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Malaysia Market Watch 10th July 2012

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KUALA LUMPUR : The FBM KLCI could still be in trouble on Tuesday, as Asian markets all ended lower on data that suggests a drop in global demand. It closed down 0.24 of a point to 1,620.31 on Monday.

Asia’s two biggest exporters, China and Japan, showed further signs of slowing down in data published on Monday, signalling risks of a fresh slide in global demand, as a top Federal Reserve official said he was downbeat on the prospects of the US economy, according toReuters.

Japan’s core machinery orders in May plunged 14.8% from April, with the key gauge of capital spending sinking far below analyst expectations of a 3.3% decline. Meanwhile, Chinese consumer inflation eased more than expected in June, with producer prices in outright deflation for a fourth month.

It does not help that a survey from financial information firm Markit showed on world business confidence cooling due to the eurozone crisis, with only US corporate sentiment a bright spot. This is likely to translate into more financial turbulence for some time to come.

Among the stocks that could be in focus are LPI Capital Bhd; ECM Libra Financial Group Bhd; KPJ Healthcare Bhd; and Hong Leong Bank Bhd.

General insurance and investment holding company LPI Capital posted a profit before tax of RM54.53 million for the second quarter (2Q) ended June 30, 2012, compared to RM41.97 million in the preceding year’s corresponding quarter.

In a statement to Bursa Malaysia on Monday, LPI Capital said it showed a profit of RM40.43 million compared to RM31.42 million in the preceding year. It declared a basic earnings per share of 18.35 sen (compared to 14.26 sen previously), and proposed a dividend per share of 15 sen (compared to 25 sen previously).

Investment banking group ECM Libra saw a group pre-tax profit of RM53.76 million for the year ended Jan 31, 2012 (FY2012), compared to RM86.67 million from the previous year. In its annual report which was released to Bursa Malaysia on Monday, it said that excluding net gain from securities available for-sale, operating profit increased from RM28.2 million in FY2011 to RM31.7 million in current financial year.

“This is mainly contributed by improvement in underlying profitability as evidenced by higher net brokerage generated of RM47.3 million (FY2011: RM44.2 million) on the back of increased remisiers base,” it said. “In addition, net interest income increased to RM36.2 million as compared to RM29.5 million recorded in FY2011 through prudent lending,” it said, adding that consequently, the group has successfully maintained its zero non-performing loans position throughout the financial year.

ECM Libra said its group net profit for the year was RM31.55 million, compared to RM65.21 million the previous year. At the company level, it said that pre-tax profit was RM16.31 million (compared to RM39 million previously), and net profit was RM15.55 million (compared to RM38.1 million previously).

It said that the outlook for the Malaysian economy was expected to be challenging, with the ongoing global economic slowdown. “The group anticipates that the investment banking landscape will continue to remain challenging and competitive, and therefore will focus on enhancing its capacity and capabilities for the next financial year. With its strong fundamentals and balance sheet, the group is expected to show satisfactory performance in the next financial year,” it said.

Maybank IB Research upgraded HLB to “Buy” from “Hold”, and raised its trading price to RM14.60. In a report on Monday, it said that several catalysts to the share price warrant a higher P/BV. HLB had also on Monday launched MACH, a range of banking facilities tailor made for the Gen Y consumer base. The stock closed up 34 sen to RM13.04, the highest close at market end. – TheEDGE By Ahmad Azrai of theedgemalaysia.com | The Edge Malaysia