Share prices close higher, CI up for fifth straight day

KUALA LUMPUR: Share prices on Bursa Malaysia closed higher on Thursday, July 29, boosted by continued buying in selected blue chips as well as
lower liners, dealers said.

At 5pm, the FBM KLCI rose 3.22 points or 0.24% to close at 1,358.41, to stay high for the fifth straight day.

It had opened 0.59 of a point higher at 1,355.78 in the morning and traded at between an intra-day high of 1,359.27 and a low of 1,353.16 during the
session.

A dealer said late gains in most regional markets had prompted buying interest in the local market.

He also said the local market traded mixed in the early session today on some profit-taking activities as investors took cue from a weaker overnight Wall
Street.

However, persistent buying in selected heavyweights, especially in afternoon session helped the key index stay above the 1,350-point level.

At close, the Finance Index eased 6.64 points to 12,334.58, the PLANTATION [] Index declined 6.30 points to 6,410.64 and the INDUSTRIAL INDEX [] slipped 23.35 points to 2,649.83.

The FBM Emas Index gained 23.28 points to 9,201.65, the FBM70 [] Index increased 28.64 points to 9,202.98 and the FBM Ace Index added 4.55 points to 3,803.73.

Advancers led decliners by 386 to 345 while 279 counters were unchanged, 358 untraded and 27 others suspended.

Volume increased to 999.630 million shares valued at RM1.481 billion from 847.160 million shares worth RM1.251 billion yesterday. -- Bernama

TSMC hikes capex after record profit; glut fears loom

TAIPEI: Top contract chipmaker TSMC sharply raised its 2010 capital spending forecast after posting a record quarterly profit, likely leading to oversupply that could hurt chip prices and the firm's bottomline.

TSMC and cross-town rival UMC are ramping up production to meet growing demand for electronics products, with stockpiles likely forming in late 2010 or early 2011 if Europe's debt problem persists and demand weakens.

The two firms' earnings are seen peaking in the third quarter, the busiest sales season, before they start to fall in the fourth quarter. TECHNOLOGY [] demand typically slows after the pre-Christmas buying boom.

"Some of their clients might have started adjusting their inventories because we are seeing some double bookings," said John Chiu, a fund manager at Taiwan's Fuh Hwa Securities Investment Trust.

"The third quarter could be a peak and weakness in the fourth quarter is inevitable," said Chiu, who has no TSMC and UMC shares in his portfolios now.

TSMC said on Thursday, July 29 it is raising total capital expenditure for this year to $5.9 billion from the previous estimate of $4.8 billion to boost capacity and widen its technology gap with smaller rivals, including UMC and China's SMIC.

TSMC, which counts Texas Instruments and Nvidia among major clients, said it expected third-quarter sales to reach T$109-T$111 billion from the second quarter's T$105 billion and higher than market expectations of about T$104.6 billion.

TSMC said its third-quarter gross profit margin should be 48-50 percent, compared with the 49.5 percent in the previous three months. It expects an operating profit margin of 36-38 percent, versus the second quarter's 38.6 percent.

By churning out more chips with more advanced technology to meet rising demand for new PCs and other high-tech gadgets, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) earned a net profit of T$40.3 billion ($1.3 billion) in April-June.

That was higher than T$24.44 billion in the same period a year ago and compared with a consensus forecast of T$35.2 billion from Thomson Reuters I/B/E/S.

LOWER INVENTORY LEVELS

Sales in the global semiconductor market would rise about 30 percent this year, with sales in the foundry market growing by a larger 40 percent, TSMC Chairman and CEO Morris Chang forecast at its quarterly investor conference on Thursday.

Chang said foundry sales growth would be higher next year, but did not give numbers.

"It is our responsibilty to do our most to meet demand (from our customers)," Chang said, adding that inventory in the whole semiconductor supply chain is rising but will still be below seasonal levels at the end of the third quarter.

Sales of microchips made by 65 nanometre process technology, or 65 billionths of a metre, accounted for 27 percent of TSMC's total sales in the second quarter, while 16 percent of its sales were from more advanced 40-nano technology in the quarter.

Intel Corp, Qualcomm Inc and Apple Inc have reported stellar quarterly results, helping to kick off the tech sector's earnings on a strong note.

Investors, however, are focused on oversupply and weaker chip prices as they look beyond the strong second quarter.

TSMC announced the results after the Taipei stock market closed on Thursday. The stock ended unchanged on the day while the main TAIEX edged up 0.2 percent.

TSMC shares have fallen 2 percent so far this year while UMC shares are down 16 percent, against a 5 percent rise on the big board. UMC's quarterly results are scheduled for August 4. - Reuters

Axiata at highest since Sept 2008

KUALA LUMPUR: Axiata Group Bhd's share price rose to its highest since September 2008 in late afternoon on Thursday, July 29 after analysts upgraded the telco on expectations of further earnings surprises.

At 3.18pm, it was up 20 sen to RM4.35 in active trade with 26.74 million shares done.

CIMB Equities Research had maintained its OUTPERFORM call and sum-of-parts based target price of RM4.95 for Axiata.

"A likely catalyst for the stock is further earnings surprises. Our forecasts are 21-23% higher than consensus although the gap is down from 30-34% two months ago," it said.

CIMB Research said falling competitive risks in India should buoy the stock. Axiata remains its top Malaysian telco pick but XL Axiata remains its favourite regional play.

JCY hits lowest since listing

KUALA LUMPUR: Shares of JCY International Bhd fell to its lowest since listing to RM1.32 in late afternoon on Thursday, July 29 in very active trade.

At 3.35pm, it was down four sen to RM1.32 with 13.2 million shares done. Its highest was RM1.98.

In a report issued on July 20, CIMB Equities Research had a Sell on JCY at RM1.48, based on its technical charts.

"The stock has fallen back to its debut price after hitting a high of RM1.98. The pullback has been severe and does not look like a correction. We expect further price weakness in the medium term as it is now forming a bearish flag pattern," it said on July 20.

CIMB Research said a break below the RM1.44 would signal that prices are heading lower towards RM1.30, based on the height of the flag. There is also a good chance that it could even drop below RM1.30.

JCY'' manufactures hard disk drive mechanical components.

Shell 2Q earnings nearly doubled to US$4.5b

KUALA LUMPUR: Royal Dutch Shell's second quarter 2010 (2QFY10) earnings, on a current cost of supplies (CCS) basis, rose 95.6% to US$4.5 billion from US$2.3 billion a year ago.

It announced in London on Thursday, July 29 that basic CCS earnings per share increased by 95% versus the same quarter a year ago.

Main highlights of the earnings: Second quarter 2010 CCS earnings, excluding identified items, were US$4.2 billion compared to US$3.1 billion in the second quarter 2009.

Cash flow from operating activities for the second quarter 2010 was US$8.1 billion.

Net capital investment for the quarter was US$5.6 billion. Total dividends paid to shareholders during the second quarter 2010 were US$2.4 billion.

Gearing at the end of the second quarter 2010 was 16.9%.

A second quarter 2010 dividend has been announced of 42 cents per ordinary share.

KBB Resources MD sees 1.54m shares force sold

KUALA LUMPUR: KBB RESOURCES BHD [] managing director and founder Datuk Ang Cho Teing saw 1.54 million of his shares force sold on Wednesday, July 28.

A filing with Bursa Malaysia showed 880,800 shares were disposed of at 18c each and another 662,100 shares also at the same price that day. The share price closed at 15.5 sen that day, off its 52-week low of 14.5 sen in intra-day day trade.

Ang remains the single largest shareholder in KBB Resources with 33.2 million shares or 39.83%.

KBB Resources markets rice and vermicelli. Its shares hit a 52-week high of 68 sen on April 14 while its 52-week low of 14.5 sen on July 28.

Market shrugs off early caution, Axiata lifts

KUALA LUMPUR: Blue chips on Bursa Malaysia shrugged off the early cautious sentiment, as some buying emerged in Axiata and Petronas Dagangan, enabling the FBM KLCI to extend its gains for the fifth straight day at the midday break on Thursday, July 29.

At 12.30 pm, the FBM KLCI was up 2.75 points to 1,357.94 as the 30-stock index, enabling the index to hold above the highest level since February 2008. Turnover was 528.83 million shares valued at RM660 million. There were 304 gainers, 313 losers and 284 stocks unchanged.

Earlier, market sentiment was'' subdued due to the slightly negative overnight close in the US markets with the Dow Jones Industrial Average ending Wednesday down 0.38% to 10,497.88. The similarly subdued performance of major regional markets'' also had a role in the trading sentiment, said a senior chartist.

However, he said that volume on the Malaysian market in the morning had improved from Wednesday's full day trading of 78.1 million shares.

"This means that there could be some bargain hunting taking place," he said. He expects short-term sentiment "should be quite supportive as long as the FBM KLCI stays above the 1,350 resistance turned support level".

Nikkei 225 -0.45% 9,709.16 Hang Seng Index -0.11% 21,067.52 Singapore's Straits Times Index -0.01% 2,985.05 Shanghai Composite Index +0.51% 2,647.17
At Bursa, Petronas Dagangan was the top gainer, up 33 sen to RM10.30, Axiata added 21 sen to RM4.36, pushing up the FBM KLCI by 4.32 points.'' Measat jumped 27 sen to RM4.07 on the takeover offer by its major shareholder.

Glove makers Hartalega added 17 sen to RM8.30 and Top Glove 15 sen to RM6.17 on a positive outlook for the sector.

Mudajaya, managed to halt its recent selling pressure, with the shares rising 11 sen to RM5.20.

Nestle, which was the top performer on Wednesday, slipped 40 sen to RM38.80. Sime Darby fell seven sen to RM7.69, CIMB three sen to RM7.46 and Maxis also three sen to RM5.29. TransOcean slumped 29.5 sen to 60.5 sen but with 300 shares done only.

Panasonic to buy out Sanyo, other unit, say sources

TOKYO: Japan's Panasonic Corp plans to buy the shares it does not already own in Sanyo Electric and another unit, four sources said, in a deal that could top US$10 billion (RM32 billion) and strengthen its push into greener businesses.

Panasonic plans to raise up to ''500 billion (RM18.29 billion) in a new share issue to help it finance the buyouts, two sources said, weighing on the company's share price.

As the world's No 4 flat TV maker speeds up a restructuring, four sources with knowledge of the matter said Panasonic would buy the remaining shares in Sanyo Electric Co and Panasonic Electric Works Co Ltd.

The move is key to Panasonic's strategy of shifting focus to energy and environment-related businesses as it struggles to boost profits in overseas markets amid tough price competition from South Korea's Samsung Electronics and LG Electronics. It has said it would withdraw from overlapping business with Sanyo.

A deal would also make it easier for Panasonic to put more resources into its promising businesses such as solar power and lithium ion batteries.

"The cost may not be small, but I think investors will welcome the deal as Panasonic can boost its rapidly growing environment-related business," said Okasan Securities analyst Kazumasa Kubota.

"With only its audio and visual business, the firm could not expect to grow dramatically."

Panasonic bought a 50% stake in Sanyo in December for about US$4 billion, gaining control of the world's top maker of rechargeable batteries and a producer of solar cells. It owns 51% of Panasonic Electric Works, which makes housing materials and lighting equipment.

Based on current market prices, acquiring the shares it does not own would cost Panasonic about ''720 billion. A typical premium could push the value of the deal to above ''900 billion.

Panasonic is considering a public cash offering and share swap to complete the transaction and could make an official announcement of its plans this week, according to the sources, who were not authorised to speak publicly about the deal.

It is looking at raising funds to finance the deal, and a new share issue is seen as one option, sources said.

"The move will be good for Panasonic's long-term strategy, but investors are worried about how many new shares it will issue. We anticipated the deal but thought it would be done by a share swap," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

At 0401 GMT, Panasonic shares were down 8.6% at ''1,067, underperforming a 0.3% fall in the benchmark Nikkei average.

Sanyo shares soared 24% to ''146 while Panasonic Electric Works was untraded amid a rush of buy orders.

Under president Fumio Ohtsubo, Panasonic has been shifting away from low-margin home electronics products and investing more aggressively in solar cells, batteries and other energy-related areas with promising growth prospects.

Ohtsubo unveiled a new three-year business plan in May under which Panasonic is aiming to roughly double its operating profit margin to 5% or more by March 2013, while boosting sales by a third to ''10 trillion.

Panasonic and Sanyo have planned to withdraw from overlapping businesses that would account for ''300 billion in annual revenue and merge the development and production of white goods. ' Reuters

Fitch downgrades Vietnam to 'B+'; Outlook Stable

KUALA LUMPUR: Fitch Ratings has downgraded Vietnam's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'B+' from 'BB-' respectively and removed them from Rating Watch Negative. The Outlooks on the ratings are Stable.

At the same time, Fitch downgraded the Country Ceiling to 'B+' from 'BB-' and affirmed the Short-term foreign currency IDR at 'B'.

"Vietnam's sovereign creditworthiness has deteriorated on the back of weaker external finances and rising external financing requirements amid an inconsistent macroeconomic policy framework, a highly dollarized economy and a weak banking system," said Ngiam Ai Ling Ngiam, Director in Fitch's Asia Sovereign team, in a report issued on Wednesday, July 28.

During Q210, the State Bank of Vietnam (SBV) accumulated additional foreign assets from the banking system, marginally adding on to the USD13.8bn trough in official foreign exchange reserves (FXR) in March 2010. However, Fitch does not believe that Vietnam's external finance position has stabilized as yet.

For the third successive year, more stable, net long-term capital flows (direct and portfolio investments) may fall short of covering the current account deficit (CAD), which is expected to stay wide at over 10% of GDP in 2010.

Repatriation of external assets by state-owned enterprises also suggests that the rise in FXR so far this year may not be sustainable.

Fitch forecasts Vietnam's gross external financing requirements (GXFR) to rise to 79% of FXR in 2010 from 37% in 2009, higher than the 'B' median of 55%. This would increase Vietnam's vulnerability to changing external financing conditions.

"Vietnam's track record of stop-go policy tightening and easing has been ad-hoc, reactive and inconsistent," adds Ngiam. There is a risk that policies may ease towards a pro-growth stance in the run-up to the January 2011 national congress of the ruling Communist Party. Premature easing increases the risk of macroeconomic and financial instability.

Fitch notes that prolonged double-digit credit extension to state and private entities underlines rising sovereign contingent liability risks posed by the banking sector. Fitch forecasts the stock of private credit to reach 116% of GDP in 2010, the highest stock of private credit relative to output in the 'B' rated category.

Vietnam has a "twin deficit" problem: the general government deficit widened to 8.7% of GDP in 2009 and Fitch expects the deficit to remain high at 7.6% in 2010. Financing deficits of this size has proved difficult, with the government resorting to domestically-issued foreign currency instruments, raising exposure to exchange rate risk.

Public debt has risen to 45% of GDP in 2009, eroding what had traditionally been a key rating strength, while the risk of contingent liabilities migrating to the public sector's balance sheet is high.

According to Fitch's Macro Prudential Risk Monitor, Vietnam's banking system's vulnerability to potential systemic stress has increased to "high" from "moderate" and now ranks E3, the lowest point on the matrix.

A preliminary Fitch analysis -- based on Vietnamese accounting standards (VAS) -- estimates a possible banking sector recapitalisation bill of the top six systemically important banks (which represent 51% of total banking sector assets) to be at least 12% of GDP, should systemic risks materialise.

Uncertainty surrounding the banking system's asset quality is underscored by the fact that VAS-based non-performing loans (NPLs) often fall short of that of international accounting standards by 3x-5x.

Furthermore, domestic confidence remains sensitive to shocks, leaving the Vietnamese dong (VND) vulnerable to renewed switches into foreign exchange and gold. Further rounds of currency pressure would be negative for financial stability given the highly dollarized banking system.

At the 'B' rating category, Vietnam's sovereign fundamentals remain supported by strong support received from multilateral and bilateral creditors as well as significant gains in income per capita following the introduction of the "doi moi" policy in 1986.

Sime Darby slips, CIMB lowers TP to RM8.15

KUALA LUMPUR: Sime Darby slipped in late morning trade on Thursday, July 29 which could be linked to near-term uncertainty over the probe into the energy and utilities division.

At 11.11am, it was down seven sen to RM7.69 with 636,100 shares done.

CIMB Equities Research had maintained a NEUTRAL recommendation on Sime with a lower target price of RM8.15. It said with the earnings downgrade, it is lowering its sum-of-parts (SOP) based target price from RM8.40 to RM8.15.

'There is no change to our valuation basis of 10% discount to SOP. The discount essentially factors in ongoing concern and uncertainty over corporate governance and the group's direction,' it said.

CIMB Equities Research said there is no change to its NEUTRAL call on the stock. We are positive on the appointment of a new CEO which could bring positive changes to the group.

'However, this is clouded by near-term uncertainty over the probe into the E&U division, a possible management reshuffle and changes in the group's strategy,' it said.