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Daily 19 May 2014 SECTOR UPDATE MY Banking Sector: Maintain Neutral NIM expansion? Not necessarily� Hawkish monetary statement points to rising interest rates � expect 25-50bps OPR hike by end-2014. This could arrest the downtrend in NIMs in FY15 but any NIM expansion would be capped by competitive pressure. Sector NEUTRAL � BUY AMMB, HL Bank & HLFG. Click here for full report » MY Water Sector S114 invocation deferred We are positive that S114 will not be invoked for it will send a very negative signal on the sanctity of government contracts. Langat 2 proceeding with less �distruption� is positive for Salcon JV and the pipe producers; we like Engtex (Not Rated). We are unable to ascertain the impact of the re-examination of SPLASH�s bulk water supply payment; HOLD Gamuda. Click here for full report » ECONOMICS 1Q 2014 Real GDP A strong start to the year 1Q 2014 real GDP growth picked up to +6.2% YoY (4Q 2013: +5.1% YoY), ahead of our and consensus estimates of +6.0% YoY and +5.4% YoY. QoQ, the economy shrank by -3.9% (4Q 2013: +3.0%), but the seasonally-adjusted QoQ GDP showed slower growth of +0.8% (4Q 2013: +1.9%) Domestic demand growth was resilient at +7.4% YoY (4Q 2013: +6.7% YoY) while net external demand rebounded by +14.9% YoY (4Q 2013: -6.8% YoY). We revise our 2014 real GDP growth forecast to +5.4% from +5.0%, mainly reflecting revision in external trade outlook. Click here for full report » Balance of Payments 1Q14 Trade surplus amid capital outflows Current account surplus was not only sustained but also widened in 1Q 2014 on continued trade surplus plus smaller services trade and income account deficits. Financial account registered a larger deficit due to net outflows in both direct and portfolio investments. In view of robust external trade figures in 1Q 2014, we now expect larger full-year trade and current account surpluses. Click here for full report » Technicals Indices feel tired at all-time highs The FBM KLCI inched up 16.62 points WoW as some consistent buying activities led the index to a fresh all-time high. The index closed at 1,883.34 last Friday, as volume remained low from 1.57b to 1.83b shares traded. With the local buying that emerged recently at 1,802, we advise clients to nibble at the support areas of 1,802 to 1,882. The resistance level of 1,883 may witness token profit taking activities. Trading idea is a Short-Term Buy on DELLOYD with upside target areas at MYR4.57 & MYR4.63. Stop loss is at MYR3.85. Click here for full report » Other Local News FGV: Plans on NBPOL at early stage. Felda Global Ventures Holdings Bhd (FGV) says it is looking at New Britain Palm Oil (NBPOL) as part of its growth strategy. A spokesperson said in a statement, plans with reference to NBPOL were at a preliminary stage at this juncture. Kulim (M) Bhd currently holds 48.97% in NBPOL, which has a market capitalization of GBP615.2m (MYR3.34b). (Source: The Star) Sunsuria: Ter to inject projects worth MYR10b. Sunsuria Bhd is expected to see a corporate exercise whereby Datuk Ter Leong Yap, the executive chairman and major shareholder of Sunsuria, is likely to inject property projects worth some MYR10b spanning over 403 acres into the company, according to sources. (Source: The Star) CMS: To unveil first resort hotel in Samalaju. The 177-room four-star Tanjung Samalaju resort hotel is being built by Cahya Mata Sarawak Bhd (CMS) with an investment of MYR66m. According to CMS group MD Datuk Richard Curtis, the resort hotel would be ready in early October. CMS group would soon embark on the Samalaju Centre project,which would provide retail commercial and industrial units to both small and medium enterprises in the heart of the Samalaju Industrial Park. (Source: The Star) E&O: Awaiting state govt clearance for STP phase 2. Eastern & Oriental Bhd�s (E&O) unit,Tanjung Pinang Development Sdn Bhd has entered a critical phase with the company awaiting the endorsement of the state government for its proposed masterplan before it can proceed with the reclamation work of Seri Tanjung Pinang (STP) phase two. (Source: The Star) Delloyd: capital reduction and repayment exercise. Delloyd Ventures Bhd�s major shareholders who own a cummulative stake of 63.58%, plans to take the company private via selective capital reduction and repayment exercise of MYR4.80 a share. (Source: Bursa Malaysia) Outside Malaysia U.S: Consumer confidence unexpectedly declined in May, showing Americans are being shaken by rising grocery bills and elevated fuel costs. The Thomson Reuters/University of Michigan preliminary sentiment index decreased to 81.8 from 84.1 in April. Food prices have risen and the cost of gasoline has held near its highest level of the year, making buyers less secure in their finances. Falling unemployment, rising home prices and near-record stock indexes could provide support for sentiment, giving Americans the wherewithal to boost the spending that makes up 70% of the economy. (Source: Bloomberg) U.S: Home starts jump as builders freed from winter slowdown. The pace of U.S. home construction jumped in April to its highest level since November, led by a jump in starts on multifamily projects, showing builders returned to sites after freezing temperatures restrained work earlier this year. Housing starts climbed 13.2% to a 1.07 million annualized rate following March's 947,000 pace. Permits for future projects increased, a sign activity might accelerate in coming months. (Source: Bloomberg) U.K: Carney says house prices pose biggest risk to economy. Bank of England Governor Mark Carney shifted closer to reining in surging U.K. home prices by branding them the No. 1 risk to the economy and listing potential policy responses. In his most forthright warning yet over the property market, Carney said policy makers "could do more" to tackle excesses if needed. Options include imposing more checks on the affordability of mortgages, limiting types of loans or advising the government to rein-in its Help to Buy program. (Source: Bloomberg) Hong Kong: Growth cools to slowest pace since 2012 on exports. GDP expanded 0.2% QoQ, the government said in a statement on its website. Hong Kong's government maintained a forecast for a full-year expansion of between 3% and 4%, betting that a strengthening global economy will provide more support in the second half of 2014. China's slowdown is adding to risks for the neighboring city, and a sagging real-estate market may weigh on private consumption. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,883.3 0.9 0.2 JCI 5,031.6 17.7 0.8 STI 3,262.6 3.0 (0.3) SET 1,405.3 8.2 0.7 HSI 22,712.9 (2.5) (0.1) KOSPI 2,013.4 0.1 0.2 TWSE 8,888.5 3.2 0.1 DJIA 16,491.3 (0.5) 0.3 S&P 1,877.9 1.6 0.4 FTSE 6,855.8 1.6 0.2 MYR/USD 3.2 (1.5) (0.2) CPO (1mth) 2,629.0 0.0 (1.6) Crude Oil (1mth) 102.0 3.7 0.5 Gold 1,294.4 7.7 (0.8) TOP STOCK PICKS Buy rated large caps Price Target Tenaga 12.06 14.00 Genting Msia 4.22 4.74 HLBK 14.00 16.40 AMMB Holdings 7.26 8.50 Bumi Armada 3.90 5.00 IJM Corp 6.62 6.75 MPHB Capital 1.99 2.42