Malaysia Daily, Maybank KE (2014-09-24)

Daily 24 September 2014 MARKET STRATEGY MY Strategy: Maintain Neutral The Yen connection We continue to expect the USD/JPY to edge higher to 109 by end-2014, JPY/MYR to end 2014 at 2.99. TNB is the main beneficiary from its MYR3.4b Yen loans; auto players with Yen-denoted imports would also gain. No change in stock calls; TNB is one of our top big-cap BUYs. Click here for full report » ECONOMICS Singapore CPI, August 2014 Decelerated for the second month Inflation rate in Aug 2014 eased to +0.9% YoY (Jul 2014: +1.2% YoY), mainly on decline in car prices and housing costs. But core inflation rate (CPI ex-accommodation and private road transport) remained relatively stable ranging between +2.1% and +2.2% since May 2014 (Aug 14: +2.1% YoY; Jul 14: +2.2% YoY). We revised our 2014 CPI forecast to +1.7% versus +2.0% previously (YTD 2014: +1.5%; 2013: +2.5%) with domestic factors to remain as the main inflation driver. Click here for full report » Technicals Next stop is 1,832 and below The FBMKLCI declined 5.86 points to 1,840.19 yesterday, while the FBMEMAS and FBM100 also closed lower by 44.71 points and 42.73 points, respectively. We recommend a �Sell on Rallies� stance for the index. Trading idea is a Take profit call on COASTAL with downside target areas at MYR4.39 & MYR4.22. Click here for full report » Other Local News Power: TNB and 1MDB in MYR6b power deal in Bangladesh. Malaysia and Bangladesh have inked a government-to-government memorandum of understanding (MOU) for a MYR6b power plant project in Maheshkali, Bangladesh. The independent power project will involve Bangladesh Power Development and a Malaysian consortium comprising Tenaga Nasional and Powertek, a subsidiary of 1Malaysia Development. It will see a 1,320MW coal-fired power plant being built in Maheshkali, Cox's Bazar, Banagladesh, with 2019 as its expected commercial operation date. (Source: The Star) Oil & Gas: Petronas moves to fuel production. Petroliam Nasional (Petronas) will spend more than MYR1.1b over the next three to four years in its exploration and production technology centre to research and develop innovative and applicable technologies to rejuvenate and enhance oil production. The petroleum giant is looking at the implementation of the Enhanced Oil Recovery (EOR) programme to enhance crude oil production in maturing fields. There are currently 10 EOR projects in the pipeline at various stages, and the entire programme is scheduled to be rolled out in phases over the next decade. (Source: The New Straits Times) MAHB: Considers offer of right of first refusal on Istanbul airport. Malaysia Airports Holdings unit Malaysia Airports MSC Sdn Bhd has received a notice and offer of right of first refusal (ROFR) regarding TAV Havalimanlari Holding A.S's (TAV) offer to acquire a 40% equity stake in both Istanbul Sabiha G�k�e and LGM Havalimani Letmeleri Ticaret Ve Turizm A.S for EUR285m. The 40% stakes in both companies are held by Limak and Limak Yatirim. (Source: The Star) Sona Petroleum: Optimistic of SC nod for MYR895m Thai deal. Sona Petroleum is confident of getting the Securities Commission�s (SC) approval for its first qualifying acquisition to put it on track to complete the deal by the end of the year. The special-purpose acquisition company (SPAC), which had on Aug 29 submitted its proposal for a USD281m (MYR895.2m) deal to buy a 40% stake in the Thai unit of UK-listed Salamander Energy Plc to the SC, is expected to know the regulator's decision by next month. (Source: The Star) MRCB: Shortlisted for incinerator project. Malaysian Resources Corp (MRCB) said it has been shortlisted for the 1,000-tonne-per-day waste-to-energy incinerator project in Taman Beringin, Kepong, which is estimated to cost up to MYR800m. It is said that MRCB will team up with South Korea's Hyundai Rotem Co to bid for the concession, which may be up to 30 years. (Source: The Edge Financial Daily). External reserves as of 15 Sep 2014 amounted to MYR422.3b or USD131.5b - equivalent to 8.9 months of retained imports and 1.2 times of the country's short-term external debt. This was down from MYR424.2b or USD132.0b at 29 Aug 2014. The current reserves level reflects the weaker Malaysian Ringgit as it depreciated by 2.2% against the US Dollar during the period, indicating primarily short-term or portfolio capital outflows. The external reserves trend also suggests continued modest external trade surplus for Aug-Sep 2014. To note, trade surplus has narrowed from the recent high of MYR10.4b in Feb 2014 to MYR3.6b in July 2014. (Source: BNM, MaybankKE) Outside Malaysia E.U: Euro-area manufacturing and services growth unexpectedly slowed to the weakest pace this year, increasing pressure on the European Central Bank to add stimulus to the economy. Purchasing Managers Indexes for both industries fell and a composite gauge dropped to 52.3 in September from 52.5 in August, London-based Markit Economics said. (Source: Bloomberg) Germany: Manufacturing expanded at the slowest pace in 15 months in September as new orders fell, signaling uneven momentum in Europe's largest economy. Markit Economics said its Purchasing Managers Index fell to 50.3 from 51.4 in August, the weakest since June 2013. A gauge of services rose to 55.4 from 54.9, offsetting the drop in factory output and pushing the composite index up to 54 from 53.7. A reading above 50 indicates expansion. (Source: Bloomberg) China: Manufacturing rebound relieves growth concerns suggesting export demand is helping the economy withstand a property slump. The preliminary Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics was at 50.5, matching the highest estimates in a Bloomberg News survey of analysts and up from August's final reading of 50.2. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,840.2 (1.4) (0.3) JCI 5,188.1 21.4 (0.6) STI 3,298.1 4.1 0.0 SET 1,590.1 22.4 0.0 HSI 23,837.1 2.3 (0.5) KOSPI 2,028.9 0.9 (0.5) TWSE 9,084.9 5.5 (0.5) DJIA 17,055.9 2.9 (0.7) S&P 1,982.8 7.3 (0.6) FTSE 6,676.1 (1.1) (1.4) MYR/USD 3.2 (1.0) (0.0) CPO (1mth) 2,152.0 (18.1) 1.4 Crude Oil (1mth) 91.6 (7.0) 0.0 Gold 1,223.4 1.8 0.7 TOP STOCK PICKS Buy rated large caps Price Target Tenaga 12.28 14.00 Axiata 6.96 7.60 Sime Darby 9.12 10.20 Gamuda 4.81 5.30 UMW O&G 3.85 5.15 AFG 4.99 5.50 Perdana Petroleum 1.77 2.55 Hock Seng Lee 1.84 2.25