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Monthly Newsletter August 2004
| |Highlights: |
| | |
|Market Performance |Market Review: The KLCI closed on a firmer note for the month of July 2004 with a gain by 1.7% to |
|(Jan 2004 – July 2004) |833.96 points, on the back of an improved average traded volume across the board of 350m per day. |
| |Another notable improvement was observed on the trading volume of the Mesdaq Exchange, which surged by |
|Regional |more than 91% during the month to 43m per day compared to 22.5m per day in the previous month. The |
|Markets YTD% change |strong surge in total volume traded was justified as the market was seen to be back on a firmer footing|
| |after it has factored in all the external forces which were debated in the prior month. Amongst the |
|P’ppines 9.9% |major issues were the increase in interest rate in the US, by 25 bp, and also the high oil price that |
|Indo’sia 9.4% |could hurt world economic recovery in 2004 and 2005. |
|S’pore 7.2% | |
|M’sia 5.0% |Market Outlook: The KLCI is expected to trade range-bound throughout the month of August, within the |
|H Kong -2.7% |820 to 830 level. On a base case scenario we are looking at the possibility of the CI to trade on a |
|D Jones -3.0% |more downside bias as the trading sentiment is expected to be affected by the current results reporting|
|Nasdaq -5.8% |season and the lack of fresh positive newsflow in the market. |
|Taiwan -8.0% | |
|Korea -9.3% |From the external front, the current high oil price and the expectation of another interest rate hike |
|Thailand -17.5% |by August 10th 2004 in the US FOMC meeting, are amongst the current issues that will have a bearing |
| |towards the local bourse’s trading sentiments. |
| | |
|Economic Data |Strategy : Our asset allocation strategy for the equities market will continue to remain focused on the|
|Yoy As of |longer term investments in the market’s heavyweights which are trading at attractive valuations while |
|2004 |at the same time offering attractive dividend yields. We continued to support the strong domestic |
|GDP + 7.6% 1Q04 |related sector, namely the banking and utilities sectors. As the market is believed to be building its |
|CPI + 1.3% June04 |base at the current level, we will continue to invest on the CI-linked counters as to ride on the |
|IPI + 12.8% May04 |possible recovery in the market for the immediate term. |
|Export +22.2% June04 | |
|Import +38.4% June04 | |
|Trade Bal. | |
|(RMm) 5.1bn June04 | |
|M’facturing | |
|Sales +19.7%yoy May04 | |
|Forex | |
|R’serves US$54.2bn 15/7/04 | |
| | |
|KLSE CI | |
| | |
|Top 10 KLCI stocks | |
|(30 July 2004): | |
|% % | |
|Maybank 9.37 P Bank(L) 5.09 | |
|Telekom 8.41 P Gas 3.54 | |
|Tenaga 7.60 BAT 3.44 | |
|MISC 5.48 CAHB 3.21 | |
|Maxis 5.27 S Darby 3.04 | |
| | |
|Market Cap.(30 July 2004): | |
|Bursa Malaysia RM664.62bn | |
|KLCI RM411.0bn | |
| |JULY 2004 Stock Market Review |
| | |
|Lack of positive newsflow affecting the|Week-on-week performance: Except for the first week of July which saw improved trading activities, the |
|market during the month… |remaining weeks during the month experienced dwindled trading volume with more investors seen to be on the |
| |sideline. The continued lethargic market action was mainly due to the scarcity of positive newsflow. |
| |Investors were practically on the sideline, causing trading volumes to plummet, nevertheless continued to |
| |hold strong at above an average of 350m per day. Institutional funds were seen selectively nibbling the |
| |market, while the retailers were fairly active, judging by the movement on the second liners and lower |
| |liners during the month. |
|More trading activities in the first | |
|week of the month… |The first trading week of the month saw the KLCI traded on a firmer note, breaking the strong resistance |
| |level of 850, supported by the buying from the foreign institutions. Total average traded volume surged to |
| |approximately 500m per day. At the end of the first week the KLCI closed at 854.06 points, an increase by |
| |more than 1.6% from the prior week. Trading focus remained on the selected heavyweights and banking stocks,|
| |on the back of market optimism that the banking sector will continue to do well this year. As the proxy to |
| |the local economic growth, the banking sector will continue grow. On the back of the current low interest |
| |rate regime locally, it is expected that the total loan growth in the banking system will continue to |
| |accelerate. As at end-June 2004, the total loan growth in the system has increased by 6.4%, one of the |
| |strongest growth rate since 1997, with the current 6-month NPL strengthened to around 6.6%. |
| | |
| |Absence of positive newsflow to support the market resulted in a lower total average daily trading volume |
|An overall somber mood in the market in|for the second week of the month at 330.8m per day, with the KLCI contracted by 0.94% to 843.15 points. |
|the second week.. |There was also a lack of continued buying interest from the market players which resulted in a more somber |
| |mood on the local bourse. In the middle of the week, the market was shocked with the demise of Tan Sri |
| |Azizan Zainal Abidin, the Chairman of Petronas, MAS and KLCC Holdings Berhad. Meanwhile, the selected |
| |interest on the banking stocks continued as the news related to Temasek Holding’s acquisition of a stake in|
| |Malaysian Plantation Berhad, which owns the Alliance Banking Group, was close to being finalized. |
| | |
| |The rising crude oil prices and expectations that domestic economic growth will slow down in 2005 were |
| |amongst the issues much talked about in the market in the third week of the month amid lack of fresh new |
| |leads. These have resulted in the trading remaining in lackluster, as investors continued to remain on the |
|Market was worried on the back of |sidelines. Interesting point to note was despite the lower closing on the CI during the week at 838.20, |
|continued absence of positive newsflow…|down by 0.6%, the daily trading volume backing up the market was higher in the latter part of the week from|
| |a meager 245m on Monday to 482m as at end of the week. The week also seen the prospectus launch for the |
| |proposed listing of KLCC Property Holdings Berhad. The pending listing on the Main Board of Bursa Malaysia |
| |involved the public issue of 432.15m, and it will be one the largest listing exercises in 2004. |
| | |
|Prospectus launching of one of the big | |
|listings this year – KLCC Property… |External factors continued to haunt the market sentiment in the final week of the month, especially from |
| |the high crude oil prices which recorded its highest level during the week at USD44.40 on July 29th. 2004. |
|High oil price at USD44.40 registered |At the same time, with the results reporting season around the corner, the market turned a bit more |
|during the month... |cautious on their trading stance especially on the CI-linked counters and the heavyweights. The benchmark |
| |closed lower by 1.0% during the week to 833.98 points, while the average total traded volume remained high |
| |at 390m per day. |
| | |
| |Issues much talked about during the month were mainly related to the local economic activities like the |
|Prospects for the banking and property |prospect of the banking and property sectors. For the 1Q2004 period, it has been a positive quarter |
|sectors… |performance to the local banking sector. The new interest rate framework announced by Bank Negara Malaysia |
| |which allow local banks to determine the BLR based on individual cost structure and interest margin with no|
| |maximum credit spread are positive for the local banking sector. In particular, this would benefit the |
| |local banks which are having healthy asset quality, strong risk management framework and established |
| |infrastructure. The current low interest rate regime locally is expected to stay until end of next year, |
| |the latest, despite the possible increases in the US interest rates in the next few months. This is |
|Low interest rate scenario, higher loan|expected to trigger higher loan growth, which in envisaged by the industry players at between 5% to 8% in |
|growth rate expected… |2004/2005 period. Public Bank Berhad, for example, registered a total gross loan growth of 6%, |
| |quarter-on-quarter, driven by the stronger retail sectors. The group has also registered a higher profit of|
| |20% y-o-y and 6% q-o-q for the same period, driven by stronger contributions from both its local and Hong |
| |Kong divisions. Going forward, it is expected that the earnings growth for the sector to improve by a |
| |double digit percentage for the current year and next. |
| | |
|Property sector will be the main |A beneficiary of the current low interest rate scenario will be the property sector. The residential |
|beneficiary from the low interest rate |segment of the property sector will continue to remain robust and the demand has spilled over the |
|scenario… |high-ended landed and premium condos market. This was evidenced by the higher take up rate (of more than |
| |70%) and the recent jump in prices of these products, especially in those strategically located areas. It |
| |is expected that the property sector locally will bloom further with the relaxation of the FIC guidelines |
| |on the property acquisition by the foreigners (elaborated further in our Market Outlook segment of this |
| |Monthly Newsletter), which came into affect on August 1, 2004. |
|Region’s 4th. best performing market… | |
| |When compared to other regional markets, the Malaysian bourse continued to be one of the performing markets|
| |for the seven months of the year, ranked at number 4 (gained 5%) behind The Philippines (+9.9%), Indonesia |
| |(+9.4%) and Singapore’s (+7.2%) bourses. |
REGIONAL MARKETS PERFORMANCE
(Jan 2004 – July 2004)
|major events IN JULY 2004 |
|2/7/2004 |Malaysian exports grew by 20.5% y-o-y in May 2004. |
|5/7/2004 |Global semiconductors sales 36.9% y-o-y in May 2004, its new 4-year high; Genting Sanyen signed a 30-year PSC with an Indonesian |
| |counterpart; IOI Corp proposed issuance of a USD300m 5-year Unsecured Convertible Bonds. |
|7/7/2004 |Industrial production grew by 12.8% y-o-y in May 2004. |
|8/7/2004 |Government announced that it will implement RM8.5b infrastructure projects. |
|9/7/2004 |Tenaga Nasional proposed a new RM1.2b 300MW IPP in Sabah. |
|13/7/2004 |Crest Petroleum proposed issuance of up to USD100m Nominal Value 5-year Convertible Bonds. |
|15/7/2004 |Malaysian inflation rate increased to 1.3% y-o-y in June 2004. |
|16/7/2004 |Malaysian manufacturing sales moderated by 19.7% y-o-y in May 2004. |
|21/7/2004 |Celcom launched its latest solution to boost business efficiency called as “Celcom Integrated Business Solutions” (CIBS). |
|22/7/2004 |Maybank announced that it is eyeing for a stake in Indonesia’s 7th. largest bank – PT Bank Permata. |
|23/7/2004 |Public Bank Berhad announced its 2QFY04 results – Above Expectations; IOI Corporation Berhad announced proposed acquisition of |
| |Soctek Sdn. Bhd. for RM89.2m; Forex reserves up to USD54.2b in mid-July 2004 |
|26/7/2004 |Jaya Jusco Stores Berhad announced its 2QFY04 results – Within Expectations |
|27/7/2004 |Malakoff Berhad announced its 3QFY04 results – Within Expectations. |
|28/7/2004 |Tenaga Nasional Berhad announced its 3QFY04 results – Below Expectations. |
|29/7/2004 |Broad monetary aggregates strengthened in June 2004: M1 up by 16.3%, M2 up 11.5% and M3 up 10.5% y-o-y in June 2004. |
| |Market Outlook |
| | |
| |The local bourse is expected to be traded on a cautious note for the current month. With the overall market |
| |expectations of an economic slowdown towards 2H of the year, the current corporate result announcement will |
| |be closely watched by the investors as to gauge whether the current earnings growth rates have peaked up. |
| | |
| |Economic front: Another important release expected during the month will be the 2Q GDP figures for 2004 |
| |(sometime in late August 2004). After having recorded a growth of 7.6% in the 1Q period, the market is |
| |expecting another bullish growth figure for the 2Q at more than 7.8%, which will result in the higher 1H GDP |
| |growth of 7.7%. As for the remaining quarters (ie. 3Q and 4Q), the judgement out there continued to be mixed |
| |and most of the market watchers are expecting an overall GDP growth for 2004 at between 6.3% to 6.8%. Main |
| |impetus for growth for the current year will be from the manufacturing and services sectors which are |
| |estimated to grow by 9.7% and 5.8%, respectively. |
| |Meanwhile other sectors of the economy, namely (i) agriculture, (ii) mining & quarrying and (iii) |
| |construction are estimated to incur slower growth at 2.8% (CY03:5.7%), 4.3% (CY03:5.9%) and 1.2% |
| |(CY03:1.9%), respectively. |
| | |
|E&e sector slowdown… |E&E sector slowdown: The general consensus is looking at a slowdown in Electrical & Electronics (e&e) |
| |sector for the remaining half of the year. This is expected despite the strong surge in growth recorded in |
| |the first 2 quarters of the year. The declining trend in exports of intermediate products (like |
| |microchips), over supply and the coming to the peak of an upcycle for the e&e sector are amongst the issues|
| |that are slowing down the sector in the 2H of the year. |
| | |
| |Strong services sector: For the services sector, the anticipated accelerating growth is particularly due to|
|More from services sector... |the low base of the sector in 2003 which was at 4.1%. The sector which accounted for 56% of GDP output for |
| |2003, is estimated to grow by more than 6% for the remaining 2 quarters of the year. There are several |
| |reasons for this strong expected growth: (1) more tourists visiting Malaysia compared to the previous year |
| |due to SARs, (2) strong advertisement expenditure due to Euro2004 and higher growth towards the festive |
| |season, and (3) the banking sector’s merger and acquisition (M&A) activities to pick up. |
| | |
| |Merger & Acquisitions activities: Of particular interest for the latter was the recent acquisition by |
| |Temasek (of Singapore) of 15% equity stake in Malaysian Plantations which wholly owns Alliance Banking |
| |Group. This could reignite the interest in banking stocks, especially for those smaller niche banks, like |
| |Southern Bank and EON Capital. Another proposed merger is between AmBank and AmFinance to become a new |
|Temasek received the approval to acquire |financial group under the name Arab Investment Group Berhad or AIGB. |
|Malaysian bank… | |
| |A new FIC guidelines: The implementation of the new Foreign Investment Committee (FIC) guidelines which |
| |took into affect from August 1st 2004, would also be closely followed by the market players. Amongst other |
| |issues which are related to the new FIC guidelines are (i) the acquisition threshold which is exempted from|
| |the FIC approval raised from RM5.0m to RM10.0m and (ii) foreign interests in “national interest” companies |
| |to be limited to 30%. The sectors which are categorically named under “national interest” are water, power,|
| |telecommunication, broadcasting, defence, security and also other government-related (or GLCs). On a |
|New FIC guidelines take into affect in |broader scale, the new FIC guidelines are expected to have a positive impact on the property sector as a |
|August.. |whole. Under the new FIC guidelines, foreigners are allowed to acquire Malaysian-based property which are |
| |valued above RM150,000 with financing based from both internal and external forces allowed. At the same |
| |time foreigners are allowed to acquire agricultural land valued at above RM250,000 and at least 5 acres in |
| |area. This would help to boost the current oversupply of property spaces locally, especially in Kuala |
| |Lumpur and Johor Bharu. |
|GLCs with the new heads… |Revamping of GLCs: With the new corporate captains being appointed to head the GLCs, it is expected that |
| |some sort of revamping or corporate restructurings will take place in the immediate term. At the same |
| |time, we believe that the implementation of FIC is timely, as through the anticipated revamping exercise |
| |of the GLCs, there would be transfer of public limited companies (plc) shares belonging to Minister of |
| |Finance Inc. to Khazanah Nasional Berhad, which may result in the latter becoming the biggest and most |
| |dynamic investment house in the region. |
| | |
| |Another interest rate hike in the US? After the first 25 bp hike in US interest rate recently, all eyes |
| |will be on the next US FOMC meeting on August 10th 2004. Although there is already a general consensus |
| |that the US interest rate will be on the rise towards the end of the year, any significant increases, we |
|Higher costs of doing business in the US… |believe, will be a risk to the US market. This was mainly due to the current “inflationary” scenario in |
| |the US on the back of higher fuel prices. The crude oil price was traded at its high, at between USD40 to|
| |USD43/barrel towards end of July 2004, and has been on the increase ever since to the current level of |
| |USD44/barrel. |
| | |
| |The market is expected to observe the implementation of 3 measures recently announced by the government |
| |in its effort to strengthen the capital markets, namely (i) proposals for private placements of |
| |securities which do not exceed 10% of the issued and paid-up capital of a company will receive automatic |
| |approval of the SC, (ii) the securitization of RM25b worth of government staff housing loans, which is |
| |aimed at developing the bond market, particularly the asset backed securitization (ABS) as a new |
|3 new measures to strengthen the capital |financial tool to raise funds, and (iii) the issuance of ringgit bonds by multilateral development banks |
|market… |and financial institutions. |
| | |
| |In a nutshell, we expect that the performance of the market in the short term will depend on the expected|
| |newsflow. We have seen earlier last month (ie. In July 2004) that the KLCI was hovering between the 820 |
| |to 830 areas on the absence of positive newsflow in the market. On a base case scenario, should the |
| |current bearish sentiment persist in the market, we expect the CI to test 800 points support level in the|
| |short term. We are anticipating that the current market weakness will continue at least to the beginning |
| |of August, especially after the FOMC meeting on August 10th. |
| | |
|Newsflow will have an impact on the | |
|market’s sentiments… | |
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|US Key Economic Indicators |
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| |Strategy |
| | |
|Continue to adopt a more defensive strategy|Our investment strategy will continue to remain focused on the more defensive stocks, while at the same our|
| |exposure on the favoured domestic sectors like banking and selective property stocks will be further |
| |enhanced. We believe that the KLCI is building its base at around the 815 to 820 levels. Our short term |
| |strategy will be on continuing accumulation on those attractively valued heavyweights. On the upside, we |
| |expect that the market will face the resistance at 850 points, for the short term, which brings the market |
| |PER of between 15x to 13x FY04 and FY05, respectively |
|BARRA RISK-RETURN REPORT FOR JULY 2004 | | |
| | | | |
|Table 1: Summary of Model Portfolios | | | |
| |Equity Fund |Pension Fund |Islamic Fund |
| | | | |
| Benchmark |KLCI |PFCI |Syariah |
| Number of Stocks |26 |28 |23 |
| Beta (Total) |0,85 |0,56 |0,83 |
| Beta (Equity) |1,06 |1,09 |1,03 |
| Active Risk (Total) |7,42 |14,32 |7,50 |
| Active Risk (Equity) |5,77 |3,47 |5,24 |
| | | | |
| | | | |
|Table 2: Risk Decomposition | | | |
| Type of Risk |Equity Fund |Pension Fund |Islamic Fund |
| 1. Total |28,08 |17,92 |26,67 |
| 2. Benchmark |32,45 |31,61 |31,60 |
| 3. Active |7,42 |14,32 |7,50 |
| | | | |
| 4. Active Common Factor: |6,11 |13,88 |6,01 |
| 5. Active Industry |6,95 |15,08 |8,14 |
| 6. Active Risk Index |4,44 |3,63 |3,97 |
| | | | |
| 7. Active Specific |4,22 |3,52 |4,50 |
| | | | |
| Top-down approach (Asset Allocation) |59,15 |79,77 |57,18 |
| Bottom-up approach (Stock Selection) |40,85 |20,23 |42,82 |
| | | | |
| | | | |
|Table 3: Monthly Contribution To Total Return | | |
| |Equity Fund |Pension Fund |Islamic Fund |
| Source Of Return |Contribution |Contribution |Contribution |
| |(% Return) |(% Return) |(% Return) |
| 1 Risk Free |0,240 |0,240 |0,240 |
| 2 Benchmark Excess |1,500 |1,820 |0,870 |
| 3 Expected Active |-0,090 |-0,230 |-0,100 |
| 4 Market Timing |-0,130 |-0,490 |-0,020 |
| 5 Risk Indices |-0,180 |-0,030 |-0,010 |
| 6 Industries |-0,180 |-0,040 |-0,100 |
| 7 Asset Selection |-0,410 |-0,090 |0,280 |
| 8 Total Exceptional Active [4+5+6+7] |-0,890 |-0,650 |0,150 |
| 9 Total Active [3+8] |-0,980 |-0,880 |0,050 |
| 10 Total Managed [1+2+9] |0,520 |0,940 |0,930 |
| | | | |
KLSE Market Performance
|Indices |Closing as at |% Change |
| |30/7/2004 |1 mth |3 mths |YTD |
|Emas |200.32 |1.50 |-3.24 |2.43 |
|Composite |833.98 |1.72 |-0.50 |5.04 |
|Consumer Products |227.61 |0.91 |0.72 |5.23 |
|Industrial Products |81.83 |3.27 |-3.32 |0.54 |
|Construction |165.87 |-2.98 |-10.63 |-11.76 |
|Trading-Services |119.43 |1.14 |-1.35 |3.55 |
|Finance |6957.32 |4.20 |-1.40 |7.50 |
|Properties |735.98 |0.49 |-10.88 |-1.96 |
|Plantations |2211.23 |0.62 |-9.93 |0.06 |
|Mining |405.29 |-7.07 |-16.36 |19.66 |
|Industrial |1827.60 |1.60 |0.52 |3.11 |
|Second Board |117.87 |0.60 |-10.29 |-16.19 |
| | | | | |
|Avg. Daily Volume (mn) |385.41 | | | |
|Avg. Daily Turnover Value (RM mn) |713.44 | | | |
| | | | | |
| | | | | |
KLCI Relative Strength
Performance Review of Top Ten KLCI Weighted Stocks forJuly 2004
|Company |Close (RM) |Price Change (%) |Relative % |KLCI |
| |30/7/2004 |1 mth |YTD |KLCI (1 mth) |Weighting % |
|Maybank |10.70 |5.94 |10.88 |5.19 |9.37 |
|Telekom |10.30 |0.00 |22.62 |-2.6 |8.41 |
|Tenaga |9.95 |-1.49 |4.19 |-4.08 |7.60 |
|MISC |12.10 |2.54 |7.08 |0.96 |5.48 |
|Maxis |8.80 |0.00 |16.56 |-1.82 |5.27 |
|Public Bank (L) |6.35 |4.96 |12.19 |2.52 |5.09 |
|BAT |51.00 |0.99 |17.24 |0.28 |3.54 |
|Petronas Gas |7.15 |5.15 |-5.30 |2.89 |3.44 |
|Sime Darby |5.60 |0.90 |7.69 |0.19 |3.21 |
|Commerce Asset |4.68 |-3.70 |14.15 |-3.99 |3.04 |
| | | | | | |
KLSE Ranked Returns for July 2004
Malaysian Economic Indicators
|EXTERNAL TRADE (RM mn) |
| |Exports |% y-o-y |Imports |% y-o-y |Balance of | |
| | | | | |Trade | |
| | | | | | | |
|Apr-04 |39,689 |23.2 |33,531 |31.6 |6,158 | |
|May-04 |38,531 |20.5 |31,687 |26.5 |6,844 | |
|Jun-04 |39,750 |22.2 |34,660 |38.4 |5,090 | |
| | | | | | | |
|2002 |357,802.0 |7.0 |303,106.0 |8.2 |54,696.0 | |
|2003 |398,881.0 |11.5 |317,747.0 |4.8 |81,134.0 | |
| | | | | | | |
|INFLATION FIGURES (CPI) |
| | |Index |% y-o-y | | | |
| | | | | | | |
|2002 | |103.2 |1.8 | | | |
|2003 | |104.3 |1.1 | | | |
| | | | | | | |
|Apr-04 | |105.2 |1.0 | | | |
|May-04 | |105.5 |1.2 | | | |
|Jun-04 | |105.6 |1.4 | | | |
| | | | | | | |
|MONETARY FIGURES |
| |Jun-04 |May-04 |---------------------------- % Change ---------------------------- |
| |(RM bn) |(RM bn) |-1 mth |-3 mths |-6 mths |-12 mths |
| | | | | | | |
|Total Deposits |584.6 |577.3 |1.26 |1.99 |5.56 |11.12 |
|Total Loans |492.8 |485.8 |1.44 |2.86 |3.97 |-1.83 |
|Loan-Deposit Ratio (%) |80.2 |79.9 | | | | |
| | | | | | | |
|Money Supply |M2 |4476 |443.6 |0.90 |1.84 |5.07 |11.48 |
|Growth: | | | | | | | |
| |M3 |578.8 |574.4 |0.77 |1.81 |8.11 |10.80 |
| | | | | | | |
|MARKET MOVEMENT |
| | | | | |-------- % Change -------- |
| | | |Jul-04 |Jun-04 |-1 mth |YTD |
| | | | | | | |
|Commodities: |Palm Oil (RM/tonne) | |1,482.80 |1,556.60 |-4.74 |-18.94 |
| |Rubber (sen/kg) | |442.00 |460.20 |-3.95 |-5.08 |
| |Tin (USD/tonne) | |8,990.50 |9,343.90 |-3.78 |49.48 |
| |Nth Sea Brent (USD/bn) | |41.10 |38.20 |7.59 |32.84 |
| |Cocoa (RM/tonne) | |4,900.00 |4,500.0 |8.89 |-5.22 |
| |Gold (USD/oz) | |397.20 |391.60 |1.43 |-4.79 |
| | | | | | | |
|INTEREST RATES FORECAST |
| | | | |---------- Change ---------- | |
| | |Jul-04 |Jun-04 |-1 mth |YTD | |
| | | | | | | |
|KLIBOR |1-mth |2.84 |2.83 |0.01 |-0.16 | |
| |3-mth |2.87 |2.87 |0.00 |-0.20 | |
| |12-mth |2.99 |2.99 |0.00 |-0.22 | |
| | | | | | | |
|BLR |Malayan Banking |6.000 |6.000 |0.00 |0.00 | |
| | | | | | | |
|MGS (GRY) |1-yr |2.742 |2.750 |-0.01 |-0.18 | |
| |5-yr |4.312 |4.408 |-0.10 |0.03 | |
| |10-yr |5.103 |5.192 |-0.09 |0.25 | |
|GLOBAL STOCKMARKETS PERFORMANCE |
| | | |-------------------------------------- % Change ----------------------------- |
|Country |Index |30 Jul-04 |1 mth |3 mth |6 mth |12 mth |YTD |
| | | | | | | | |
|Malaysia |KLCI | 833.98 |1.72 |-0.50 |1.84 |15.74 |5.04 |
|Singapore |STI | 1,891.71 |2.92 |2.70 |2.35 |21.35 |7.21 |
|Japan |Nikkei-225 | 11,325.78 |-4.50 |-3.71 |5.03 |18.43 |6.08 |
|Hong Kong |HSI | 12,238.03 |-0.39 |2.47 |-7.91 |20.75 |-2.69 |
|Philippines |PCOMP | 1,584.70 |0.34 |1.91 |5.07 |27.76 |9.87 |
|Thailand |SET Idx | 636.70 |-1.54 |-1.77 |-8.90 |31.52 |-17.54 |
|Indonesia |JCI | 756.98 |3.36 |-3.37 |0.54 |49.02 |9.41 |
|Taiwan |TWSE | 5,420.57 |-7.17 |-11.40 |-14.98 |1.92 |-7.98 |
|South Korea |KOSPI | 735.34 |-6.42 |-14.78 |-13.34 |3.06 |-9.30 |
| | | | | | | | |
|United Kingdom |FTSE 100 | 4,413.10 |-1.14 |-1.71 |0.51 |6.16 |-1.43 |
|Germany |DAX | 3,895.61 |-3.88 |-2.25 |-4.02 |11.69 |-1.75 |
|France |CAC 40 | 3,647.10 |-2.30 |-0.74 |0.24 |13.61 |2.51 |
|Spain |IBEX 35 | 7,919.30 |-1.97 |-2.35 |-0.13 |12.14 |2.35 |
|Switzerland |SWISS Mkt | 5,547.20 |-1.28 |-3.93 |-3.30 |9.22 |1.08 |
|Italy |MIB 30 | 27,676.00 |-1.85 |-1.66 |-0.06 |8.62 |3.60 |
|Sweden |OMX Idx | 683.30 |-2.12 |-0.33 |1.39 |19.67 |7.39 |
| | | | | | | | |
|United States |DJIA | 10,139.70 |-2.83 |-0.84 |-3.32 |9.81 |-3.01 |
|United States |NASDAQ | 1,887.36 |-7.83 |-1.71 |-8.65 |8.78 |-5.79 |
|United States |S&P 500 | 1,101.72 |-3.43 |4.10 |-2.60 |11.25 |-0.92 |
| | | | | | | | |
| | | | | | | | |
|GLOBAL STOCKMARKETS PERFORMANCE |
|Country | |MARKET |---------------------- PER (x) ---------------------- |
| | |CAPITALISATION | |
| | |(USD bn) | |
| | | | | |
| | | |2004 (f) |2005 (f) |2006 (f) | |
| | | | | | | |
|Malaysia @ | |174.9 |14.7 |13.0 |10.9 | |
|Singapore | |238.7 |14.4 |13.5 |11.8 | |
|Hong Kong # | |702.9 |14.4 |13.0 |12.2 | |
|Philippines | |74.6 |12.6 |10.7 |9.8 | |
|Thailand # | |99.9 |10.4 |8.9 |8.8 | |
|Indonesia # | |56.3 |8.3 |7.4 |6.4 | |
|Taiwan # | |351.0 |11.6 |10.7 |10.4 | |
|Korea | |284.9 |6.8 |6.6 |6.0 | |
| | | | | | | |
Source: RHBRI # Estimate Directory Market Cap. as at 31/7/04
|EARNINGS & ECONOMIC GROWTH FORECASTS |
| |-------------- EPS y-o-y Growth (%) -------------- |--------------- GDP Growth (%) --------------- |
| |2004 (a) |2005 (f) |2006 (f) |2003 (f) |2004 (f) |2005 (f) |
| | | | | | | |
|Malaysia @ |17.0 |14.0 |11.0 |5.3 |6.3 |5.4 |
|Singapore |16.0 |11.0 |11.0 |0.8 |4.9 |4.4 |
|Hong Kong # |16.0 |11.0 |7.0 |2.3 |4.6 |3.5 |
|Philippines |25.0 |12.0 |13.0 |3.7 |4.0 |3.9 |
|Thailand # |13.0 |14.0 |4.0 |6.0 |6.1 |5.6 |
|Indonesia # |15.0 |15.0 |16.0 |3.8 |4.4 |4.5 |
|Taiwan # |28.0 |13.0 |0.0 |2.9 |4.5 |4.7 |
|Korea |41.0 |14.0 |6.0 |2.7 |5.2 |5.5 |
| | | | | | | |
Source: RHBRI # Estimate Directory
| |JULY 04 BOND Market Review |
|RM Bond Market Recap |Market Commentary: |
| | |
| |MGS |
| | |
| |Throughout the month, the MGS’ were seen trading sideways. Due to the lack of new leads, |
| |investors were not compelled to take yield levels beyond market equilibrium. There were a few |
| |mini rallies but prices were quickly pressured back down by sharp profit taking. We believe |
| |that market players were consolidating their positions ahead of the announcement of new |
| |15-year MGS to be issued at month end. Most investors assumed that the issuance size may not |
| |be as big as expected hence the stability of prices. Trading yields were relatively unchanged,|
| |whilst fund flows were slanted towards the short to medium tenured benchmarks. |
| | |
| |To recap, at end June, the market was in a net cash position as RM11.7 bill maturities were |
| |met with only RM9.6 bill Govt Securities issued. In addition, a further RM1 bill of Khazanah |
| |as well as RM2.3 bill Danaharta bonds matured during the month whilst a further RM700 mill |
| |Govt Securities matured in July. However, only RM2 bill of the 15 year MGS3/04 was issued in |
| |July. At a YTM of 5.73%, the issue was 1.6x oversubscribed. |
| | |
| |Going forward, at least for the immediate term, we expect yield curve to steepen further at |
| |the short to medium end as investors seek to replace the maturities of the more liquid Govt. |
| |Securities. |
| | |
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| | | | | |
|MGS |Yield |Yield |+/- | |
| |30/07 |30/06 | | |
| |(%) |(%) | | |
|MGS 3/98 MGS |2.80 |2.80 |(%) | |
|3/C86 |3.71 |3.83 |uc | |
|MGS1/04 |4.25 |4.36 |-0.12 | |
|MGS 2/04 |5.05 |5.12 |-0.11 | |
|MGS3/04 |5.73 |NA |-0.07 | |
| | | |NA | |
| | | | | |
|AAA | | | | |
|TLKM07 |4.23 |4.27 | | |
|PUTRA10 |5.12 |5.20 |-0.04 | |
|PLUS 07 |4.07 |4.15 |-0.08 | |
|PLUS 09 |4.82 |4.85 |-0.08 | |
|PLUS 11 |5.97 |5.93 |-0.03 | |
| | | |+0.04 | |
|AA | | | | |
|YTLPG12 |5.95 |6.10 | | |
|TNB 06 |4.15 |4.07 |-0.15 | |
| | | |+0.08 | |
|A | | | | |
|RHBCap06 |5.30 |5.10 | | |
|ASTUTE11 |5.60 |5.62 |+0.20 | |
| | | |-0.02 | |
| | |
| | |
|US Bond Market Recap | |
|(As at 30 July 2004) | |
|US Treasuries |Yield |Yield |+/- | |
| |31/07 |30/06 | | |
|2Y |(%) |(%) | | |
|5Y |2.79 |3.16 |(%) | |
|10Y |3.66 |3.81 |-0.37 | |
| |4.48 |4.62 |-0.15 | |
| | | |-0.14 | |
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|Source : Citibank, Bloomberg, Recent Treasury | |
|Notes and Bond Auction Results | |
| |PDS |
| | |
|Corporate bonds remained thinly traded |Corporate bonds remained sparsely traded throughout the month. Meanwhile, investors are still |
|throughout the month |trying to digest the statement made by DPM Najib that Tenaga Nasional is keen to re-negotiate the |
| |power purchase agreements (PPAs) with local IPPs as the present contracts are believed to be not |
| |in its favour. This follows Najib's call for a review of privatisation contracts, stating some |
| |earlier deals favour the concessionaires. We have always understood that the strength of the IPPs|
| |is based on the Power Purchase Agreement (PPA). Should the terms in the PPA be adapted to the |
| |disadvantage of the IPPs and they are not compensated accordingly, their bankability would be |
| |affected. The way we see it, the potential credit upside will be on Tenaga, whereas the drawbacks|
| |are on the IPPs. |
| | |
| |Not surprisingly, there was slew of activity on the AA segment, centered on the power papers. |
| |Tenaga bonds continue to be actively traded whilst the recently issued RN3.4bn AA+rated Kapar |
| |Energy Ventures bonds with tenors ranging from 1-15 years were seen being sold down from primary |
| |levels. Power Asset, Segari moved up a few bps. Other regular names reported done were Kesas, |
| |Gamuda, and Guthrie. Wah Seong also makes its debut this month. |
| | |
| |On the AAA papers, interest was skewed along short to medium tenures, trading largely unchanged. |
| |Papers traded include Putrajaya, Plus, Sime Darby, to name a few. |
| | |
| |On the single A segment, the more active papers done were the banks’ Subdebts ie. Alliance, |
| |AmFinance, RHB Sakura, possibly due to BNM’s approval on insurance companies to hold a certain |
| |percentage of subdebts in their portfolios. |
| | |
| |Moving forward , the market will continue to trade range-bound due to lack of fresh leads We see |
| |possible steepening of the curve in the medium term as players demand higher premium for the |
|Possible steepening of the curve in the medium |longer end of the yield curve. Though most players may choose to remain sideline, we expect some |
|term as players demand higher premium for the |investors to pick up long dated papers for better yield play. |
|longer end of the yield curve. | |
| | |
| | |
| | |
| | |
| | |
|Expect some investors to pick up long dated | |
|papers for better yield play | |
| | |
| | |
| | |
| |Money Market |
| | |
| |Overnight rates stayed at 2.60% – 2.65% levels whilst the 3 month KLIBOR remained at 2.86%. |
| | |
| |MARKET OUTLOOK |
| | |
|Malaysia's interest rates are expected to remain|Based on data released for the second quarter, sustained strength on the export sector as well as |
|low next year to bolster economic growth |domestic activities continues to spur economic growth. Export growth strengthened to +22.2% yoy in |
| |June, from +20.5% yoy in May. The growth beat the market’s expectations of over 19%, suggesting that|
| |exports remained resilient despite the rise in crude oil prices. In a statement made by Prime |
| |Minister Abdullah Badawi, real GDP will grow at 6.7% for 2004. To date, GDP growth has already |
| |chalked 7% in the 1st half of 2004. |
| | |
| |We expect a further hike in the Feds rate of another 25bps in August during the next FOMC meeting on|
|Yields in the coming weeks will not fluctuate |the 7th. The expected raise in US rates will narrow the interest rate differential between US and |
|significantly |Malaysia to 120 bps, but it will still remain wide. As such, we do not believe that Malaysia will |
| |raise its rates this year. In fact, our views are supported by the Second Finance Minister Nor |
| |Mohamed Yakcop. He stressed that Malaysia's interest rates are expected to remain low next year to |
| |bolster economic growth, and commented further that there is no pressure to raise interest rates |
| |in 2005. Overnight rate will continue to remain at about 2.70%. |
| | |
| |Meanwhile we believe that yields in the coming weeks will not fluctuate significantly and the |
| |market will continue to move directionless in the short term as the anticipation of the increase in|
| |US interest rates has already been factored into the local bond prices. |
| | |
|The market will continue to move directionless |In the long term, if economy grows, the rates bias will grow wider. If fast, yield curve steep speed|
|in the short term |at which it rises may not be as fast as the market is pricing it. |
| |NEW ISSUES |
| |Sarawak International |: |RM425mill Al-Ististhna Serial Bonds |
| |Medical Centre | | |
| |(AAA – MARC) | | |
| | | |RM250mill Bonds |
| |CIMB Berhad | | |
| | | | |
| | |: | |
| |RATING NEWS |
| |Malakoff Berhad (Malakoff) | |RAM has reaffirmed the long-term rating assigned to Malakoff’s |
| | | |RM1,850 million Serial Bonds (2003/2013) at AA2. Concurrently, the|
| | | |ratings for its RM420 million CP/MTN (2001/2008) has also been |
| | | |reaffirmed at P1/AA1(s). The reaffirmed ratings have a stable |
| | | |outlook. |
| | | | |
| |Commerce International | |RAM has reaffirmed CIMB’s long- and short-term general bank ratings|
| |Merchant Bankers Berhad | |at AA3 and P1, respectively. The rating of the Bank’s RM600 million|
| |(CIMB) | |Negotiable Certificates of Deposits has also been reaffirmed at |
| | | |AA3. Both ratings carry a stable outlook. The reaffirmation is |
| | | |based on CIMB’s ability to maintain its clear visibility in the |
| | | |market via its strong franchise and high-profile business deals. |
| | | |More importantly, this had translated into its improved bottom line|
| | | |in FYE 2003 compared to FY 2002. |
| | | | |
| | | |RAM has reaffirmed the rating of Grand Saga’s RM210 million BaIDS |
| |Grand Saga Sdn Bhd’s (Grand | |at AA3, with a stable outlook. Grand Saga is the toll |
| |Saga) | |concessionaire for the 11.5-km Cheras-Kajang section of Federal |
| | | |Highway Route 1. |
| | | | |
| | | |MARC has reaffirmed the long-term and short-term ratings of |
| |Cagamas Bhd (Cagamas) | |Cagamas Bhd (Cagamas) at AAA and MARC-1 respectively. The |
| | | |reaffirmation reflects the strong ability and flexibility of the |
| | | |Company to meet its financial commitments, supported by a |
| | | |favourable portfolio of loans and debts with full recourse to the |
| | | |selling institutions, its strong capitalization and a proactive |
| | | |management team. As the country’s National Mortgage Corporation, |
| | | |the Company’s strategic role in the development of the secondary |
| | | |mortgage market and the strength of the Company’s shareholders are |
| | | |positive factors. |
| | | | |
| | | |(source : RAM and MARC) |
|Fixed Income Portfolio Summary |PERFORMANCE REVIEW |
|(July 2004) | |
| |The Fixed Income portfolio showed a weighted average holding yield of 4.98% p.a. in July, up 24bps |
|Weighted Ave Holding Yield % (including cash) |from the previous month. The portfolio outperformed the benchmark 3-month Maybank FD by 198bps. |
| | |
|(RM) Avg |STRATEGY |
|Yield (%) | |
| |Medium dated papers are still preferred from relative value standpoint. Selective long-term papers |
|Total 1,433.26 4.98 |could also provide absolute yield enhancement depending on credit spreads and convexity level. |
| | |
| |Being selective sectorally may provide value enhancement as it provides better yield pickup compared|
| |to papers with similar credit and duration. |
| | |
|Holdings Breakdown % |In managing risk, portfolio duration in general is kept at moderate level. Liquidity management will|
|[pic] |also be considered depending on mandates. |
|Duration | |
|4.34 years | |
| | |
|Top 5 Sectors | |
| | |
|Sector % Mkt Value | |
|Power 23.5 | |
|Infrastructure 18.2 | |
|ABS 16.9 | |
|Construction 13.7 | |
|Finance 10.0 | |
| | |
|Top 5 Holdings | |
| | |
|Issuer % Mkt Value | |
|ABS Real Estate 8.3 | |
| | |
|PLUS 7.1 | |
|SKS Power 6.2 | |
|Anjung Bahasa 6.2 | |
|SILK 3.8 | |
| | |
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