Market Commentary (After Market Close): Stocks Sink as Sellers Exert Control

The heady gains that followed a better-than-expected GDP headline number in the previous session proved unsustainable as sellers returned to action Friday to send stocks sharply lower. Losses were broad-based as nearly 95% of the issues in the S&P 500 logged losses, which contributed to the worst weekly loss in five months for the broad market measure.

Financials were the worst hit of the major sectors. They had actually helped lead broad-market gains in the previous session, but plummeted to a 4.8% loss this time around. Within the sector, life and health insurers shed 6.1%. Diversified financial services stocks dropped 6.3%.

Materials stocks and energy stocks were also hit hard, however. The two sectors fell 3.8% and 3.5%, respectively. Their case was worsened by the drop in commodities and energy prices amid a stronger dollar, which advanced 0.6% against a basket of foreign currencies. That marked the greenback's sixth gain in seven sessions.

Even integrated oil giant Chevron (CVX 76.54, -1.41) couldn't shake free from sellers, despite posting better-than-expected third quarter earnings of $1.72 per share. Not a single sector in the S&P 500 proved immune to this session's selling effort. In turn, each finished with a loss of at least 1%. That helped take the S&P 500 well below its 50-day moving average of 1052 and hand the stock market its first monthly loss since an 11% monthly drop in February.

There wasn't any immediate cause for this session's decline, though some market watchers point out that stocks have had an increasingly difficult time of climbing higher since making their strong runs in recent months. Others have pointed out that there may be some month-end portfolio rebalancing and window dressing accounting for the recent whipsaw trade.

Nonetheless, the concerted selling effort brought about a spike in volatility. That sent the Volatility Index, often dubbed the Fear Gauge, up 24%, which marks its sharpest single-session spike by percent this year. Moreover, the VIX now stands at its highest level since July. Complementing the spike in the VIX is an elevated put-to-call ratio of 1.2, which is indicative of positioning for downside protection.

The broader market's negative bias this session overshadowed what was generally a solid batch of economic data. Specifically, personal income for September was flat, as expected, and spending fell 0.5%, as expected. That data was already included in the third quarter GDP data that was released Thursday, though.

The October Chicago PMI bounced to 54.2, which bested the 49.0 consensus, but the report was largely ignored.

Stocks to watch: LKT, Lityan, Scomi, Alam Maritim

KUALA LUMPUR: After several days of losses, investors sentiment could perk up on Friday, Oct 30, as Wall Street snapped its recent losses following a recovery in the US economy in the third quarter.

The US government's first estimate of US gross domestic product showed the economy expanded at an annual rate of 3.5% in 3Q, showing signs it was emerging from the worst recession in 70 years. However, economists' concerns are whether the growth is sustainable once the subsidies end.

The Dow Jones industrial average gained 199.89 points, or 2.05%, to end at 9,962.58. The Standard & Poor's 500 Index jumped 2.25%, to 1,066.11 -- marking its biggest one-day percentage gain in three months. The Nasdaq Composite Index jumped 37.94 points, or 1.84%, to close at 2,097.55.

At Bursa, stocks to watch are LKT INDUSTRIAL BHD [], LITYAN HOLDINGS BHD [], SCOMI GROUP BHD [], ALAM MARITIM RESOURCES BHD [] while other companies which could attract interest are banks, PLANTATION []s, SUNRISE BHD [], KURNIA ASIA BHD [], YTL E-SOLUTIONS BHD [] and Rubberex Corp (M) Bhd.

LKT minority shareholders were offered RM2.10 per share, or 30 sen above the last traded price, by major shareholder Precision Engineering - a unit of Temasek Holdings - which wants to take it private.

Lityan, which has regularised its financial condition, will resume trading on Friday. The reference price is RM1 and the upper trading limit shall be 400% above the reference price whereas the lower limit shall be 30% for the whole day.

Scomi subsidiary Scomi International Pte Ltd has sealed a multi-year distributor agreement with UK's Artevea Digital Ltd, an expert in terrestrial trunked radio communication systems, to offer the latter's extensive line of radio mobile communication solutions globally.

Alam Maritim's 60% owned subsidiary Workboat International DMCCO was awarded two contracts from a main contractor of oil majors that is cumulatively worth RM36.98 million.

Banks and plantations, which came under profit taking recently, should show some recovery, underpinned by the improved market sentiment.

Sunrise expects to launch at least two real estate projects in the Klang Valley within its current financial year ending June 2010 and add to its unbilled property sales, which stand at some RM860 million.

Kurnia Asia posted a net profit of RM32.25 million in the three months to Sept 30, 2009 versus a net loss of RM12.11 million a year earlier due to a turnaround in the investment portfolio and improved underwriting performance.

YTL E-Solutions has appealed to the Malaysian Communications and Multimedia Commission (MCMC) against a RM1.9 million fine meted out by the latter for its failure to meet stipulated targets in its WiMAX rollout.

Rubberex's 3Q earnings rose owing to better profit margins and better sales contributions from its China subsidiaries. Net profit nearly doubled to RM5.55 million from RM2.35 million a year earlier, while revenue fell to RM85.23 million from RM87.3 million. It declared a first interim tax-exempt dividend of six sen per share.

US Market Commentary (After Market Close): Positive GDP Surprise Bolsters Buying

A better-than-expected third quarter GDP reading helped the stock market snap back from its worst loss in weeks, but it wasn't enough to prevent stocks from heading into Friday with a week-to-date loss in excess of 1%. 

Despite some wavering in the first few minutes of trade, stocks put together a steady ascent that took all 10 major sectors higher. The broad-based gains stemmed from news that third quarter GDP surged to an annualized growth rate of 3.5%. GDP was expected to increase 3.2% after contracting 0.7% in the second quarter.

The stronger-than-expected growth overshadowed news that initial jobless claims for the week ending October 24 totaled 530,000, which is more than the 525,000 initial claims that were widely expected and still uncomfortably high.

Financial issues garnered the most support of the major sectors. The sector surged 4.3%, which is its best single-session percentage gain in three months. Life and health insurers (+7.6%) and multiline insurers (+6.7%) saw some of the strongest gains following a positive earnings surprise from Lincoln Financial (LNC 25.34, +3.09) and an upgrade of Genworth Financial (GNW 10.18, +1.49).

Materials stocks also fared well. The sector climbed 3.2% as broader market support and commodities and basic materials prices were propped up by a drooping U.S. dollar, which sank 0.6% against a basket of major foreign currencies in its first down session in one week.

Traders pushed oil prices up 3.1% to $79.89 per barrel, which helped the energy sector to a 2.4% gain. Exxon Mobil (XOM 73.96, +0.12) eked out a gain, but was generally a drag on the sector after it missed the consensus earnings estimate.

Fellow Dow component Procter & Gamble (PG 59.54, +2.31) posted a positive earnings surprise, as did its competitor Colgate-Palmolive (CL 78.94, +1.26). Though their results were strong, the consumer staples sector underperformed as broader market.

Telecom lagged for the entire session and even spent the first half trading with a loss as integrated telcos (-0.1%) offset strength in Motorola (MOT 8.74, +0.78), which posted better-than-expected third quarter earnings and upside fourth quarter forecast.

With participants pushing many defensive-oriented issues aside in favor of riskier holdings, Treasuries also came under pressure. That took the benchmark 10-year Note down some 20 ticks, which lifted its yield back toward 3.5%. Treasuries caught additional attention as results from a $31 billion auction of 7-year Treasuries drew a slightly stronger than expected bid-to-cover ratio of 2.65.

AirAsia revises delivery dates for 8 Airbus

KUALA LUMPUR: AIRASIA BHD [] has revised the delivery dates of eight Airbus A320 aircraft, originally scheduled for delivery in 2011,  to 2014 and 2015.

The low-cost carrier said on Thursday, Oct 29 that it had yesterday signed an amendment agreement with Airbus S.A.S for the revision of the delivery dates.

Under a purchase agreement signed on March 11, 2005 and a number of amendment agreements entered into between Airbus and AirAsia, the latter agreed to a firm order of 175 Airbus A320 aircraft.

The schedule of delivery was from December 2005 to October 2014. No penalties are payable by AirAsia in revising the delivery schedule of the aircraft.

"Under the amendment agreement the parties have agreed to revise the original delivery schedule of eight aircraft in 2011 to the year 2014 and 2015," it said.

AirAsia said the rationale for the deferral of the 2011 aircraft was similar to the rationale for the deferral of the Aircraft in August 2009 in that AirAsia foresees infrastructural constraints with the current airport facilities.

"Until the new Low Cost Carrier Terminal is constructed, the present infrastructure at the low cost terminal is not able to accommodate AirAsia's fleet expansion in the number of aircraft originally scheduled to be delivered in 2010 and 2011," it added.

AirAsia said the rationale to further scale down on the delivery of aircraft in 2011 was to enable it to optimise its fleet and avoid the costs associated with leaving idle or underutilised aircraft due to infrastructural limitations - avoiding having to incur depreciation, interest expense and other costs without earning revenue.

Written by Joseph Chin

Temasek offers RM2.10 each for remaining 14.24% of LKT

 

KUALA LUMPUR: Temasek Holdings' unit is offering RM2.10 per share for the remaining LKT Industrial shares it does not own at RM2.10 per share. LKT said on Thursday, Oct 29 that the offer price was extended by Singapore Aerospace Manufacturing Pte Ltd under the privatisation exercise.

LKT was last traded at RM1.80 before trading was suspended.

Stocks to watch: Proton, auto, Tradewinds, DiGi

KUALA LUMPUR: Investors will have to brace for more downside on Thursday, Oct 29 as key regional markets, including Bursa Malaysia, react to the triple-digit losses of the Dow Jones Industrial Average.

US stocks tumbled in a broad sell-off on Wednesday, pushing the broader S&P 500 lower for a fourth straight day, as investors were rattled by weak data on new home sales.

The DJIA fell 119.48 points, or 1.21 percent, to 9,762.69, the Standard & Poor's 500 Index fell 20.78 points, or 1.95 percent, to 1,042.63. The Nasdaq Composite Index slid 56.48 points, or 2.67 percent, to 2,059.61.

The MSCI Asia Pacific Index fell 1.2% to 116.49 on Wednesday.

At Bursa Malaysia, there are more positive news with the revised national automotive policy (NAP) and positive corporate news.

Stocks to watch include Proton, auto stocks, Tradewinds Malaysia and DiGi while other counters that could see some interest are SP SETIA BHD [], WCT BHD [] and MAH SING GROUP BHD [].

Under the NAP, Proton could be given a boost as it sees prospects for a possible tie-up with a strategic partner which manufactures cars with engine capacity of 1.8 litre and above.

The government is looking into the introduction of Vehicle End of Life Policy where vehicles above 15 years will have to undergo mandatory inspection during renewal of road tax. This should stir interest in the car industry and would benefit companies like Tan Chong Motor and UMW.

The NAP did not bring about cheaper cars as the import and excise duty structure remained unchanged. However, the auto plan liberalised the higher-end segments of the car assembly market and improved incentives for component manufacturers.

TRADEWINDS (M) BHD [] has served a notice of unconditional mandatory offer on PADIBERAS NASIONAL BHD [] (Bernas) at RM2.08 per share after securing shareholders' approval for proposed acquisition of a controlling stake of 53.76% in the national rice distributor.

DiGi.Com net profit of RM244.1 million in its third quarter ended Sept 30, up 4% compared to its second quarter.

With Maxis Bhd due to list next month, its rival DIGI.COM BHD [] upped its dividend story by increasing its minimum payout to 80% of net profits from 50% currently.

DiGi declared a special dividend of 75 sen per share which brings its total dividend declared for the year ended Dec 31, 2009 to RM1.24 per share.

SP Setia's foray into China will see the company develop some four billion yuan (RM2 billion) worth of PROPERTIES [] in Zhejiang province's capital city Hangzhou, in a four-phase initiative involving high-rise commercial and residential units.

Expected to be completed within five years, the initiative is through a joint venture with China-based Hangzhou Ju Shen CONSTRUCTION [] Engineering Ltd which is the landowner of the project.

As for WCT, it has teamed up with Iskandar Investment Bhd to jointly develop and co-own 1Medini which is a residential project with a gross development value of RM600 million.

Mah Sing posted a stronger net profit of RM23.5 million in its third quarter, a 42% surge from RM16.5 million a year ago. It proposed a private placement of 63 million new shares of 50 sen each which amounts to about 10% of its paid-up capital.

Written by Yong Min Wei

US: New Home Sales Drop

The new home market is in difficult shape due to credit issues.  Existing home sales are often purchased by more credit-worthy borrowers and can be more broadly in areas where demand is more steady.  The outlook for new home sales will remain poor for some time.New home sales declined 3.6% to 402,000 in September. The drop was completely unexpected as the consensus forecasted new home sales to increase 5.5% to 440,000 homes.

Inventories of already constructed new homes held steady at 7.5 months.

The median price actually rose from $199,900 in August to $204,800 and the average price increased a whopping 10.2% to $282,600.

47% of homes sold were less than $200,000 in September, down 2% from August.

he decline in sales is extremely disheartening. The first-time home buyer tax credit was expected to push up sales for homes through the end of November. We've seen the effects of the tax credit as existing home sales have surged.

There really isn't any specifics that would explain why the tax credit would not have helped new home sales. Reports from CNBC suggest that sales were down because new homes take a long time to build and buyers wouldn't be able to get their home closed before the November deadline. In this case buyers would not need to rush in and purchase a home.

Unfortunately it is not possible to determine how much of the supply of new homes is priced low enough to attract a first-time home buyer.

More reading:

Homebuyer Tax Credit Plan Agreed to by U.S. Senate Democrats

US Market Commentary(After Market Close): Participants Dump Stocks Ahead of GDP Report

The S&P 500 closed below its 50-day moving average for the first time since mid-July as sellers moved en masse ahead of tomorrow morning's advance third quarter GDP reading.

Stocks were mired in weakness for the virtually the entire session as buyers stepped to the sidelines despite another batch of generally better-than-expected earnings. Stiff selling in overseas trade certainly didn't help the case for bulls, nor did disappointing new home sales data, which showed that new home sales for September fell 3.6% month-over-month to an annualized rate of 402,000 units. That was well below the rate of 440,000 units that was widely expected.

The disappointing report caused an immediate drop in stocks, though a premarket durable goods orders report that was largely dismissed. According to that report, durable goods orders were up 1.0% in September, in-line with expectations, while orders less transportation increased a stronger-than-expected 0.9%.

Partial to selling, participants pushed stocks to their worst loss since the start of the month and left the S&P 500 to trade below its 50-day moving average. The technical line initially provided some support, but persistent pressure took the stock market through the line and left it to finish near session lows.

Declines were steep and broad based as nine of the 10 major sectors posted losses.

Financials were among the worst performers this session. The sector dropped 3.2% amid ongoing weakness in bank stocks. Including this session's 3.2% decline, the KBW Banking Index has fallen more than 9% during the past four sessions.

Visa (V 76.57, +2.67) was one of the few financial issues to post a gain this session. The company garnered support after it posted last evening better-than-expected adjusted earnings of $0.74 per share.

Materials stocks were also wrought with weakness. The sector fell nearly 3.2% as the greenback gained 0.5% against a basket of major foreign currencies, causing weakness among basic materials stocks and commodities-related stocks.

With the dollar gaining ground for the fifth straight session, the CRB Commodity Index fell 2.0% in its worst single-session loss in one month. Both metals prices and energy prices weighed heavily on the CRB. Gold prices settled pit trade 0.5% lower at $1030.50 per ounce, below their 2008 high of $1033.90 per ounce, while crude oil prices dropped 2.8% to $77.44 per barrel following disappointing gasoline inventory data this morning.

Softer oil prices and broader market weakness took the energy sector to a 2.9% loss. Better-than-expected earnings from ConocoPhillips (COP 49.49, -1.41) did nothing for the sector.

Telecom stocks made up the only sector to advance. What's more, its 1.8% gain was its best single-session advance in one month and it came in the face of considerable weakness in the broader market. Its gain this session extended the previous session's advance. In the weeks preceding that point, telecom had been considerably underperforming the broader market.

Participation was strong this session. Specifically, nearly 1.7 billion shares exchanged hands on the NYSE. That's the highest level in more than one month and exceeds both the 50-day and 200-day moving average for trading volume.

Another round of Treasury auctions was met with solid turnout. An auction of 5-year Notes produced an above-average bid-to-cover ratio 2.6. Though Treasuries pulled back a bit following the announcement, weakness among equities helped Treasuries hold onto gains. In turn, the yield on the benchmark 10-year Note has fallen to roughly 3.4% from 3.5% in just two days.

Treasuries have performed well this week and stocks are now down more than 3% week-to-date, but both fixed income traders and equity market participants are turning their attention to the advance third quarter GDP morning, which is a headline event for tomorrow morning.

Highlights of "new" National Automotive Policy

Below are the highlights of the new National Automotive Policy announced on Wednesday, Oct 28, 2009

1)    The freeze on new manufacturing licence will be lifted for selected segments, namely passenger vehicles with engine capacity of 1,800cc and above and that are priced at RM150,000 and above (on the road). Also lifted is the freeze on manufacturing licence for hybrid and electric vehicles, pick-up trucks, commercial vehicles and motorcycles with engine capacity of 200cc and above. There will be no equity conditions imposed on these new manufacturing licences, meaning foreigners can own up to 100% equity in the operations.

2)   The freeze on manufacturing licence for rebuilt vehicles (reconditioning and reassembling) is maintained.

3)    The current rates of import duty and excise duty are maintained.

4)    Increased exemption on statutory income from 10% to 30% for goods that attain at least 30% value-add from local content and from 15% to 50% for goods that attain at least 50% value-add.

5)    To prevent under declaration, prices will be gazetted for imported used completely built up (CBU) motor vehicles. At the moment only prices for new CBU are gazetted

6)    Companies undertaking design and production of critical and high value-added parts/components such as transmission, brake, airbag and steering systems will be given 100% pioneer status (PS) for 10 years (previously five years) or 100% investment tax allowance (ITA) (previously 60%) for five years.

7)    To promote  hybrid/electric vehicles and development of related infrastructure, local assemblers/manufacturers of such vehicles will be given 100% ITA or PS for a period of 10 years. They will also enjoy an exemption of 50% on excise duty for locally assembled/manufactured hybrid or electric vehicles or provision of grants under the Industrial Adjustment Fund (IAF). Similar incentives will also be given to manufacturers of selected critical components supporting hybrid/electric vehicles.

8)    Effective June 2011, the government will prohibit imports of used parts/components. At the moment, there are no restrictions on  such imports.

9)    Imports of used commercial vehicles will be prohibited effective Jan 1, 2016.

10)    Implementation of Euro 4 emission standard for fuel by 2011.

11)    In line with the gradual introduction of Vehicle End of Life Policy, all vehicles above 15 years of age will undergo a mandatory annual comprehensive inspection  before road tax renewal.  After considering feedback from "rakyat", the gov decide to call off this policy. Bravo!!


12)    The open AP system used for imports of used vehicles will be terminated by Dec 31, 2015. No new applications for open APs will be considered. Franchise APs will be terminated by Dec 31, 2020.

13)    New strategic partnership between Proton and a global established OEM will be formed.

No surprise, still implementing self protection mode... risking Malaysians life to drive milo tin car for many years to come... Dissappointed

Companies benefit from the new policies will be Proton,  Hiro and Ingress

Maxis retail offering at RM5.20 per share

KUALA LUMPUR: Maxis Bhd's retail offering of 212.29 million shares under its initial public offer (IPO) is tentatively fixed at RM5.20 per share.

In its prospectus issued on Wednesday, Oct 28, it said the offer price was subject to a refund if the final IPO price is less than the IPO price.

It added the final IPO price will equal the lower of the IPO price of RM5.20 and 95% of the institutional price to be determined by bookbuilding.

Stocks to watch: SunCity, Titan, NSTP, MEMS

KUALA LUMPUR: The weaker overnight close on Wall Street is expected to continue to weigh on investors' risk appetite for equities on Wednesday, Oct 28 as the US job market rut deepens consumer gloom.

On Wall Street, the S&P 500 and the Nasdaq fell on profit taking while a weaker-than-expected consumer confidence raised concerns about the strength in the recovery of spending.

The Dow Jones industrial average gained 14.21 points, or 0.14 percent, to 9,882.17. The Standard & Poor's 500 Index fell 3.54 points, or 0.33 percent, to 1,063.41. The Nasdaq Composite Index declined 25.76 points, or 1.20 percent, to 2,116.09.

On the home front, Maxis will release its prospectus today, which will see the telco relisting only its local operations. The bookbuilding is still ongoing while local funds are said to be keen if the prices ranging from RM4.90 to RM5 or lower.

Meanwhile, IOI CORPORATION BHD [] and property developer MUTIARA GOODYEAR DEVELOPMENT [] Bhd will hold their shareholders meetings today.

SUNWAY CITY BHD [] is teaming up with Sino-Singapore Tianjin Eco-City Investment and Development Co Ltd (SSTEC) for a project in Tianjin Eco-City with a gross development value of RM2.48 billion.

As for the Sunway group's Singapore venture, SUNWAY HOLDINGS BHD [] will dip into its own financial reserves to fund its Singapore condo project joint-venture with Hoi Hup Realty Pte Ltd.

Sunway group chairman Tan Sri Jeffrey Cheah says the company has enough funds to proceed with the 400 to 500 unit condo project there. Sunway will have a 30% stake in the venture with a gross development value of S$435 million (RM1.1 billion).

Titan Chemical Corp Bhd's net profit surged to RM143.47 million in the third quarter ended Sept 30, 2009 from RM9.67 million a year ago, as its profits were enhanced by higher polymer-naphtha margin and a 4% increase in sales volume.

The New Straits Times Press (M) Bhd posted net profit of RM18.49 million for its third quarter ended Sept 30, 2009, an improvement from a year ago and on-quarter basis, underpinned by higher revenue, lower operating expenses and higher other operating income.

Its 3Q net profit rose 14.9% from RM16.09 million a year ago and up 74.7% from the second quarter's RM10.58 million.

MEMS TECHNOLOGY [] BHD [] has been given 14 days by the Securities Commission (SC) to adjust its re-issued financial statements dated Oct 7, 2009 - the second time this year that it has been directed to do so.

Written by Joseph Chin

US Market Commentary(After Market Close): Lack of Direction Leaves Major Indices Mixed

Stocks struggled for the entire session to set forth on a clear path. That left the major indices to finish a bit mixed.

The Dow was able to net a modest gain as Exxon Mobil (XOM 74.91, +1.68) and Chevron (CVX 76.59, +1.14) shared in strength stemming from a better-than-expected earnings report from BP PLC (BP 57.82, +2.34). IBM (IBM 120.65, +0.54) also provided leadership to blue chips by announcing that it has authorized $5.0 billion for stock repurchases, which not only help improve earnings per share results by reducing the number of outstanding shares, but also sends a signal to investors that strong companies are now willing to fund buybacks, rather than stash cash into their coffers amid economic tumult.

Despite IBM's strength, many large-cap tech issues traded as laggards following downside guidance from Internet search engine Baidu.com (BIDU 383.66, -49.31). Collective weakness among large-cap tech caused the Nasdaq to underperform the other headline indices.

Shares of consumer discretionary stocks were among the worst performers this session, though. They dropped 1.7% as retailers recoiled following a disappointing Consumer Confidence Index reading of 47.7 for October. The consensus had called for a reading of 53.5. Even shares of Under Armour (UA 29.27, -3.82) slumped, despite better-than-expected quarterly earnings and a raised forecast.

Steel stocks also suffered. They dropped 5.8% amid ongoing concerns regarding demand from such players as US Steel (X 37.41, -3.17) and Schnitzer Steel (SCHN 47.38, -3.81), though both beat earnings expectations.

Energy stocks steadily outperformed the broader market for the entire session. The sector was helped along by a 1.6% gain by integrated oil stocks and a 1.0% increase in oil prices, which settled pit trade at $79.44 per barrel.

Oil's advance came in the face of a 0.2% gain by the U.S. dollar against a basket of foreign currencies. The Dollar Index has now advanced for four straight sessions.

Treasuries advanced solidly amid the mixed action among stocks. They were also helped along by a strong 3.6 bid-to-cover outcome for a $44 billion auction of 2-year Treasuries. That helped the benchmark 10-year Note climb nearly one full point and push its yield back below 3.5%. 

Short term buy: AIRASIA

Bought airasia for short term trading, estimate crude oil will pull back a bit.

Strong support found at RM1.35, will up if sustain, RSI picking up.

Stocks to watch: Tenaga, Jetson, Octagon, SP Setia

KUALA LUMPUR: Investors will have to brace for another volatile market on Tuesday, Oct 27, after US stocks fell for a second straight session but selected stocks could attract positive interest including Tenaga, Octagon Consolidated and SP Setia.

On Wall Street, US investors ditched home builders and financials on fears lawmakers may let a federal home buyer tax credit expire, while commodity shares succumbed to pressure from the higher U.S. dollar

The Dow Jones industrial average dropped 104.22 points, or 1.05 percent, to 9,867.96. The Standard & Poor's 500 Index shed 12.65 points, or 1.17 percent, to 1,066.95. The Nasdaq Composite Index fell 12.62 points, or 0.59 percent, to 2,141.85.

At Bursa Malaysia, Tenaga could rise after it posted 4Q net profit of RM133.4 million versus net loss of RM281.3 million a year ago. The power giant sees a challenging year. It recommended 10 sen dividend and a special tax-exempt of 2.5 sen.

Octagon is selling the technical documents for the design, engineering for waste-to-energy plant in Colombo, Sri Lanka for RM40 million.

SP Setia's subsidiary is teaming up with Vietnam;s Investment and Industrial Development Corporation to undertake a US$16.2 million mixed-development project in Vietnam.

REDTONE INTERNATIONAL BHD [] made a net profit of RM1.19 million in the first quarter ended Aug 31, 2009, compared to a net loss of RM354,000 a year earlier, on positive contributions from its broadband business and Chinese operations.

Profit taking could set in after the surge in the securities of KUMPULAN JETSON BHD [] on a news report that its sister company could bag a massive development project in Kuala Lumpur.

However, of concern is whether the stock is running ahead of fundamentals and whether the project will be viable.

However, the stocks could be supported by its plan to team up with Medallion Builder Sdn Bhd, which secured a RM104 million contract to revive a housing project in Bukit Cerakah, Kuala Selangor.

US Market Commentary(After Market Close): Participants Push Stocks Broadly Lower

Stocks dropped in broad-based fashion after they failed to extend an early gain and the U.S. dollar made another strong move off of its yearly low.

The major indices were been up solidly in the early going, but the S&P 500 struggled to break above the 1090 zone and the Nasdaq 100 ran into resistance when it approached the 2009 highs that it had set last week. As stocks stalled, sellers stepped in and undercut the early advance. That caused stocks to drop sharply and spend the rest of the afternoon trading in negative territory.

A stronger dollar also weighed on stocks. The greenback has now gained ground against a basket of foreign currencies for three straight sessions, the latest of which took it 0.7% higher in its best single-session percentage move of the past month. That made for particular trouble against multinationals and materials stocks, which dropped 2.5%.

Monsanto (MON 70.69, -4.54) created an additional drag on the materials sector. The stock was caught up in chatter that an analyst issued pessimistic comments about the chemical company's pricing efforts.

Financials were also among the worst performers this session. The sector sank 2.5% as bank stocks tumbled 4.1%, based on the KBW Banking Index. Weakness surrounding banking issues stemmed from a downgrade by Rochdale of regional lenders Fifth Third (FITB 9.52, -0.82) and SunTrust (STI 19.85, -1.14).

There weren't any real leaders for participants to follow this session. Dow component Verizon (VZ 28.64, -0.21) was one of the only widely-held companies to report its latest results this morning. The integrated telecom giant posted better-than-expected adjusted earnings of $0.60 per share for the third quarter, but they were largely dismissed, leaving telecom to fall to a 1.3% loss.

All 10 major sectors finished the session in the red. Seven of them suffered losses in excess of 1%.

Despite widespread weakness in the equity markets, Treasuries suffered. As such, the benchmark 10-year Note dropped roughly 18 ticks, which took its yield above 3.5% for the first time since August. Its weakness seemed to worsen in the wake of better-than-average results for an auction of 5-year TIPS.

Picture of the Day: Debt Life

 This is interesting, most of of the people become bank workers "indirectly" nowadays...

Malaysia Budget 2010: Highlights

1. Tax relief for broadband subscription fee.  
Govt proposes individual taxpayers be given tax relief on broadband subscription fee up to RM500 a year from 2010 to 2012 

2. Personal income tax to be reduced by 1%.

3. Govt to allocate RM899m for tourism industry in 2010, attract more participants from UK, Japan, Korea under Malayia, My Second Home.
4. Govt to speed up implementation of high speed broadband at total cost of RM11.3b,of which RM2.4 billion is from government and RM8.9 billion from Telekom Malaysia.

5. Govt to allocate RM9b for infrastructure, of which RM4.7b for road, bridge, water, sewerage projects and RM900 million for rail.

6. Govt to look into micro insurance, takaful coverage. Premiums from as low as RM20 per month for small traders, coverage from RM10k to RM20k.

7. Flexible brokerage sharing btwn stockbrokers, remisers. Flexible brokerage at 40% for remisiers. To be fully liberalised in second stage by Jan 1, 2011.

 8. Allow 100pct foreign equity stake in corporate finance, financial, planning companies from at least 30pct local stake now.

Malaysia 2010 Budget Update: Tax revenue from companies, individuals to rise in 2010

KUALA LUMPUR: The Federal Government's total tax revenue for this year is expected to register a 1.4% increase to RM162.1 billion or 23.4% of GDP, on higher investment income and also from petroleum income tax (Pita).

However, for 2010, revenue is expected to decline 8.4% to RM148.4 billion or 20.5% of GDP because of lower contributions from investment income and also from Pita. This would be partly offset by higher collection from companies and individuals.

Of the direct tax revenue for 2010, the taxes collected from companies are expected to rise 12.8% to RM35.7 billion (2009: RM31.7 billion) and individuals up 3% at RM15.8 billion (2009: RM15.4 billion).

However, Pita is expected to decline 28.3% to RM19.4 billion (2009: RM27 billion).

As for indirect taxes, collections from excise duties are expected to rise 5.5% in 2010 to RM10.3 billion (2009: RM9.8 billion); and sales taxes to decline 8% to RM7.8 billion (2009: RM8.4 billion).

For non-tax revenue, licenses and permits are expected to show a 8.1% decline in 2010 to RM9 billion (2009: RM9.8 billion).

Investment income is projected to fall 23.7% to RM32.3 billion in 2010 (2009: RM42.4 billion), returning to the 2008 level of RM32.3 billion. 

Written by Joseph Chin

Malaysia 2010 Budget Update: Budget to lay foundation for 10th Malaysia Plan

KUALA LUMPUR: The Budget 2010 will lay the foundation for the new economic model and the formulation of the 10th Malaysia Plan.

The Economic Report released on Friday, Oct 23 said measures would be taken to move the country to a high-income economy.

"It focuses on moving the nation to a high-income economy by strengthening the private sector as an engine of growth, creating skillful and talented workforce, intensifying R&D activities as well as promoting innovation and creativity," it said.

The thrust will be to create a conducive environment for businesses and entrepreneurship to thrive in a more liberalised environment supported by market driven policies.

"The government is also committed to consolidate its financial position to create fiscal flexibility," it said.

To achieve the objective of becoming a high income economy, the government will revitalise private investments. This would be achieve through improving the investment climate.

"Barriers to investment including policies, rules, regulations and procedures will be reviewed," it said, as the government creates more opportunities for the private sector.

The report highlighted that foreign investors would be attracted to take up equity positions in local companies and encouraging joint venture projects.

"Under the second wave of privatization, selected government agencies will be privatised. In addition, customized incentives will continue to be provided to attract investment in the growth corridors," it added.

The financial sector will be enhanced to ensure efficient intermediation. Hence, measures will be taken to enhance access, reduce transaction costs as well as promoting stockbroking and fund raising activities.

The report also said the government will addresses issues relating to motor vehicle insurance to ensure basic coverage is affordable.

Money lending activities will be closely monitored and regulated to protect consumers.

Written by Joseph Chin

Malaysia Budget 2010 Update: Services to expand 3.6% in 2010

KUALA LUMPUR: The services sector, which accounts for more than half of the country's economy, is expected to grow 3.6% in 2010 from 2.1% in 2009, underpinned by a favourable performance in several sectors.

The report says the sectors that will see favourable performances are communications, finance and insurance, wholesale and retail trade as well as real estate and the business-services sub-sector.

"Prospects for the services sector are expected to remain favourable as the government continues to intensify its efforts in developing the sector as the key sector of growth," Budget 2010's Economic Report states.

The services sector is expected to account for 58.5% of GDP in 2010 compared with 57.9% in 2009.

The report is also optimistic about the manufacturing sector, forecasting a rebound by 7.1% from a contraction of 12.1% this year.

Export-oriented industries are expected to benefit from the recovery in global trade, while domestic industries expand in line with better consumer sentiment and business confidence.

The electrical and electronics industry is expected to turn around, driven by higher demand for electronic equipment and parts as well as semiconductors.

The report anticipates 2.5% growth in the agriculture sector from a contraction of 2.3% in 2009, following a recovery in the commodity sub-sectors.

Production of crude palm oil is envisaged to grow 4.9% to 17.8 million tonnes (2009: -4.1% to 17 million tonnes) as mature areas expand to four million hectares from 3.8 million hectares in 2009.

The mining sector is expected to turn around also to show 1.1% growth from a contraction of 2.9% this year.

The economic recovery and on-going CONSTRUCTION [] activities under the second stimulus package will enable the construction sector to expand 3.2% in 2010, a slight dip from the 3.5% this year.

Major projects include the light rail transit extension works on the Kelana Jaya and Ampang lines, Pahang-Selangor Water Transfer project, new low-cost carrier terminal at the Kuala Lumpur International Airport and the expansion of the Penang International Airport.

Another major project that will drive the growth of the civil-engineering sub-sector is the electrified double-track railway line between Ipoh and Padang Besar.

Written by Joseph Chin 

PM unveils Budget 2010

Prime Minister and Finance Minister Najib Abdul Razak is currently unveiling Budget 2010 in the Dewan Rakyat.

Stay tune.

Budget 2010: The broad strokes

Experts are expecting a populist budget from PM Najib Abdul Razak, based on his people friendly policies since he took power.

He needs to show that 1Malaysia can deliver,said PAS research director Zulkefly Ahmad.

Zulkefly, along with DAP national publicity secretary Tony Pua, Selangor DAP vice-chairman Charles Santiago and PKR Selayang MP Willam Leong spoke to Malaysiakini yesterday in an exclusive video interview about the upcoming budget.

This, he also said, coincides with rumours that the general election is just around the corner.

However civil society, especially those often overlooked in the national budget considerations, expect more than just the normal gifts and sweeteners.

As Petpositive president Anthony Thanasayan puts it, "We want PM Najib to really look into our needs rather than just the usual talk."

Experts cautioned that this populist approach may cause a further widening of the budget deficit, which some studies have projected to reach up to 7.6 percent of the GDP in 2010.

But the growing deficit can also be attributed to the stimulus packages previously announced to pump prime the economy.

Bank Negara Governor Zeti Akhtar Aziz recently admitted in a Bernama report that more stimuli are required to sustain our economic recovery.

'Malaysia's problems like cancer'

This the experts concede is a necessary evil in order to jumpstart our economy, especially to stimulate domestic demand.

We need to focus on disposable income and sustaining the domestic demand in the aftermath of the global recession where all countries, especially Asian countries, must reduce their reliance on the export sector, said Ratings Agency Malaysia (RAM) chief group economist Yeah Kim Leng.

But above and beyond Najib's public relations campaign and measures to tackle the effects of the global economic crisis, experts warned that there is a more urgent underlying problem hobbling our economy, which must be addressed.

The global economic crisis is like H1N1, it comes and then it goes away. But Malaysia's structural problems is a cancer which is eating away at our economy,said William Leong of PKR.

According to the experts, major structural issues faced by the Malaysian economy include:

•The inability to maintain our competitiveness compared to other emerging nations, despite our head start during the Mahathir administration. The major causes of this include our lack of infrastructure such as our underdeveloped ICT sector, which has been classed as >below today=s application threshold.
•Our lack of human capital to sustain growth in knowledge based sectors which are due to our inability to consistently produce quality graduates and retain local talents.
•The government has created an artificial low income trap by maintaining a low wage structure, and this is forcing households to borrow more and sink deeper into debt to maintain their lifestyles in the face of escalating cost of living. High household debt leaves the economy vulnerable to external shocks.
•A major portion of household debts is made up of housing and vehicle loans. A step toward reducing is to look at affordable housing and more efficient public transportation. This will also contribute to forming a low carbon economy.
•Malaysia is still basically an old commodity-based economy. In fact, our so-called manufacturing sector is too focused on assembly to drive innovation and move us up the value chain to a higher income economy. The manufacturing sector, as it is, is also attracting low skilled and cheap foreign workers, which contributes to the problem of depressed wages.

These issues are something that Najib will have to consider in his budget if it is to truly drive our economy towards a long term recovery rather than just a short term shot in the arm.

However, experts agree that measures to heal our economy will take time and an integrated approach to succeed. This is something that Najib should consider in planning the 10th Malaysia Plan which begins in 2011.

For an in depth look into the 2010 budget, tune into Malaysiakini.tv on Monday for a post-budget discussion with the four Pakatan economic experts.

Hazlan Zakaria & Aidila Razak

Stocks to watch: Three-A, Green Packet, Proton, Notion VTec

KUALA LUMPUR: Blue chips may regain ground on Friday, Oct 23 after the firmer close on Wall Street while investors would also keep a close watch on the Budget 2010 proposals to be unveiled by Prime Minister Datuk Seri Najib Razak at 4pm.

Investors will be watching out for the winners and losers stemming from the proposals of the Budget.

The sectors to watch out for would be in the real estate investment trusts (REIT), brewery, tobacco and property sectors, as well as the auto sector.

Overnight, Wall Street rose on solid earnings from several companies, including Dow components 3M, AT&T and McDonald's Corp which lent credence to the idea that corporate profitability has stabilised.

Quarterly results from insurer Travelers and regional bank PNC Financial gave a boost to financial stocks.

The Dow Jones industrial average gained 131.95 points, or 1.33 percent, to 10,081.31. The Standard & Poor's 500 Index rose 11.51 points, or 1.06 percent, to 1,092.91. The Nasdaq Composite Index added 14.56 points, or 0.68 percent, to 2,165.29.

At Bursa, stocks to watch are THREE-A RESOURCES BHD [], GREEN PACKET BHD [], PROTON HOLDINGS BHD [] and NOTION VTEC BHD [].

Three-A Resources' net profit for the third quarter ended Sept 30, 2009 (3QFY09) doubled to RM5.89 million from RM2.99 million on the back of higher revenue.

Revenue rose 14.5% to RM45.14 million from RM39.43 million a year ago. Earnings per share was 1.91 sen against 0.97 sen.

Green Packet Bhd may see trading interest as it is set to secure a WiMAX broadband licence in Singapore. It inked a deal with Singapore-based Pacnet Internet Corp(S) Pte Ltd to transfer its facilities-based operator’s licence and wireless broadband access spectrum rights to the former.

Proton Holdings Bhd is confident of achieving annual sales of 155,000 units by March 2010.
Proton Edar Sdn Bhd chief executive officer Mohamad Shukor Ibrahim said for the six months ended Sept 30, car sales exceeded an initial target of 73,000 units.

He said car buyers were starting to notice the improvements in Proton's products and service quality, especially "hot" selling models like the Persona, Saga and Exora.

Notion VTec proposed a private placement of up to 10% of its paid-up at an issue price to be determined later, to fund its factory expansion in Thailand.

It plans to issue up to 14.07 million new shares of 50 sen each. Assuming the placement shares were issued at an illustrative price of RM2.38 per share, a 5% discount to its theoretical NVB post-share consolidation exercise price of RM2.50, the exercise was expected to raise RM33.49 million.

US Market Commentary(After Market Close): Closing out the day

Stocks edged higher today, adding to the week's big gains after the government issued a mixed trade report. The Commerce Department said the trade deficit declined 3.5 percent to $30.7 billion in August, as imports fell on lower oil demand. The battered dollar rallied, Treasuries plunged as Bernanke said rates needed to stay low until economy improves but Fed eventually will have to hike. Wall Street is bracing for next week's earnings reports and economic data for indications the recovery has started. Among the high volume stocks today Yahoo (YHOO), Dryships (DRYS), Acorda Therapeutics (ACOR), Discover Financial Services (DFS) and Spectrum Pharmaceuticals (SPPI) moved lower on the day while Texas Instruments (TXN), NetApp (NTAP), Rambus (RMBS), I Flow (IFLO) and Smithfield Foods (SFD) closed higher. The Chicago Board Options Exchange Volatility Index moved down 1.08 to close the day at 23.10, a 4.47% decrease for the day. The Put/Call Volume Ratio is at 0.77 while the Put/Call Open Interest ratio is at 0.90.

Stocks to watch: OilCorp, L&G, Pelikan, Mamee

KUALA LUMPUR: Investors will have to brace for more downside pressure on Thursday, Oct 21 after Wall Street fell overnight following a late sell-off in financial shares, making it the second straight day of losses.

The Dow Jones industrial average dropped 92.12 points, or 0.92 percent, to end at 9,949.36. The Standard & Poor's 500 Index lost 9.66 points, or 0.89 percent, to 1,081.40. The Nasdaq Composite Index shed 12.74 points, or 0.59 percent, to 2,150.73, according to Reuters.

However, the latest batch of corporate exercises could attract interest in the companies including Pelikan International Corp Bhd and HUNZA PROPERTIES [] BHD [] which are proposing to undertake rights issue while MAMEE-DOUBLE DECKER (M) BHD [] has received the regulator's approval for its rights issue.

Other stocks to watch include OILCORP BHD [], LAND & GENERAL BHD [] (L&G), Atis Corp Bhd and PLANTATION []s.

Plantation stocks would see continued trading interest, albeit some profit taking continuing from Wednesday when most of them fell. IOI Corp Bhd fell four sen to RM5.50, IJM PLANTATIONS BHD [] two sen to RM2.70, KUALA LUMPUR KEPONG BHD [] down six sen to RM14.94 while SIME DARBY BHD [] was unchanged at RM8.79.

OilCorp Bhd's subsidiary has terminated its contract, believed to be valued at RM36 million, with Carigali Hess Operating Company Sdn Bhd involving a brownfield retrofit project. The termination was over a dispute of non-payment.

L&G plans to acquire more land in the Klang Valley for more commercial and residential projects, riding on the optimism of rising demand for mixed development properties. Its 8trium @ Sri Damansara, a mixed commercial initiative, costing RM160 million, is being built on a 1.1ha piece of freehold land. Completion date is 2012.

Pelikan plans to raise RM188.74 million from a proposed renounceable rights issue. This will be on the basis of one rights share for every two existing ordinary shares held. The rights issue of up to 171.58 million new shares of RM1 each will be at an issue price of RM1.10 each.

Hunza is undertaking a rights issue to raise RM43 million by issuing around 45.2 million new shares.

Mamee-Double Decker (M) Bhd has received the Bursa Malaysia Securities Bhd's approval for its proposed bonus issue of 65.16 million new shares on a four-for-five basis.

Atis is buying 21.38 million MUTIARA GOODYEAR DEVELOPMENT [] Bhd shares or 9.26%, for a cash consideration of RM20.74 million from Laman Arif Sdn Bhd and Lim Beng Guan. This will Atis's stake to 30.28%.

The acquisition would push up Atis's net asset per share to RM1.60 from RM1.45, but would also increase its net borrowings to RM74.65 million from RM34.5 million and net gearing level to 0.29 times from 0.15 times based on its consolidated financial results as of March 31, 2009.

MILUX CORPORATION BHD [], which is undertaking a proposed placement of 4.237 million shares , has fixed the issue price of RM1.11. The issue price was a discount of about 9.76% to the five-day volume weighted average market price of Milux's shares up to and including Oct 20 of RM1.23.

Written by Tony Goh

US Market Commentary(After Market Close): Late Selling Effort Leaves Stocks to Settle with Loss

An aggressive selling effort in the final hour of trade took the stock market from a solid gain to a considerable loss. The downturn was broad based and left many of the major sectors to settle at session lows.

Stocks had been showing moderate weakness ahead of the opening bell, but jumped out to a strong gain in the early going. The S&P 500 even made its way to a near 1% gain so that it fractionally set a new high for 2009.

Financials underpinned the stock market's early advance. The sector traded to a gain of 1.3% following strong earnings from Morgan Stanley (MS 34.08, +1.56) and U.S. Bancorp (USB 24.43, +0.63). However, financials rolled over in late trade and settled with a 1.9% loss as pressure intensified against Wells Fargo (WFC 28.90, -1.56), which was hit with a midday downgrade by widely-followed analyst Dick Bove. Bove, and others, were unimpressed with Wells Fargo's report, even though it featured better-than-expected earnings.

As financials fell under a strong fit of selling pressure, the broader market also buckled.

Even energy stocks couldn't hold their gains into the close. The sector overcame an early loss of roughly 0.9% to climb to a gain of nearly 2% before falling back into the red to finish with a 0.2% loss. Energy stocks had been helped by higher oil prices, which reached new 2009 highs around the $82 per barrel mark following the latest oil inventory data. Crude oil inventories increased 1.31 million barrels, which is below the 1.5 million barrel build that had been expected. Gasoline inventories had a draw of 2.21 million barrels, which is larger than the draw of 850,000 barrels that was widely expected. Oil futures prices closed at $81.37 per barrel, up 2.9%.

Stocks and commodities paid little attention to a weaker dollar in the early going, but the greenback garnered more attention as it extended its slide. The dollar's drop came amid comments from a British central bank governor that suggested higher interest rates could be in the offing. That strengthened the British pound, but helped send the Dollar Index to a fresh 12-month low.

Nine of the 10 major sectors fell to a loss -- only utilities (+0.2%) posted a gain.

Health care stocks had lagged for virtually the entire session as participants shrugged off better-than-expected earnings and an upside forecast from Eli Lilly (LLY 33.66, -1.58). They finished with a 1.3% loss.

Consumer discretionary stocks settled with the steepest loss of any major sector. They settled down 1.5% as retailers fell to a 1.9% loss. Retailers had actually been up as much as 1.3%.

Trading volume was higher this session than in recent sessions, but still shy of longer-term averages. Nonetheless, trading volume spiked into the close, which is when this session's selling effort intensified.

Stocks to watch: Masteel, F&N, George Kent, Johan, RHB Cap

KUALA LUMPUR: Investors should brace for some profit taking on Wednesday, Oct 21 after blue chips rose to a fresh 17-month high the previous day, powered by institutional buying of PLANTATION []s and banks.

The local market could take the cue from Wall Street where US stocks retreated from 12-month highs on disappointing housing and inflation data prompted investors to book recent gains despite strong results from bellwethers including Apple and Caterpillar,

The Dow Jones industrial average dropped 50.71 points, or 0.50 percent, to end at 10,041.48. The Standard & Poor's 500 Index fell 6.85 points, or 0.62 percent, to 1,091.06. The Nasdaq Composite Index shed 12.85 points, or 0.59 percent, to close at 2,163.47.

At Bursa Malaysia, oil and gas counters should attract attention as light crude oil briefly topped the US$80 per barrel as the US dollar weakened against all major currencies.

The higher crude oil could spur more activities in brownfield and deepwater exploration.

At Bursa Malaysia, stocks to watch include Malaysia Steel Works (KL) Bhd (Masteel),
FRASER & NEAVE HOLDINGS BHD [] (F&N), GEORGE KENT (M) BHD [] and JOHAN HOLDINGS BHD [], RHB Captal Bhd, Hock Lok Siew Corporation Bhd (HLS Corp) and Sarawak Energy Bhd.

Masteel could see some positive trading activity after it sealed a deal with Stemcor Australia Pty Ltd to export steel worth millions of ringgit to the world's leading independent international steel trading organisation.

F&N will break ground for its RM350 million plant at the Pulau Indah Halal Hub this Friday, Oct 23.

This will bring investment in its dairies manufacturing operations in Malaysia and Thailand to RM600 million – in line with its aspirations to become an innovative world class regional food and beverage player.

In George Kent and Johan Holdings, low-key Tan Sri Khoo Kay Peng of the MUI Group has increased his shareholdings in both companies via Cherubim Investment (HK) Ltd.

Cherubim bought 973,000 George Kent shares from the open market from Oct 12 to 15, riasing the shareholding to 9.1% or 20.058 million shares.

Cherubim also bought 1.33 million shares of Johan Holdings from the open market from Oct 12 to 16, increasing it stake to 6.87% or 42.181 million shares.

RHB Captal could see more trading activity after the recent acquisition of the Indonesian bank. Minority shareholders expressed disappointment over the higher price tag despite the more optimistic outlook by research houses.

RHB Capital proposed to buy an 80% stake in Indonesia's PT Bank Mestika Dharma for RM1.16 billion cash.

The price tag is 3.5 times price-to-book ratio based on the bank’s audited net assets of RM415.4 million as at Dec 31, 2008

HLS Corp had acquired 488,600 BOUSTEAD HOLDINGS BHD [] shares at an average price of RM3.51 per share for a total of RM1.7 million in the open market, HLS said.

Sarawak Energy still has more upside, despite the strong gains yesterday, after the Sarawak Government offered RM2.65 a share to take it private.

Axis Real Estate Investment Trust (Axis REIT) posted a 3.7% increase in net profit to RM10.25 million for the third quarter (3Q) ended Sept 30, 2009 from RM9.86 million a year earlier.

Written by Joseph Chin

US Market Commentary(After Market Close): Strong Earnings Can't Keep Stocks from Slipping

Positive earnings surprises from Apple (AAPL 198.76, +8.90), Texas Instruments (TXN 23.66, +0.14), Caterpillar (CAT 59.61, +1.76), Pfizer (PFE 17.93, -0.05), and UnitedHealth (UNH 25.96, +1.04) couldn't keep the broader market from slipping to a loss as a stronger dollar pressured stocks and commodities alike.

Stocks looked poised to start the session on strong footing and extend the previous session's gains, but the positive tone among participants dwindled in the opening minutes as enthusiasm faded for the strong earnings of several widely-held companies. A bounce by the U.S. dollar also undercut stocks, basic materials stocks (-1.1%) and energy stocks (-0.9%) were hit particularly hard, given their correlation to commodity prices.

With the Dollar Index climbing 0.4% this session, the CRB Commodity Index retreated to a 0.5% loss as oil futures prices fell 0.7% to $79.09 per barrel. Gold prices were able to recover from negative territory to finish fractionally higher at $1058.60 per ounce, however.

Health care stocks also struggled this session. The sector shed 1.0% as Boston Scientific (BSX 8.57, -1.59) slumped in the wake of its quarterly earnings report, which actually contained a positive earnings surprise and an in-line earnings forecast. That couldn't stop a Wells Fargo downgrade from dragging down the stock, though.

Meanwhile, managed care providers (+2.2%) looked strong following better-than-expected earnings and reaffirmed upside guidance from UnitedHealth, but their gains couldn't overcome weakness in the rest of the health care sector.

Tech stocks settled as the best performing sector, even though it closed unchanged. The sector found strength as participants flocked to shares of Apple in the wake of its strong quarterly results. Apple was also a primary leader in the Nasdaq.

In economic news, the Producer Price Index for September made a surprise month-over-month drop of 0.6%, while core producer prices made a surprise 0.1% slip. Housing starts for September came in at an annualized rate of 590,000, which is below the rate of 610,000 units that was widely expected.

Stocks to watch: Sarawak Energy, MPHB, RHB Cap, KFCH, AIRB

KUALA LUMPUR: Bursa Malaysia should see the blue chips and mid-cap extending their gains on Tuesday, Oct 20, buoyed by fresh corporate news and the strong overnight close on Wall Street where US stocks rose to fresh 12-month highs.

The Dow Jones industrial average added 0.96%, to end at 10,092.19. The Standard & Poor's 500 Index gained 0.94% to 1,097.91. The Nasdaq Composite Index rose 0.91% to 2,176.32.

Optimistic investors rode a wave of solid quarterly earnings, which continued after the session's close when Apple Inc's shares jumped on its results.

At Bursa Malaysia, Sarawak Energy Bhd's shares are likely to jump after the Sarawak government launched a takeover offer at RM2.65 a share. Its offer price is a 51 sen, or 23.8%, premium over its last traded price before it was suspended yesterday.

The state government already owns 987.54 million shares, or 64.65% of Sarawak Energy. Its offer to buy the remaining shares amounted to RM1.38 billion.

Another company to benefit from the sale is MPHB, which owns about 3% or 48 million shares in Sarawak Energy, according to reports. Based on the offer price, MPHB will receive RM127.2 million cash.

RHB CAPITAL BHD [] has proposed to buy an 80% stake in Indonesia's PT Bank Mestika Dharma for RM1.16 billion cash. The price tag is 3.5 times price-to-book ratio based on the bank’s audited net assets of RM415.4 million as at Dec 31, 2008.

RHB Cap had also proposed a renounceable rights issue, of indicatively 361.11 million shares of RM3.60 per share, of new RHB Cap shares to raise RM1.3 billion to fund the acquisition.

In KFC Holdings Bhd, Singapore-based Arisaig Asean Fund ceased to be a substantial shareholder after selling all its 13.65 million shares. KFCH closed 50 sen higher at RM8, wich was a two-year high.

Analysts said it was unlikely that major shareholder QSR would launch a takeover offer as it already holds more than 50% and it is able to equity account the earnings from cash-rich KFCH.

Arisaig sold the shares in an off-market deal to undisclosed buyers.

ALIRAN IHSAN RESOURCES BHD [] has declared a special dividend of 12 sen per share, in wich MMC owns 74.23% stake. MMC stands to receive RM19.83 million in special dividends.

The share price of The New Straits Times Press (Malaysia) Bhd should stabilise after falling the most in almost three years after MEDIA PRIMA BHD [] offered to buy the newspaper group at less than half its book value and at a 19% discount to its last traded price.

CIMB Research said MPB's offer to buy out other shareholders of the group at a reference price of RM2 came as an "unwelcome surprise" for NSTP minority shareholders as it was below its RM2.46 share price last Friday.

NSTP share price fell by 15%, the most in nearly three years, to close at RM2.09, with 4.79 million shares done.

Written by Ellina Badri