Wednesday, December 31, 2008

KLCI: 1st Half 2009 Rebound

KLCI is building momentum for further upside. So expect a chinese new year rally to 950. Do keep in mind that a break down of 850 will be start of another fierce bear trend. So hold on to your stock if the CI can hold above 900 level in coming weeks. My rebound target is set at 1100 level.

[Previous KLCI Posting]

Friday, December 19, 2008

Global Economy Seen Sinking Into 'Severe' 2009 Recession

TOKYO (AFP) - - A major banking group warned the global economy will sink into "severe" recession next year as Japan's battle to stave off a prolonged contraction was Friday hit by predictions of zero growth into 2010.
The Japanese cabinet approved the country's first zero growth forecast in real terms in seven years, which came as the central bank continued a two-day meeting to consider slashing interest rates to rock-bottom.
With the world's second largest economy battered by slumps in domestic demand and exports, the Washington-based Institute of International Finance (IIF) said the global economy would shrink 0.4 percent in 2009, after 2.0 percent growth this year.
Charles Dallara, managing director of the IIF -- which represents more than 375 of the world's major banks and financial institutions -- called it "the most severe, globally synchronised recession in modern economic history".
The global crisis requires a global coordinated response, he said at a news conference.
Dallara said the economy was mired in a negative feedback loop of weakening economic activity and intense financial market strains.
"You'll see much more bang for the buck" with a coordinated response, he said, adding: "It will be important that these measures be complemented in Europe and in Japan."
In a grim assessment, the IIF said in its monthly Global Economic Monitor report: "It should be emphasised that an overall contraction in the global economy is a truly weak outcome, and the first time this has happened in the post-1960 period."
Mature economies -- including the US, Britain the 15-nation eurozone and Japan -- that are now in recession were forecast to contract a hefty 1.4 percent amid the worst financial crisis since the Great Depression.
The US economy, the world's largest and the epicentre of the financial tsunami, would shrink 1.3 percent in 2009 after growth of 1.2 percent this year, according to the IIF projections.
The eurozone would contract by 1.5 percent from 0.9 percent growth, and Japan would shrink 1.2 percent after zero growth, the IIF said.
France, a part of the eurozone, said Friday it will sink recession next year for the first time since 1993 while it also faces a steep rise in unemployment.
Tokyo share prices were down 1.10 percent by noon Friday following the zero growth forecast, though trade remained cautious ahead of the Bank of Japan decision on interest rate cuts.
Japanese news reports said auto giant Toyota is likely to suffer its first-ever operating loss in the year to March 2009 due to a stronger yen and a global industry slump
It would be Toyota's first operating loss since it began releasing earnings figures in 1941, the Nikkei business daily said.
The dollar bounced back from fresh 13-year lows against the yen, which retreated from earlier highs as investors debated whether rates will be cut from the already low 0.3 percent, dealers said.
By late morning, the dollar was at 89.48 yen, the same level as in New York late Thursday. It had fallen to as low as 87.16 Thursday.
The euro fell to 1.4228 dollars in Tokyo trade from 1.4268 in New York and to 127.30 yen from 127.70.
World crude prices held steady above 36 dollars on Friday, at their lowest levels in more than four years, as the OPEC oil cartel's announcement of a record 2.2 million barrels per day production cut failed to rally prices.
Meanwhile the United Nations Thursday warned countries struggling with the falling value of their currencies to resist hiking interest rates to prevent devaluations.
"Rising interest rates and falling government expenditure will only reinvite speculation and worsen matters in the real economy," said the UN Conference on Trade and Development (UNCTAD) in a policy newsletter.
UNCTAD cited Brazil, Hungary, Iceland, Romania and Turkey as countries facing devaluations.

Thursday, December 18, 2008

IMF: Recovery by 2010

LONDON: The International Monetary Fund (IMF) cautiously forecast a US recovery by early 2010 and a British central banker said yesterday interest rates could hit zero, a level Japan’s are forecast to drop closer to this week.

The US is mired in recession and has dragged much of the world with it, following the meltdown of its housing market in 2007 and the crippling bank losses that resulted.

The Federal Reserve cut its key rate to near zero on Tuesday but the failure of Opec’s biggest ever supply cut to lift oil prices underscored just how gloomy markets are about the world economy.

”There is a reasonable probability ... of the US economy starting to recover at the end of 2009 or the start of 2010,” IMF managing director Dominique StraussKahn told Spanish newspaper Expansion. – Reuters

Understanding The Financial Crisis

Water Related Stocks Playing Soon?

PAAB to assume RM15b water asset loans
PUTRAJAYA: The federal government is expected to assume some RM15 billion worth of loans under its planned acquisition of state and private water assets in Peninsular Malaysia.

The amount involves some RM7.9 billion owed by state governments to the federal authorities, and another RM7 billion worth of bonds issued by private water concession holders.

“It (RM15 billion) is a rough estimate,” Pengurusan Aset Air Bhd (PAAB) chief executive officer Suhaimi Kamaralzaman told reporters in Putrajaya yesterday after a signing ceremony for the transfer of water assets in Melaka to PAAB under the National Water Services Industry Restructuring Initiative.

Melaka got the ball rolling, with the signing of the agreement to transfer RM889 million worth of water assets to the federal authorities, and in return, the state was relieved of its RM770 million worth of loans. As the value of the assets exceeds the loan, the differential sum of RM119 million will be channelled back to the state.

Deputy Prime Minister Datuk Seri Najib Razak, who witnessed the signing ceremony, said: “The involvement of the federal government has created a water services model which I believe will spur the local sector into a holistic, efficient, effective, competitive and established industry.”
The national project is seen as a win-win deal, aimed at improving the efficiency of the local sector. PAAB, a unit under the Minister of Finance Inc, will take over the water assets, and in exchange, assume the water-related debts.

The acquired assets will be leased back to the state government which will undertake the water distribution portfolio, and infrastructure maintenance, while the responsibilities of building and financing water infrastructure projects will fall on PAAB’s shoulders.

To date, PAAB has secured a RM3 billion loan facility from a local financial institution, according to Suhaimi, who also indicated the company’s intention to issue ringgit-denominated bonds to finance the company’s future undertakings.

More states are expected to climb onto the bandwagon. Talks are already in advanced stages to acquire water assets in Negri Sembilan, Johor and Pahang, In non-BN- held states, Suhaimi said the Kelantan state government had approved in principle the implementation of the national initiative in the state.

“Perak, Penang and Kedah have got a change of government. We have explained to the previous state governments and now we have to conduct a new roadshow,” he said. According to news reports, Selangor, meanwhile, had until March 31 next year to do so pending the finalisation of its water assets’ collective value.

AmResearch Sdn Bhd expects Puncak Niaga Holdings Bhd and Kumpulan Perangsang Selangor Bhd (KPS) to be winners in the water asset takeover deal. This is because both companies will be able to monetise the embeddeed value of the water concession assets, hence, boosting the valuation of the shares in both firms.

“Ideally, state-backed KPS remains the best candidate to house all four water concessionaires in Selangor under a single holistic structure. This is in line with the spirit of the new water legislation.

“But things are still in a state of flux due to intense political lobbying by various parties with vested interest along Selangor’s water supply chain. Moreover, the structure of the migration exercise remains uncertain - there could be multiple operations and maintenance licences being issued,” AmResearch analyst Mak Hoy Ken wrote in a note. Mak recommends a hold for Puncak Niaga and KPS with fair values of RM2.75 and RM1.48, respectively.

Puncak Niaga fell three sen to RM2.58, while KPS rose two sen to RM1.45 yesterday.