Malaysia Market Watch 27th July 2012

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KUALA LUMPUR – The FBM KLCI could come under some selling pressure on Friday on profit taking, as the market loses steam and is seen as being overbought. With few catalysts and little fresh corporate news flow, investors have been heavily influenced by external factors and the eurozone malaise has done little to keep investor sentiment intact.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi said that the initial public offer (IPO) listing for IHH Healthcare on Wednesday went fine, but the local index grew softer on Thursday on local and foreign selling activities. He said blue chip stocks like BAT, Genting Malaysia, Genting, KLK, Sime Darby and UMW led the index down in a severe bout of liquidation activities.

“With the softer tone that emerged last week, the weaker support levels are seen at the 1,591, 1,611 and 1,620-levels, whilst the recent resistance levels of 1,623, 1,638 and 1,647 would cap any rebound activities. We believe that investors would continue to liquidate on rallies, as the bearish divergent chart signals have caused the FBM KLCI to peak at its all-time high of 1,647.94 on 19 Jul 2012,” Lee said.

Among the stocks that could be in focus are MMC Corporation Bhd (MMC Corp), IHH Healthcare Bhd, Tasek Corporation Bhd (Tasek Corp), MISC Bhd and rubber glove manufacturers.

Shares of MMC Corp could extend losses on Friday after Bursa Malaysia said the stock would be replaced by IHH Healthcare on the FTSE Bursa Malaysia KLCI effective Aug 1. According to an analyst from Kenanga Research, the impact on share price should only be short term.

“From an analyst perspective, the fundamentals and valuation of the business still remains the same. However, MMC will likely suffer a fall in demand for the stock as certain fund managers will no longer consider the stock for their portfolio. Without being on the FBM KLCI, the MMC Corp stock will be given less priority by fund managers to buy or own,” said the analyst.

IHH Healthcare, which made an impressive debut on Bursa Malaysia on Wednesday, is likely to continue to command some presence after Bursa Malaysia said the stock would replace MMC Corp on the FTSE FBM KLCI list.

Tasek Corp’s net profit for the second quarter ended June 30, 2012 fell 4.1% to RM23.13 million from RM24.12 million a year earlier, due mainly to under performance of its concrete segment. The company said on Thursday that its revenue for the quarter rose marginally to RM30.57 million from RM30.25 million in 2011.
Earnings per share was 18.99 sen compared to 19.52 sen previously, while net assets per share was RM7.55. Tasek Corp declared a gross interim dividend of 30 sen per share payable on Sept 6.

MISC shares fell at noon on Thursday, after the company said that a fire broke out early Thursday on board its chemical/palm oil tanker Bunga Alpinia in Labuan, Sabah. MISC said in a statement on its website had said the Bunga Alpinia, a 38,000 DWT IMO II vessel, had 29 crew, comprising 23 Malaysians and six Filipinos.
“No further details of the incident are available at this point,” the statement said, adding that all authorities had been notified accordingly and MISC was working closely to render necessary assistance.

Meanwhile, Malaysian rubber glove producers say they are ready for the implementation of the minimum wage policy and anticipated removal of natural gas subsidies.
Malaysian Rubber Glove Manufacturing Association president Lim Kwee Shyan said industry players are requesting for a time frame to prepare for the removal of gas susbidies which will increase manufacturers’ production cost.

“We cannot say no. Give us a time frame,” Lim told reporters here during the rubber glove industry media roundtable session on Thursday. On the minimum wage policy, Lim said the policy will prompt industry players to further automate their manufacturing processes. -By Surin Murugiah of theedgemalaysia.com | The Edge Malaysia