Malaysia Daily, Maybank KE (2014-10-01)

Daily 01 October 2014 SECTOR UPDATE MY Utilities: Maintain Neutral A relook at reserve margins Peninsular Malaysia�s reserve margin would drop below 20% in 2014-2020 (from 30% in 2013). Reserve margin could fall further to 10% if some of the new plants are indeed delayed; extending expiring SLAs/PPAs appears the most convenient fix. New capacity will be required beyond 2020; IPPs would benefit if PPA terms become less onerous. Click here for full report » MY Banking Sector: Maintain Neutral Loan growth stable in August Industry loan growth was stable at 8.6% YoY in August; our 2014 loan growth forecast of 8.7% maintained. Of concern is that deposit growth continued to slip further to 5.6% YoY � this will intensify deposit competition. NEUTRAL on sector; BUYs are AFG, HL Bank and HLFG. Click here for full report » REGIONAL SECTOR UPDATE Plantations: Maintain Neutral New ownership rule not retroactive Foreign companies with existing Indonesian plantation operations will not be affected by Indonesia�s new rule. If foreign limit is set too low, we expect new planting to slow in Indonesia and help boost CPO price in the long term. Neutral impact for now. Maintain our 12M NEUTRAL view on the sector. Click here for full report » Technicals Range trading for the index The FBMKLCI inched down by 0.03 points to 1,846.31 yesterday, while the FBMEMAS and FBM100 also closed lower by 3.15 points and 2.82 points, respectively. We recommend a �Range Trading� stance for the index. Trading idea is a Short-Term buy on ELSOFT with upside target areas at MYR1.78 & MYR2.04. Stop loss is at MYR1.38. Click here for full report » Other Local News Banking: CIMB not involved in high level talks on merger plan. CIMB Group Holdings said the bank is not involved in the purported talks between the Abu Dhabi and Malaysian governments with regards to the proposed merger between CIMB, RHB Capital (RHB Cap) and Malaysia Building Society. "It is a government-to-government (G2G) discussion and we want to leave it at that," said acting group chief executive officer Tengku Datuk Zafrul Tengku Abdul Aziz. (Source: The Star) SBC Corp: To launch five projects worth MYR750m in GDV. Builder and property developer SBC Corp is set to launch five developments with a combined gross development value (GDV) of MYR750m over the next 12 months, said its managing director Sia Teong Heng. The projects will boost SBC's GDV to MYR6.2b over the next five to 10 years from MYR4.8b currently. The projects will be located in Sabah (MYR400m) and in the Klang Valley (MYR350m). (Source: The Edge Financial Daily) Sime Darby: Sime walks away from NBPOL stake. Sime Darby has walked away from buying a stake in New Britain Palm Oil Ltd (NBPOL) after the exclusivity period to conclude the deal ended. Sime Darby gave no reason for walking away from negotiating to buy a 48.97% stake in NBPOL from Kulim (M) but with them out of the race for NBPOL, Felda Global Ventures Holdings is back in the spotlight to likely re-enter the bidding process. (Source: The Star) Telekom: TM completes investment in P1, set to announce new board and management. Telekom Malaysia (TM) said it has completed the investment in wireless network player Packet One Networks (M) Sdn Bhd (P1), together with Green Packet and SK Telekom Co Ltd. It is now the largest shareholder of P1 with a 55.3% stake and a substantial shareholder of Green Packet and SK Telekom with 31.1% and 13.6% respectively. TM invested MYR560m in P1. (Source: The Edge Financial Daily) Money supply (M3) growth moderated to +4.8% YoY in Aug 2014 (July 2014: +5.7% YoY). Net financing to private sector remained the main driver for M3 growth(Aug 2014: +8.8% YoY; July 2014: +8.7% YoY), supported by faster growth in private debt securities (Aug 2014: 12.4% YoY; July 2014: 10% YoY). Meanwhile, growth in the total outstanding banking system loans was stable in Aug 2014 at +8.6% YoY (July 2014: +8.6% YoY) amid signs of key components steadying i.e. household loans (Aug 2014: 11.0% YoY; July 2014: 11.1% YoY); business loans (Aug 2014: 6.7% YoY; July 2014: 6.8% YoY). . A notable drag on M3 growth was external reserves, which were down from a year ago (Aug 2014: -1.2% YoY; July 2014: -3.5% YoY). (Source: BNM, MKE) Outside Malaysia U.S: Consumer confidence decreases to a four-month low in September as Americans' views of the labor market deteriorated. The Conference Board's index decreased to 86 this month, weaker than the most pessimistic forecast in a Bloomberg survey of economists, from an August reading of 93.4 that was the strongest since October 2007. (Source: Bloomberg) E.U: Euro-area inflation slowed in September to the lowest level in five years, challenging European Central Bank officials gathering this week to decide whether more measures are needed to avert deflation. Consumer prices rose an annual 0.3%, the European Union's statistics office said. Unemployment held at 11.5% in August, Eurostat said in a separate report. (Source: Bloomberg) Germany: Unemployment unexpectedly rose for a second month as seasonal factors combined with economic risks from the Ukraine crisis to a faltering euro-area recovery. The number of people out of work climbed a seasonally adjusted 12,000 to 2.92 million in September, the Nuremberg-based Federal Labor Agency said. The adjusted jobless rate was unchanged at 6.7%, the lowest level in more than two decades. (Source: Bloomberg) U.K: Home prices fell for the first time in almost a year and a half in September, adding to evidence the property market is softening. Prices slipped 0.2% MoM from August to an average GBP188,374 (USD 306,700), Nationwide Building Society said. The annual rate of growth slowed to 9.4% from 11%. (Source: Bloomberg) China: Manufacturing gauge fell from an initial reading a week ago as a property slump weighs on the world's second-largest economy. The Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics for September was at 50.2, lower than the preliminary figure of 50.5 and unchanged from August. Numbers above 50 signal expansion. (Source: Bloomberg) Japan: Manufacturer sentiment unexpectedly gains in Abe boost. The Tankan index of big manufacturers rose to 13 in September from 12 in June, the Bank of Japan said. The index is forecast to remain at 13 in December. (Source: Bloomberg) Japan: Output unexpectedly fell in August while stronger retail sales and an improving job market showed resilience in the world's third-biggest economy as Prime Minister Shinzo Abe weighs another sales-tax increase. Industrial production declined 1.5% MoM in August from July. Retail sales increased 1.9% MoM and the jobless rate slid to 3.5%. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,846.3 (1.1) (0.0) JCI 5,137.6 20.2 (0.1) STI 3,276.7 3.5 (0.4) SET 1,585.7 22.1 (0.0) HSI 22,933.0 (1.6) (1.3) KOSPI 2,020.1 0.4 (0.3) TWSE 8,966.9 4.1 0.1 DJIA 17,042.9 2.8 (0.2) S&P 1,972.3 6.7 (0.3) FTSE 6,622.7 (1.9) (0.4) MYR/USD 3.3 0.1 0.0 CPO (1mth) 2,232.0 (15.1) 1.4 Crude Oil (1mth) 91.2 (7.4) (3.6) Gold 1,208.2 0.5 (0.6) TOP STOCK PICKS Buy rated large caps Price Target Tenaga 12.38 14.00 Axiata 7.00 7.60 Sime Darby 9.15 10.20 Gamuda 4.82 5.30 UMW O&G 3.88 5.15 AFG 4.99 5.50 Perdana Petroleum 1.81 2.55 Hock Seng Lee 1.90 2.25