RM3.70. The prized assets in KLCCP were long-term leases and blue-chip tenants.

'Expect strong cash flows post-completion of Lot C by end-2011 with potential capital management

'Upgrade to Buy for 17% upside to unchanged TP of RM3.70, strong earnings visibility and decent yield of 4%,' it said.

MBSB extends gains ahead of Budget 2012

KUALA LUMPUR: MALAYSIA BUILDING SOCIETY BHD [] (MBSB) shares continued to be traded actively on Friday, Oct 7, ahead of the tabling of Budget 2012 later in the day, on expectations that the Budget would provide for civil servants' wage adjustment.

At 9.15am, MBSB shares rose seven sen to RM1.54 with 8.99 million shares done while its warrants gained two sen to 64.5 sen with 13.5 million units done.

OSK Research in a note Oct 7 said MBSB rallied by a strong 14% yesterday on rumors of a potential salary hike for civil servants when today's Budget 2012 is tabled.

The research house said the company would likely benefit from the civil servants' wage adjustment given that it is one of the few players in the niche civil servants personal loan space.

'On top of this, the launch of its Islamic credit card targeting civil servants will possibly bring in more non-interest income given the higher disposable incomes post potential salary hike.

'Maintain BUY with an unchanged fair value at RM2.35,' it said.

S&P cuts core Dexia banks by one notch, on watch

Standard and Poor's on Friday downgraded the core banks of Franco-Belgian financial group Dexia by one notch, citing difficulties in securing wholesale funding and the need for increased collateral.

The ratings agency also said it could take further action, including further downgrades or even an upgrade, depending on how a proposed restructuring panned out.

The board of Dexia, whose shares are suspended, will meet in Paris on Saturday to vote on a break-up plan after Belgium and France pledged to guarantee its financing in the face of a share-price slide.

"We expect to resolve the CreditWatch placement once we have more information about what the restructuring means for Dexia's operating banks and more details about accompanying support that the French and Belgian governments could provide," S&P said in a statement.

S&P said it had lowered ratings by one notch to 'A-/A-2' on Dexia Credit Local, Dexia Bank and Dexia Banque Internationale a Luxembourg, which together represented over 90 percent of the group's consolidated assets.

It also placed those ratings on CreditWatch with developing implications.

"We could raise the ratings on some of Dexia's operating banks if separation from the group would strengthen their financial profiles or result in greater parent or government support," said the agency.

"The CreditWatch placement also reflects the possibility of a downgrade for some or all of Dexia's operating banks if funding problems deepen or asset sales accelerate," it added.

Asset sales could weaken capital if Dexia were required to recognise in its earnings some of the group's 6.9 billion euros of negative revaluation reserves on available-for-sale securities, said S&P.

The agency said the ratings reflect the strong support Dexia receives from the Belgian and French governments.

"(They) are likely to provide further support to Dexia --a highly systemically important bank in our view -- if necessary," said S&P. ' Reuters

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Jobless claims data points to labor improvement

WASHINGTON: New claims for unemployment benefits rose modestly last week but hovered near levels normally associated with improving labor market conditions, in a hopeful sign for the struggling economy, Reuters reported on Thursday, Oct 6.

Initial claims for state jobless aid climbed 6,000 to a seasonally adjusted 401,000, the Labor Department said, from 395,000 the prior week.

That left claims holding steady around the 400,000 mark, which is usually regarded as consistent with some improvement in the jobs market, for a second week. Economists, who had expected claims to rise to 410,000, saw this as yet another sign the ailing economy was not falling back into recession.

"Claims suggest that layoffs remain contained despite high uncertainty in the economy. We continue to expect moderate growth rather than a recession," said Guy Berger, an economist at RBS in Stamford, Connecticut.

The data falls outside the survey period for the government's closely watched employment report for September, which will be released on Friday.

Nonfarm payrolls likely increased 60,000 last month, according to a Reuters survey, after being flat in August.

The gain in nonfarm employment will mostly reflect the return of 45,000 striking Verizon Communications workers to payrolls. The jobless rate is seen steady at 9.1 percent.

U.S. stocks rose for a third day, while prices for government debt fell. The dollar was marginally weaker against a basket of currencies.

THREAT FROM EUROPE

The lofty level of unemployment has put downward pressure on incomes, weighing on consumer spending.

However, reports by U.S. retailers on Thursday suggested back-to-school sales were brisk last month, and 23 retailers posted an average sales gain of 5.1 percent at stores open at least a year, according to Thomson Reuters. Analysts were anticipating a 4.6 percent rise.

Data ranging from manufacturing to motor vehicle sales have also suggested that the economy, which expanded at a 1.3 percent annual rate in the second quarter, could avoid an outright contraction in output.

While the weak labor market remains the Achilles heel of the recovery, an even bigger threat is looming from Europe's debt crisis. Economists warn troubles in the euro zone could push the U.S. economy into a new recession.

Treasury Secretary Timothy Geithner said on Thursday Europe's debt crisis could significantly damage the U.S. economy, although major U.S. banks and money market funds have little direct exposure.

"Europe is so large and so closely integrated with the U.S. and world economies that a severe crisis in Europe could cause significant damage by undermining confidence and weakening demand," he said according to testimony obtained by Reuters.

The European Central Bank on Thursday took steps to pump more cash into the banking system in a bid to contain the debt problem.

Slow domestic growth prompted the Federal Reserve last month to announce a new measure designed to push long-term borrowing costs lower by shifting assets on its balance sheet.

Interest rates have dropped in response, with the 30-year fixed mortgage rate falling to a record low 3.94 percent this week, according to Freddie Mac.

Although the labor market stalled in August, it appears to have regained some footing in late September. The four-week moving average of initial claims -- considered a better measure of labor market trends -- fell for a second week.

"If initial jobless claims continue to trend lower that would be an encouraging sign that labor market conditions may be improving," said John Ryding, chief economist at RDQ Economics in New York.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped to its lowest level since July in the week ended September 24.

A total of 6.86 million Americans were claiming unemployment benefits during the week ended September 17 under all programs, down 123,009 from the prior week.

Greece bailout talks not ended yet - troika official

ATHENS: Greece said on Thursday it concluded talks with the IMF on a vital tranche of aid but inspectors said negotiations on the bailout were continuing and that there was no final conclusion with any party.

Inspectors from the European Union, the International Monetary Fund and European Central Bank -- known as the troika -- resumed their review of Greece's progress on a bailout deal last week, and an IMF official said the Fund's latest review of Greece's loan programme will be completed within days.

The Finance Ministry issued a statement saying Minister Evangelos Venizelos had finalised bailout talks with the IMF and would resume talks with the European Commission on Friday.

"The talks are continuing," a troika official told Reuters on condition of anonymity.

Without the aid, Athens may run out of cash as early as next month, prompting a swift default that would drag the euro zone deeper into a debt crisis already shaking financial markets worldwide.

A senior official from the troika told Reuters on Wednesday that the Greek aid tranche was likely to be agreed but that Athens must first do more to convince its lenders it can implement reforms.

Earlier on Thursday, sources close to the troika told Reuters they expected the talks to continue until early next week. ' Reuters

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Nikkei rises on Europe hopes; US jobs report awaited

TOKYO: The Nikkei stock average climbed on Friday on hopes that a plan to support Europe's financial sector is making progress, but gains will be limited ahead of a U.S. non-farm payrolls report later in the day.

The Nikkei rose 0.9 percent to 8,594.89. The broader Topix added 0.8 percent to 742.92. ' Reuters

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Europe lifts Wall Street for third day, payrolls awaited

NEW YORK: Stocks rose for a third day in a row on Thursday, Oct 6 as developing euro zone plans to backstop European banks gave investors hope the threat of a financial crisis was waning.

Bank shares led gains on Wall Street as the EU planned to recapitalize banks. The European Central Bank said it was ready to buy bonds to provide longer-term cheap money for European lenders in need of funding.

The S&P Financial Sector gained 3.2 percent and has risen 8.8 percent in the past three days, though it remains one of the weakest sectors this year.

Europe's woes were the primary cause behind the selling that briefly dropped the S&P 500 into bear-market territory on Tuesday. Since hitting a 13-month low near 1,075 that day, the S&P 500 has gained 8.4 percent.

"We're popping back up again, based on the idea they (European officials) will reach an agreement and rescue us," said Doug Roberts, chief investment strategist at Channel Capital Research.

He said the market has been swinging between euphoria and despair on headlines from Europe. That has translated to increased volatility and an overall directionless market.

Highlighting the recent volatility, Thursday marked the fifth consecutive day of moves above 1.7 percent in the S&P 500. In those five days, it has gained just 0.39 percent.

Market attention will next turn to Friday's U.S. payrolls report for September. Investors hope the data suggests the U.S. economy is not falling into recession but growing slowly.

The Dow Jones industrial average gained 183.38 points, or 1.68 percent, to 11,123.33. The S&P 500 gained 20.94 points, or 1.83 percent, to 1,164.97. The Nasdaq Composite gained 46.31 points, or 1.88 percent, to 2,506.82.

The ECB's bond-buying is intended to boost confidence in stocks and other risky assets. A move in the same direction from the U.S. central bank last year triggered rallies.

Shares of Morgan Stanley, which have been hurt recently by fears of its exposure to European banks, rose more than 21 percent in three days to close Thursday at $15.18.

From a technical perspective, the S&P 500 remains in a downtrend. The index has been trapped in a range in the past months, which has been deteriorating with lower lows.

"For the time being, we do remain in a fairly well-defined downtrend," said Richard Ross, global technical strategist at Auerbach Grayson in New York.

He said the fact that the benchmark has not traded above its 50-day moving average since late July is a sign that the market can still go lower.

"If you did get a break back above 1,180, that would be a stronger signal that the bottoming process has begun," he said.

A rally in copper prices off 14-month lows helped lift shares in the materials sector. Dow component Alcoa rose 5.4 percent to $9.88.

Apple shares gave up earlier gains and slipped 0.2 percent to $377.37 a day after co-founder Steve Jobs, the driving force behind the creation of the iPod, iPhone and iPad, died of pancreatic cancer at the age of 56.

New claims for unemployment benefits rose slightly less than expected last week, hinting at an improved labor market a day before the closely watched non-farm payrolls report.

About 9.14 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the year's daily average so far of 8.02 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of more than 11 to 2, while on the Nasdaq, more than three stocks rose for every one that fell. - Reuters

Xian Leng: Probe into irregularities to extend to 7 yrs

KUALA LUMPUR: XIAN LENG HOLDINGS BHD [], which reported financial irregularities relating to capital expenditure of RM17.36 million between 2006 and 2008, said the probe would cover seven financial years.

In a reply to a query from Bursa Malaysia Securities on Thursday, Oct 6, it said among the measures was to appoint an independent party for the special audit.

It added that it had also reviewed existing internal control measures and introduced new measures on financial records.

Xian Leng also said since the financial irregularities related to capital expenditure, it did not foresee any operational impact arising from such irregularities.

'Although financial impact is expected resulting from impairments to capital expenditure, the board of directors will only be able to determine the extent of such impact upon completion of the special audit,' it said.

It also said since the discovery of the financial irregularities, the board of directors and audit committees had held numerous meetings to address the issues.

'Our board has also sought consultation with Bursa pertaining to the possible actions to be taken. In addition to the intended appointment of independent party for the special audit by our board of directors, we have also reviewed existing internal control measures and introduced new measures on financial records.

'The financial years pertaining to the RM17.36 million announced are 2006 and 2008. Nevertheless, the scope of investigation by the special auditors shall extend to a period of seven financial years,' it said.