FBM KLCI above 1,360 level at mid-morning

KUALA LUMPUR: The FBM KLCI stayed above the 1,360-point level at mid-morning on Monday, Aug 2, lifted by gains at key blue chips including Tanjong, CIMB, Public Bank, RHB Capital and IOI Corp.

At 10am, the index was up 4.41 points to 1,365.33. Gainers led losers by 300 to 127, while 171 counters traded unchanged. Volume was 201.24 million shares valued at RM211.15 million.

At the regional markets, Japan's Nikkei 225 was up 1.24% to 9,655.79, the South Korean Kospi Index up 1.26% to 1,781.49, Taiwan's Taiex Index up 1.48% to 7,875.10, Singapore's Straits Times Index 0.91% to 3,014.96 and the Shanghai Composite Index up 0.37% to 2,647.24.

Meanwhile, Hong Kong's Hang Seng Index opened 1.1% higher at 21,268.71.

RHB Research Institute Sdn Bhd said the FBM KLCI's current run-up appeared more resilient than expected in the wake of broad-based selldown in the overseas markets late last week.

It said given the strong rotational plays on blue chips and lower liners, the research house continues to stay bullish on the market direction for short-, medium- and long-term period.

The research also said the constant profit-taking pressure was well absorbed in recent sessions, as what it had expected earlier, should the index sustain at above the 1,350 resistance-turn-support level.

'This has strongly portrayed the strength on the current upswing, and suggested more upside potential on the back of growing buying support.

'And as long as the daily turnover remains firm at between 800m and 1.0bn shares mark, and the market goes without any external negative shock, we believe the FBM KLCI will rechallenge the next upside target at 1,390 soon, it said.

For a support, the solid resistance-turn-support level at 1,350 will cap any surprise downside potential, it said.

Among the major gainers on Bursa Malaysia, Tanjong jumped RM3.58 to RM21.16, CIMB rose seven sen to RM7.47, Public Bank and RHB Capital added four sen each to RM12.20 and RM6.53, while IOI Corp gained one sen to RM5.13.

Nestle was up 70 sen to RM39.50, KFCH 20 sen to RM11, APM Automotive 17 sen to RM4.80, Aeon 15 sen to RM5.25 while Shell rose 14 sen to RM10.80.

DFZ Capital was the top loser at mid-morning and fell 28 sen to RM3.34; Lay Hong and Hong Leong Bank fell 13 sen each to RM1.03 and RM8.88, Nylex down eight sen to 85 sen while Hai-O fell seven sen to RM3.57.

Sinotop was the most actively traded stock with 14.1 million shares done. The counter added 2.5 sen to 26.5 sen. Other actives included Jadi, E&O, Malton, P&O, Ivory PROPERTIES [] and KNM.

E&O leads property stocks up

KUALA LUMPUR: Eastern & Oriental Bhd led property counters higher in morning trade on Monday, Aug 2, spurred by a report that its shareholders are believed to be considering a privatisation.

At 11.42am, E&O added five sen to RM1.23 in active trade.

Talam added 0.5 sen to 12 sen in very active trade with 33.5 million shares done. Malton added 2.5 sen to 52.5 sen and Equine 3.5 sen higher to 47 sen.

The Edge weekly reported that the company had been buying its shares which clearly indicated the company was undervalued. E&O managing director Datuk terry Tham Ka Hon is the single largest shareholder with totoal stake of 123.21 million shares or 16%.

Singapore-based GKG Investment Holdings Pte Ltd holds 94.94 million shares or about 12%.

HSBC's China July PMI drops to 16-month low of 49.4

BEIJING: HSBC's China Purchasing Managers' Index fell below the boom-bust line of 50 in July for the first time since the depths of the global downturn in March 2009, according to Reuters on Monday, Aug 2.

The index dropped to 49.4 from 50.4 in June.

The month-on-month deterioration in Chinese manufacturing, which prolongs a cooling trend that set in at the start of 2010, was led by the second successive drop in output and new orders.

The PMI is designed to provide an early indication of conditions in industry. A figure above 50 points to expansion.

The plunge in the index below that threshold suggests that government steps to slow bank lending, fight property speculation and improve energy efficiency are finding their target.

The new orders sub-index fell in July to 47.9, a 16-month low, from 49.7 in June. There was also an outright drop in new export orders.

"However, there is no need to panic because this is just a slowdown, not a meltdown," said Qu Hongbin, chief economist for China at HSBC.

He said continued investment in infrastructure projects already under way, public housing CONSTRUCTION [] and resilient private consumption would fuel economic growth of about 9 percent in the second half of 2010 and in 2011.

The government's own PMI, released on Sunday, fell to a 17-month low of 51.2 in July from 52.1 in June but remained in positive territory.

Markit, the British research firm that conducts a survey from which the index is compiled, highlighted the following findings:

-- The fractional drop in output, which contrasts with near-record growth early in 2010, mainly reflected fewer new orders. Some textile and clothing firms said labour shortages were crimping production.

-- Exactly 23 percent of respondents booked fewer new orders in July than in June. On the export front, those reporting declines cited weakness from the United States and Europe.

-- The rate of finished inventory accumulation was the fastest since the launch of the survey in April 2004; 16 percent of panellists reported a month-on-month rise in stocks.

-- At the same time, companies reduced their pre-production inventories of semi-manufactured goods and raw materials at the quickest pace since April 2009; 19 percent of respondents said their stocks of inputs fell in July from June.

-- Both input and output prices fell further below the neutral mark of 50. Factory gate prices dropped at the steepest rate in 15 months, reflecting stiffer competition and falling raw material prices. A quarter of respondents said their input costs fell on the month, twice as many as those who reported a rise.

-- The lengthening in delivery times was mainly due to a lack of supply at vendors. Transport difficulties were also a factor. - Reuters

REDtone to sell 100% stake in REDTone China

KUALA LUMPUR: REDTONE INTERNATIONAL BHD [] is disposing of all its 100% stake in REDtone Telecommunications (China) Ltd to Hotgate TECHNOLOGY [] Inc, and is expected to recognise a gain of RM41.44 million.

REDTone, whose shares were suspended for the morning session on Monday, Aug 2, said the entire stake, comprising of 58 million shares, would be disposed to Hotgate. REDtone currently holds 12.25% of Hotgate and after the corporate exercise, Hotgate will be a 91% subsidiary.

"The proposed disposal is an avenue for REDtone to unlock its investment in REDtone China," it said.

It added that based on the audited consolidated net asset of REDtone for the financial year ended May 31, 2009 of RM59.97 million, REDtone, at the company level, is expected to recognise a gain on disposal of RM41.44 million upon completion of the proposed disposal although there will not be any gain or loss to the enlarged REDtone Group arising from the proposed disposal.

"In addition, REDtone would still be able to consolidate the contributions from REDtone China indirectly via REDtone's 91.94% shareholdings in Hotgate upon completion of the Proposals.

"REDtone will be able to control Hotgate, a company listed on the Over the Counter Bulletin Board in the US. With Hotgate's listed status, any future capital required by REDtone China may be raised through Hotgate either via a placement exercise and/or rights issue," it said.

P&O rallies, Prudential may acquire stake

KUALA LUMPUR: Shares of Pacific & Orient Bhd rose in early trade on Monday, Aug 2 on news reports that Prudential could be keen to acquire a stake in the insurance company.

At 9.54am, P&O was up 9.5 sen to RM1.02, off the early high of RM1.09. There were 8.79 million shares done.

A wire report said Prudential could be targeting stake in the local insurer.

P&O posted net profit of RM3.247 million in its second quarter ended March 31, 2010 versus RM2.51 million a year ago. Its revenue was RM134.83 million versus RM111.63 million a year ago.

OSK Research: Take profit on Unisem

KUALA LUMPUR: OSK Research has recommended investors take profit on Unisem, citing that the share price, which hit a high of RM3.50 (cum bonus price) in May, was nearing its historical 9-year average high P/NTA of 2.2x.

"We continue to worry if such valuations could be sustained as the industry is expected to slow down by about 50% after this year. Hence, we stick to our call and fair value based on 1.2x FY10 P/NTA," it said on Monday, Aug 2.

OSK Research said also the 16.5% upward adjustment on earnings has no impact on its FY10 P/NTA valuation, considering that Unisem's paid-up share capital to be enlarged by 25% after the exercise of its warrants.

#Update* Tanjong surges after takeover offer

KUALA LUMPUR: Tanjong plc share price surged in early trade on Monday, Aug 2 after it resumed trade following a conditional takeover offer from Tanjong Capital Sdn Bhd at RM21.80.

At 9am, it was up RM3.68 to RM21.26 with 15,800 shares done.

Tanjong Capital is a special purpose vehicle established by Usaha Tegas Sdn Bhd and its concert parties to acquire all the ordinary shares in Tanjong with a cash offer price of RM21.80 per share. This values

Tanjong at RM8.8 billion, with minority shares valued at up to RM4.7 billion.

Currently, Usaha Tegas and parties acting in concert own 46.9% of Tanjong and do not intend to maintain Tanjong's listing status.

OSK Research said the privatisation is expected to be completed by end-September.

"We are raising our TP to RM21.80 to reflect the offer price and recommend that investors accept the offer," it said.
OSK Research said the offer price represents a 21.9% premium to Tanjong's last traded share price and a 22.0% premium over its volume weighted average (VWAP) share price over the past six months.
"The offer price is also a relatively attractive 17.2% premium over our fair value of RM18.60, a 14.2% premium over the market's average fair value of RM19.08/Tanjong share and thumps the upper end of the market's fair value by 7%," it said.

HDBSVR: Blue chips likely to inch up

KUALA LUMPUR: Stocks on Bursa Malaysia could inch up on Monday, Aug 2 ahead with its benchmark FBM KLCI possibly making its way towards the immediate resistance target of 1,375, says Hwang DBS Vickers Research (HDBSVR).

"Likely to give the bellwether a head start today is Tanjong plc following a cash offer to privatize the conglomerate at RM21.80 per share, which represents a 22% premium on its last traded price.

"Assuming the stock (which carries an existing weight factor of 1.3%) jumps to RM21.15 (or 3% below the offer price) when trading resumes this morning, the FBM KLCI is expected to get an instantaneous lift of 3.2-index point," it said.

HDBSVR said riding on the current wave of corporate exercises, we may also see increased trading interest in:

a) E&O in reaction to a media report saying that its major shareholder may take the company private;

(b) MPHB, after a news article speculating that the company is looking to re-list Magnum by offering Magnum shares to its existing shareholders.

Tanjong boost for FBM KLCI

KUALA LUMPUR: The FBM KLCI got off to a positive start to the week on Monday, Aug'' 2, lifted by Tanjong Plc, Petronas Dagangan and KLK in early trade.

At 9.05am, the index added 4.68 points to 1,365.60. Gainers led losers by 113 to'' 44, while 79 counters traded unchanged. Volume was 35.25 million shares valued at RM42.98 million.

Tanjong was the top gainer and jumped RM3.54 to RM21.12 with 210,100 shares done.

Billionaire T. Ananda Krishnan's Usaha Tegas Sdn Bhd, which controls 46.96% of Tanjong plc, has served a take-over on the power-gaming company at RM21.80 per share or for RM4.7 billion. The offer price is RM4.22 or 24% above its pre-suspension price of RM17.58.

Petronas Dagangan rose 12 sen to RM10.40 and KLK added eight sen to RM16.96. Other early gainers included KFCH, Crescendo, Eastern & Oriental and Pacific & Orient.


Among the early decliners were Maybank, MISC, Adventa, Nylex, Perduren, Hai-O and Stamford College.

#Today's Diary* What to expect on Aug 2, 2010

The 2nd International Conference on Oil Palm Biomass to be officiated by the Deputy Minister of PLANTATION [] Industries & Commodities at Matrade Exhibition & Convention Centre at 9am.

Opening of the 2nd International Firefly Symposium 2010 by the Ministry of Natural Resources and Environment Secretary-General at Holiday Villa Subang, Selangor at 9.30am.

Maybank to launch online trade finance service at Level 51, Menara Maybank, Jln Tun Perak, KL at 9.45am.

Standard Chartered Saadiq opens new branch to be officiated at Minister of Finance II at No.G15, Block 3, No.7 Persiaran Sukan, Laman Seri Business Park, Seksyen 13, Shah Alam, Selangor at 10am.

Theta Edge Bhd (formerly Lityan) to be officially launched by Minister in the Prime Minister's Department Datuk Seri Jamil Khir Baharom at Auditorium Tabung Haji, Bangunan Tabung Haji, KL at 11.30am.

ASLI organises The National Symposium On The 10th Malaysian Plan at Grand Bahamas, Level 12, Sunway Resort Hotel & Spa, PJ, Selangor at 11.45am.

Tan Sri Muhyiddin Yassin witnesses the signing ceremony for the restructuring of Perlis water supply services at Putrajaya International Convention Centre at 12.30pm.