Malaysia Daily, Maybank KE (2014-07-11)

Daily 11 July 2014 COMPANY UPDATE CIMB Group Holdings: Maintain Hold A tripartite merger in the making CIMB, RHB Cap and MBSB�s merger will create Malaysia�s largest financial group with assets 6% larger than Maybank�s. Possible negative knee-jerk reaction to CIMB�s share price on expected dilution in ROE, but BVPS likely to increase; our TP of MYR8.00 is thus unchanged. HOLD maintained on CIMB and RHB Cap (TP: MYR8.70) pending further developments. Click here for full report » ECONOMICS BNM Monetary Policy As expected, OPR raised by 25bps Bank Negara Malaysia (BNM) raised the Overnight Policy Rate (OPR) by 25 bps to 3.25%. Tone of Monetary Policy Statement (MPS) still "hawkish" with continued reference to "financial imbalances" which has proven to be a strong signal of impending OPR hike. We expect a further 25bps increase by end-2014 with two meetings remaining i.e. 17-18 Sep and 5-6 Nov. Click here for full report » Industrial Production (IP), May 2014 Continued positive momentum Industrial production in May 2014 was a better than expected +6.1% YoY% (revised Apr 2014: +4.9% YoY). It expanded by +5.1% in Jan-May 2014 (Jan-May 2013: 2.2%). Revised full-year IP growth to 6.2% from 3.6% previously (2013: +3.3%). Click here for full report » REGIONAL SECTOR UPDATE Plantations: Maintain Neutral Lower stocks to halt price decline June 2014 inventory declined 10% MoM on lower production, higher exports and domestic Ramadhan demand. We expect CPO price to trade between MYR2,400-2,600/t till Aug 2014, before pushing higher in 4Q14. Maintain 12M NEUTRAL view. Key upside risk to our view is the return of a strong El Ni�o and further tension in Iraq. Click here for full report » Technicals Index inched up slightly The FBMKLCI inched up by 1.46 points to 1,892.62 yesterday, while the FBMEMAS and FBM100 rose 19.66 points and 14.42 points, respectively. We recommend a �Nibble on Dips� stance for the index. Trading idea is a Short-Term Buy on OSK with Upside target areas at MYR2.39 & MYR2.54. Stop loss is at MYR1.96. Click here for full report » Other Local News Perak Corporation: State gets MYR280m animation park loan. Perak Corporation Bhd (PCB) yesterday announced the formalization of a syndicated term loan facility totalling MYR280m to partly fund the development of Asia�s first animation theme park, Movie Animation Park Studio (MAPS) in Bandar Meru Raya, Ipoh. The animation park, which is estimated to cost MYR390m is scheduled to be completed by the end of next year. It will be developed, owned and managed by Animation Theme Park Sdn Bhd (ATP), a joint venture company between Sanderson Project Development Malaysia Sdn Bhd and PCB, and boost tourism in Perak. (Source: Business Times) GST: Subsidy rationalization decision by Q4. The government will decide on the subsidy rationalization programme by the fourth quarter of the year and will implement it next year, said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah yesterday. By then, the government will also decide whether the RON95 petrol and diesel should be exempted from the Goods and Services Tax (GST), which will be implemented on April 1 next year. He said the government is looking at about MYR2.5b revenue from GST in the first year of implementation, and MYR8b in the following year. (Source: Bernama) Manufacturing: Sales in May up 5.5%. The sales value for the manufacturing sector in May 2014 rose by 5.5% (MYR2.8b) to MYR53.1b from the MYR50.3b reported in the same month a year ago. On a month-on-month basis, the sales value decreased by 0.4 per cent (MYR0.2b) compared with the preceding month. The sales value in April 2014 was a revised positive 7.8 per cent year-on-year to record MYR53.3b, said the Department of Statistics Malaysia in its Monthly Manufacturing Statistics. (Source: Bernama) Genting: Disposes stake in FPEC to SDIC. Genting Bhd has completed the disposal of its 724MW coal-fired power plant in Fujian, China for RMB694m (MYR355.3m). The company sold its indirect 51% stake in the Fujian Pacific Electric Company Ltd (FPEC), which owns and operates the Meizhou Wan power plant, to SDIC Power Holdings Co Ltd. SDIC Power is a China government-owned company and its main business activity is power generation. The sale consideration was determined on a willing buyer, willing seller basis taking into consideration the Genting group�s estimated carrying value of FPEC as at Dec 31, 2013 and the estimated future cash flows of the power plant. (Source: The Star) Century Logistics: Proposes bonus issue and share split. Century Logistics Holdings Bhd is planning a bonus issue and share split exercise which will see its issued and paid-up share capital worth up to MYR183.1m comprising 366.2m subdivided shares. The proposals are not expected to impact the group�s earnings for the financial year 2014. The move is meant to reward shareholders of Century and would be funded by the company�s retained earnings. (Source: The Edge Financial Daily) Outside Malaysia U.K: Posted its widest trade deficit in May in four months as manufacturers shipped fewer goods to European Union nations and sales of oil to other countries fell. The gap was GBP 9.20b (USD 15.8b) compared with GBP 8.81b in April, the Office for National Statistics said. Exports rose 0.6% MoM and imports climbed 1.7% MoM, largely due to GBP 1.2b of aircraft purchases, the ONS said. (Source: Bloomberg) China: Exports trailed estimates in June, suggesting support for growth from global demand will be limited as leaders try to defend their economic-expansion goal of about 7.5% this year. Overseas shipments gained 7.2% YoY, the customs administration said. Imports rose 5.5% YoY, leaving a USD 31.6b trade surplus. (Source: Bloomberg) China: Talks with U.S. highlight steps on Yuan, investment. The U.S. and China completed talks by highlighting pledges on the yuan's exchange rate and progress on a bilateral investment pact, as officials sought common ground amid cyberspying and maritime tensions. China committed to reduce currency intervention as conditions allow, according to a joint statement after the two-day Strategic and Economic Dialogue in Beijing, a move U.S. Treasury Secretary Jacob J. Lew called a "big change." Lew and Chinese Vice Finance Minister Zhu Guangyao cited significant progress toward the investment treaty. (Source: Bloomberg) S. Korea: The Bank of Korea cut its growth outlook for this year and said inflation was picking up more slowly than expected, after leaving interest rates unchanged. Governor Lee Ju Yeol said the central bank lowered its growth forecast for 2014 to 3.8% from 4%. The BOK held the seven-day repurchase rate at 2.5% for a 14th straight month. One of the seven board members opposed the decision, Lee said. (Source: Bloomberg) Indonesia: Central bank held its key interest rate for an eighth straight meeting, maintaining a tight policy setting to help narrow a current-account deficit that has depressed the rupiah. Bank Indonesia Governor Agus Martowardojo and his board maintained the reference rate at 7.5%, the central bank said. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,892.60 1.4 0.1 JCI 5,098.00 19.3 1.5 STI 3,269.50 3.2 -0.2 SET 1,518.00 16.9 0.7 HSI 23,239.00 -0.3 0.3 KOSPI 2,002.80 -0.4 0.1 TWSE 9,565.10 11.1 0.8 DJIA 16,915.10 2 -0.4 S&P 1,964.70 6.3 -0.4 FTSE 6,672.40 -1.1 -0.7 MYR/USD 3.2 -3 0.1 CPO (1mth) 2,450.00 -6.8 0.4 Crude Oil (1mth) 102.9 4.6 0.6 Gold 1,335.80 11.2 0.6