Malaysia Daily, Maybank KE (2014-10-20)

Daily 20 October 2014 COMPANY UPDATE Hong Leong Bank: Maintain Buy The cheaper proxy to retail banking A worthy and cheaper alternative to Public Bank with prudent management and a strong deposit base. Trimming our FY15-FY17 earnings by 2% p.a. on lower contributions from Bank of Chengdu. BUY � MYR16.20 TP maintained on unchanged CY14 P/BV target of 1.9x, supported by ROEs of ~14.6%. Click here for full report » KNM Group: Maintain Buy Proposes rights issue  Shariah-compliant Plans a 1-for-5 rights issue plus 1 warrant for every 2 rights. We advocate shareholders to subscribe to the rights issue. Reiterate BUY. Recent share price weakness is an opportunity to accumulate. Our MYR1.50 TP is on 0.7x EV/backlog. Click here for full report » SECTOR UPDATE MY Automotive: OVERWEIGHT Sep TIV: A minor speed bump  Shariah-compliant Sep TIV fell to 47.8k units (-7% MoM), a temporary weakness as buyers held back in anticipation of new model launches. There is upside to our 2014 TIV forecast (+3% YoY). Stay OVERWEIGHT. Expect small car sales to outperform as buyers trade down amid rising costs/GST. MBM our Top Pick. Click here for full report » ECONOMICS Malaysia CPI, Sep 2014 Slower on "base-effect" Inflation rate slowed in Sep 2014 to +2.6% YoY from +3.3% YoY in Aug 2014 on "base-effect" from the fuel price hikes in Sep 2013. The "base effect" should be temporary as we see inflation rate picking up and averaging +3.2% YoY in 4Q 2014 from the latest round of fuel price hike earlier this month. Our full-year 2014 inflation rate estimate is +3.3% (YTD 2014: +3.3% YoY), and we see inflation rate accelerating to 4.5%-5.0% in 2015 on the impact of fuel subsidy reform and GST introduction on 1 Apr 2015. But OPR to stay at 3.25% for most of 2015 as BNM refrains from reacting to policy-driven spike in inflation amid growth concern, and any review is likely only in late-next year. Click here for full report » Singapore Exports, Sep'14 Positive end to 3Q 2014 NODX reported back-to-back monthly growth in Sep 2014. NORX rebounded last month. Trade surplus widened in 3Q 2014 which may result in upward revisions to 2Q 2014's advanced estimates of +2.4% YoY and +1.2% ann. QoQ s.a. Click here for full report » Technicals Selling on rebounds would be wise The FBM KLCI plunged 20.57 points WoW to close at 1,788.31, as persistent forced selling activities led the index down below the 1,800-mark. We advise clients to sell at the resistance areas of 1,795 to 1,879. The support levels of 1,732 and 1,788 will see some meagre buying activities. Trading idea is a Take Profit call on BAT with downside target areas at MYR63.76 & MYR62.80. Click here for full report » Other Local News Infrastructure: SPAD will propose to government 'spur line' for MRT2 between Sungai Buloh and Selayang. The spur line is expected to be finalised in two weeks said SPAD CEO, Mohd Nur Kamal. (Source: The Star) Consumer: GST zero-rate, exempt list will result in CPI rising 1% rather than 1.8% next year. The Consumer Price Index (CPI) is expected to be lower next year due to the expanded zero-rate and exempt list under the goods and services tax (GST), said Customs Department GST director Datuk Subromaniam Tholasy. (Source: The Star) Affin Holdings: Small banks still needed. Deputy chairman and non-executive director Tan Sri Lodin Wok Kamaruddin do not think the mega bank merger will have an impact on Affin because if focuses on a niche market and it's a question of efficiency. (Source: The Edge Financial Daily) Bursa Malaysia: Eyes new tier of HK-based funds. Bursa Malaysia wants to tap a new tier of Hong Kong-based funds, especially the small to mid capitalised that have regional mandates. CEO Datuk Tajuddin Atan, said the bourse found that fund managers were keen on the Malaysia story and Malaysia's unique growth potential as Asean's multinational marketplace. (Source: The Star) Outside Malaysia U.S: Consumer sentiment increases to a seven-year high in October, showing a brightening in Americans' moods as gas prices drop and the labor market gains traction. The Thomson Reuters/University of Michigan preliminary sentiment index for this month increased to 86.4, the strongest since July 2007, from a final reading of 84.6 in September. (Source: Bloomberg) U.S: Housing starts rise as construction firms regain footing. Housing starts climbed 6.3% to a 1.02 million annualized rate from a 957,000 pace in August, the Commerce Department reported in Washington. Work increased on multifamily and one-family homes. (Source: Bloomberg) Russia: Credit rating nears junk as reserves erode amid sanctions. Russia's credit rating was cut to the second-lowest investment grade by Moody's Investors Service, which cited sluggish growth prospects and an erosion of the country's reserves amid sanctions over Ukraine. Moody's downgraded the sovereign one level to Baa2 from Baa1 and kept a negative outlook on the rating on Oct. 17. It is in line with Fitch Ratings Ltd.'s credit grade and one step above Standard & Poor's, which lowered Russia to BBB-in April. (Source: Bloomberg)     Key Indices Value YTD (%) Daily (%) KLCI 1,788.3 (4.2) 1.2 JCI 5,028.9 17.7 1.6 STI 3,167.7 0.0 0.4 SET 1,528.7 17.7 0.2 HSI 23,023.2 (1.2) 0.5 KOSPI 1,900.7 (5.5) (0.9) TWSE 8,512.9 (1.1) (1.4) DJIA 16,380.4 (1.2) 1.6 S&P 1,886.8 2.1 1.3 FTSE 6,310.3 (6.5) 1.8 MYR/USD 3.272 (0.1) (0.7) CPO (1mth) 2,165.0 (17.6) 1.4 Crude Oil (1mth) 82.8 (15.9) 0.1 Gold 1,237.2 3.0 (0.4) TOP STOCK PICKS Buy rated large caps Price Target Tenaga 12.52 14.00 Axiata 7.03 7.60 Sime Darby 9.17 10.20 Gamuda 4.81 5.30 UMW O&G 3.38 5.15 AFG 4.85 5.50 Perdana Petroleum 1.52 2.55 Hock Seng Lee 1.82 2.25