FBM KLCI stays above 1,590-level at mid-morning

KUALA LUMPUR: The FBM KLCI stayed above the 1,590-level at mid-morning on Thursday, July 7 in line with the slightly firmer overnight close at Wall Street.

However, investor sentiment remained cautious at key regional markets following China raising interest rates and Japan's Nikkei 225 succumbing to profit-taking, snapping its 7-day positive run.

The FBM KLCI rose 1.59 points to 1,592.93 at 10am.

Gainers led losers by 253 to 169, while 221 counters traded unchanged. Volume was 288.99 million shares valued at RM280.96 million.

At the regional markets, Japan's Nikkei 225 shed 0.10% to 10,072.37, the Shanghai Composite Index fell 0.27% to 2,802.77 and Taiwan's Taiex lost 0.58% to 8,773.26.

Meanwhile, Hong Kong's Hang Seng Index rose 0.43% to 22,614.58, South Korea's Kospi added 0.49% to 2,181.82 and Singapore's Straits Times Index edged up 0.34% to 3,125.15.

BIMB Securities Research in a note July 7 said Wall Street disregarded China's rate hike and the downgrade on Greece's debt to junk status to stage a recovery yesterday after a weak opening.

On the local front, all eyes will be on Bank Negara Malaysia today as the central bank will convene and decide on the OPR and SRR, it said.

'Therefore, this may hinder the FBMKLCI ascension after another record breaking performance yesterday.

'Nonetheless, we believe even if BNM does hike the OPR with another 25 basis points, impact on the local bourse is seen minimal. As mentioned, 1,600 should be no problem,' it said.

Among the gainers at mid-morning, MSM rose 48 sen to RM6.09, DiFGi 24 sen to RM30, AFG 15 sen to RM3.58, Boustead 13 sen to RM6.06, Malayan Flour Mills 12 sen to RM8.38, Puncak and Affin 11 sen each to RM2.10 and RM3.55, while MNRB added 10 sen to RM3.

Losers were led by GAB that fell 20 sen to RM10.40, SOP 10 sen to RM4.11, KYM down nine sen to RM2.21, George Kent and Hong Leong Industries six sen each to RM1.09 and RM4.08, Maxwell 5.5 sen to 39 sen, whiekl Notion, Subur Tiasa, BToto amd IOI Corp fell five sen each to RM2.03, RM2.62, RM4.44 and RM5.30.

The actives included MSM warrants, ASB, AFG, Focus and Timecom.

RAM Ratings reaffirms BAT Malaysia's AAA/P1 ratings

KUALA LUMPUR: RAM Ratings has reaffirmed the AAA/P1 ratings of British American Tobacco (Malaysia) Bhd's RM100 million Commercial Papers/Medium-Term Notes Programme (2007/2014).

It also reaffirmed the AAA rating of BAT's RM700 million Medium-Term Notes Programme (2007/2020) has also been reaffirmed.

Both the long-term ratings have a stable outlook.

In a statement Thursday, July 7, RAM Ratings said BAT's credit profile was supported by its entrenched market position and superior financial profile.

Although its share of domestic sales contracted 0.6 percentage points year-on-year in 2010, the group remained the clear leader with a 59.7%-share of the market, it said.

'Its flagship Dunhill remained the most popular local premium brand last year, with a 65.6%-share (2009: 64.8%) of this segment.

'The group also garnered a significant 33.5%-share of the value-for-money segment (2009: 33.7%). Despite the challenging landscape of the tobacco industry, BAT's adjusted funds from operations and operating cashflow debt cover ratios stayed superior at above 1 time as at end-December 2010,' it said.

RAM Ratings said that offsetting the above strengths were the increasingly difficult operating environment and regulatory risks of the local tobacco industry.

The industry's sales volumes are still vulnerable to excise-duty hikes and the proliferation of illicit cigarettes, it said.

Industry sales volumes declined for the seventh consecutive year in 2010, following a steep 16% spike in excise duty last October, it said.

'While the incidence of illicit cigarettes had reduced slightly from its peak of 37.5% in 2009 to 36.3% in 2010, they still accounted for a significant portion of local tobacco consumption.

'Despite the minimum pricing imposed on cigarettes last year, we understand that certain manufacturers of extremely-low-priced cigarettes have been selling their output below floor prices, in a bid to gain market share,' it said.

The rating agency said that should this persist, the sales volumes of the 3 major domestic tobacco manufacturers ' BAT, JT International Berhad and Phillip Morris Sdn Bhd ' may be affected.

At the same time, BAT Malaysia's margins are expected to be squeezed by a full year's effect from the withdrawal of 14-stick packs (which yield higher margins than 20-stick packs), it said.

Nonetheless, the group's profitability is viewed to remain commendable relative to its AAA-rated peers.

RAM Ratings' Head of Consumer & Industrial Ratings Kevin Lim said that looking ahead, RAM Ratings expects BAT's cashflow-protection measures to stay superior, supported by its well-established market position and strong brand equity.

UOA Devt rebounds after hitting post-IPO low

KUALA LUMPUR: Shares of UOA Development Bhd rebounded to RM2.23 in late morning on Thursday, July 7 after falling to new post IPO low of RM2.06 earlier.

At 11.15am, it was up 14 sen to RM2.23 with 3.74 million shares done on some institutional buying support.

The call warrants UOA Development-CA rose 3.5 sen to 14 sen with 10.38 million units done.

The FBM KLCI scaled new historic highs, up 1.33 points to 1,592.67. Turnover was 513.38 million shares valued at RM554.48 million. There were 310 gainers, 238 losers and 304 stocks unchanged.

UOA Development was listed on June 8 and ended the first day atRM2.59.

The institutional price was fixed at RM2.60 and the final retail price at RM2.52 after the bookbuilding. The indicative retail price was RM2.90.

The listing exercise of UOA Development included an offer for sale of up to 407 million existing shares of 5.0 sen each.

RHB Research Institute had valued UOA Development at RM3.45, at its RNAV per share and in line with its valuations on IJM Land Bhd.

Supermax, Top Glove up in early trade

KUALA LUMPUR: Shares of Supermax and Top Glove rose in early trade on Thursday, July 7 after CIMB Research rated both the stocks as technical Buys.

At 9.35am, Supermax rose seven sen to RM3.87 while Top Glove added four sen to RM5.48.

CIMB Research has a technical Buy on Supermax Corp at RM3.80 at which it is trading at a FY12P/E of 8.3 times and price-to-book value of 1.8 times.

The research house said on Thursday, July 7 that since its previous call on Supermax on June 2, prices have rebounded to a high of RM4.00 before succumbing to profit taking.

However, Wednesday's long white candle on rising volume may be a sign that the bulls are ready to kick start another rally.

'With both the indicators reconfirming their buy signals, we think that there is a good chance of a decent rally in the near term,' it said.

It said traders may opt to buy now with a stop placed below the recent low of RM3.70. They could also place their stop below the RM3.60 mark. A push past the recent RM4.00 high is likely to send prices shooting towards its 200-day SMA at RM4.20 next. It also has potential to reach as high as RM4.52 in the longer term.

Meanwhile, CIMB Research has a technical Buy on Top Glove Corporation at RM5.44 at which it is trading at a FY12P/E of 17.0 times and price-to-book value of 3.1 times.

It said Top Glove broke out of its consolidation triangle on Wednesday. Although prices pulled back a tad at the close, prices remained above the triangle resistance turned support level of RM5.38.

'Both indicators are rising, supporting a positive outlook for the stock in the near term. The RSI has yet to reach the overbought region, suggesting that there is still room on the upside.

'Traders should jump in and buy now to try to ride on this breakout run. We expect prices to nudge higher towards RM5.87-RM6 once the RM5.58 minor resistance gives way. Only a fall below the RM5.24 support would trigger our stop loss,' it said.

HDBSVR sees KLCI extending gains

KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) said with the underlying momentum still looking positive, the Malaysian bourse might just extend its upward trend on Thursday, July 7.

'The benchmark FBM KLCI ' which closed at a new record high yesterday ' could be making its way towards the immediate resistance level of 1,605 ahead,' it said.

HDBSVR said investors will be keeping their eyes on Bank Negara Malaysia's monetary policy committee meeting to be held this evening.

The research house said a media survey showed more economists are expecting the policymakers to raise the overnight policy rate (by 0.25%) as well as the statutory reserve requirement. This comes on the back of China's announcement of an interest rate hike on Wednesday.

On the corporate front, of interest would be: (a) Boustead Holdings, which has proposed a distribution of Pharmaniaga shares (via dividend-in-specie) and a restricted offer for sale of Pharmaniaga shares to its shareholders, as well as a 1-for-10 bonus issue; and (b) Allianz Malaysia and MNRB, following their mutual termination of negotiation for Allianz to acquire an insurance unit in MNRB.

SapuraCrest extends gain in early trade

KUALA LUMPUR: SAPURACREST PETROLEUM BHD [] extended its gains in early trade on Thursday, July 7 after it said on Wednesday that it was in talks with Clough Ltd for a business acquisition or cooperation for its marine CONSTRUCTION [] business.

At 9.05am, SapuraCrest rose five sen to RM4.55 with 49,500 shares done.

Clough is an Australian integrated oil and gas company with a market cap of AU$561 million.

RHB Research in a note on July 6 said Clough's marine division was a good fit with Sapuracrest's T&I division based on the asset and JV profile.

The research house said that the purchase or JV would give Sapuracrest more international exposure and increase its access to the global subsea market which is expected to be vibrant given the growing number of deepwater projects.

'We maintain our fair value of RM4.80/share (based on 20x FY13 EPS) and Outperform call until further guidance on the proposal has been provided by management.

'We highlight the share price has gained 3% today post-announcement,' it said yesterday.

Boustead up on Pharmaniaga stake distribution plan

KUALA LUMPUR: BOUSTEAD HOLDINGS BHD []'s shares advanced on Thursday, July 7 after the company proposed to distribute part of its stake in drugmaker PHARMANIAGA BHD [] to its minority shareholders to help meet the required 25% free-float to stay listed.

At 9.10am, Boustead rose 14 sen to RM6.07 with 352,900 shares traded.

Boustead's proposed a corporate exercise to reduce its current stake of 97.81% in Pharmaniaga includes a dividend-in-specie, restricted offer for sale, divestment and bonus issue.

MNRB rises after ceasing talks with Allianz

KUALA LUMPUR: MNRB HOLDINGS BHD [] shares rose on Thursday, July 7 after it ended negotiations with ALLIANZ MALAYSIA BHD [] over MNRB's proposed sale of its takaful business.

At 9.25am, MNRB rose 13 sen to RM3.03 with 177,300 shares traded.

Both parties yesterday announced that they had mutually agreed to end the negotiations. The proposal involved MNRB's disposal of its equity interest in its unit Takaful Ikhlas Sdn Bhd.

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PetDag continues ascend

KUALA LUMPUR: PETRONAS DAGANGAN BHD [] continued to attract investor interest and rose on Thursday, July 7 following its proposal of a special gross dividend of 25 sen and final gross dividend of 35 sen per share for the financial year ended March 31, 2011.

At 9.30am, Petronas Dagangan added 14 sen to RM17.30 with 10,500 shares traded.

The company said on July 4 the special and final dividends would be paid on Aug 28, subject to shareholders' approval at its AGM to be held on July 28.

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ASIA-Shares likely to be tentative as global markets sag

WELLINGTON: Asian stocks are likely to pause on Thursday, as policy tightening in China and Portugal's credit downgrade worked to erase some of the positive mood which had lifted markets over the past week.

China's central bank increased interest rates for the third time this year on Wednesday, making clear that taming inflation is a top priority as its economy slows gently.

The main Wall Street indices posted modest gains of between 0.1 percent and 0.5 percent, with the transport sector, a good barometer of economic activity the standout performer.

The Dow Jones Transportation Average rose 1.2 percent to a closing record high, led by Con-Way Inc who cited economic improvement. For details, see

Asian stocks listed on Wall Street were virtually unchanged while global stocks as measured by the MSCI world equity index fell 0.31 percent and the Thomson Reuters global stock index was 0.13 percent lower.

British stocks fell 0.4 percent and European ''shares fell 0.3 percent, as debt fears flared in the wake of Portugal's downgrade to junk status by Moody's and the China tightening weighed on sentiment.

Those concerns also dragged the euro lower, while safe havens such as the Japanese yen gained.

Japanese markets, which rose to a post-quake high on Wednesday for the longest rising streak in two years, are likely to be more tentative after the Chinese rate rise and firmer yen.

Nikkei futures traded in Chicago are up 0.5 percent, but barely changed from the last closing level in Osaka.

Australian stocks are looking to a negative start, with share price index futures down 8 points to 4,583, a 22 point discount to the close of the underlying S&P/ASX 200 index. ' Reuters

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