Malaysia FDIs to grow at 15%

By The Edge

Malaysia is expected to see a growth of 10% to 15% in foreign direct investments (FDI) this year, with spillover effects benefiting sectors like construction, property and manufacturing, said consulting firm Frost & Sullivan GIC Malaysia Sdn Bhd managing director for Southeast Asia Manoj Menon.

While investors would generally be more cautious in making investments, China, India, South Korea and Middle Eastern countries would continue to spur FDI growth in Malaysia.

“Investors from the Middle East are looking very aggressively at the Malaysian market so we see collaboration with Middle East investors going up substantially,” he said.

Its partner and head of automotive and transportation practice for Asia-Pacific Kavan Mukhtyar said despite bearish sentiments on the US economy and its possible impact on the domestic economy, construction and property segment in Malaysia would be one of the fastest growing sectors in 2008.

“There is an overall buoyancy in these markets which is not solely driven by foreign buyers. We believe there is huge home demand and corridor projects driving these segments,” Kavan said after its Futurewatch 2008-The Frost & Sullivan Asia Pacific Outlook briefing on Jan 25.

Asked on the possible impact of a recession in the US on the Malaysian economy, Manoj said: “While our overall view is that the US is showing signs of slowing down, we believe strong domestic demand within Asia would, in many ways, soften the impact of any slowdown from US.”

Manoj said there would be an indirect impact on the local economy, in industries like electronics and manufacturing where the US was the predominant market. “The overall growth pattern for these sectors however, would range between 8% and 10%.”

“If there is a serious recession in the US and this continues for more than 12 months, or up to 24 months, 2009 will then be a recessionary growth year. However, as we have strong domestic demand, we will be relatively insulated from what happens in the US,” he said.

Meanwhile, the firm’s director of chemicals, materials and food for Asia-Pacific Kumaraguru Veerasamy said crude palm oil (CPO) prices would likely decline to RM2,800 per tonne towards June due to a possible slowdown in the US economy.

Five stocks with strong potential upsides

By Biz Times

CREDIT Suisse is recommending to investors KPJ Healthcare and four other small stocks with significant potential upsides over the next 12 months, ranging from 42 per cent to 88 per cent.

It has a RM5.80 target price on KPJ, Malaysia's largest and only listed private hospital group, implying an upside of 88 per cent from the stock's closing price of RM3.08 yesterday

The other stocks it likes are E&O Property Development (target price of RM4.50), Salcon (RM1.72), Boustead Holdings (RM9.75) and Muhibbah Engineering (RM5.30).
The foreign research house believes these companies could deliver strong earnings in 2008 against a backdrop of high oil and commodity prices and slower global economic growth, offset by Government infrastructure spending and moves to boost the domestic economy.

It also noted that Middle Eastern oil money is flowing into Malaysia, seeking a home in property assets and other investments.

"We have picked (those) companies because they are positioned favourably amidst this backdrop to deliver strong earnings growth in 2008," it said in a report dated January 17.

It said E&O Property Development, a property developer in the Klang Valley and Penang, offers investors exposure to Malaysia's high-end property sector.

The company has five upcoming launches with a gross devlopment value of more than RM1.6 billion in the Klang Valley high-end property segment.

Conglomerate Boustead, meanwhile, has plantations and fabrication yards driving earnings, on the back of higher crude palm oil prices and a strong wave of shipbuilding activity, coupled with a potentially huge privatisation contract.

The research house believes there is also hidden value in Boustead's prime property assets.

It noted that KPJ is the cheapest hospital stock in the region, while water-related Salcon is a laggard.

It expects oil and gas (O&G) company Muhibbah to ride on the back of global O&G exploration activity and infrastructure spending.

The stock closed at RM3.74 on friday, while E&O closed at RM2.60, Boustead RM6.30 and Salcon, RM1.07

What's wrong with the KLCI?

By the edge

THE Kuala Lumpur Composite Index (KLCI) may hit the 1,500 points level in first quarter of 2008, supported mainly by buying of heavyweights, particularly plantation stocks, CitiGroup Global Markets Malaysia Sdn Bhd director Choong Wai Kee said today.

“Looking at crude palm oil prices and the current positive sentiment towards the market, particularly election speculation, we cannot rule out that the KLCI may hit 1,500 this quarter,” he told a media briefing on Malaysia’ economic and equity markets outlook for 2008.

The benchmark Composite Index reached 1,487.39 points at 9.34 am today, a fresh all time high to date, beating yesterday’s record high of 1,473.74.

Choong, who is the company’s head of Malaysia Research, said apart from plantation, telecommunication was also a sector driving the gains of Bursa Malaysia shares at present.

Since the listing of Sime Darby in November 2007, the plantation and telecommunication counters had accounted for more than 25 per cent of the CI, he said.

Besides the plantation and telecommunication sectors, the banking sector is also favourable as it will be a beneficiary of the government’s efforts to drive consumer spending, Choong said.

Maybank and Public Bank are among the banking stocks expected to be in the forefront because the banking groups are likely to give good visible dividend yields, he said.

However, the potential of rising inflation might impact private consumption, raising concerns among public, especially on the back of slowdown of the US economy and higher cost of living, he added.

Despite assumption that the US economy is going for soft landing and not recession, which will benefit the Asian economy including Malaysia, investors have continued to adopt a defensive approach towards the local bourse, according to Choong.

“We want investors to continue being cautious and be very defensive. Go for stocks with very high earnings visibility and strong dividend yields and cashflow,” he said.

He also said that more than 80 percent of the stocks are considered as
“very defensive”.

Defensive stocks referred to those that remain stable under difficult economic conditions and provide a greater degree of certainty to investors.

Choong said Citigroup has projected the KLCI to be around the 1,600-point level by year-end.

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KLCI likely to undergo brief consolidation

By S.N.LOCK

The KLCI's technical pullback over the first three trading days hit its intra-day low of 1,431.69 on Thursday, staging a successful re-test of this column's envisaged support zone (1,409 to 1,443 levels).

Subsequent sharp technical rally took the KLCI to a all-time historical high of 1,467.78 yesterday, moving into the confines of this column's envisaged resistance zone (1,451 to 1,485 levels).

Chartwise, the KLCI continued to stay decisively above its downside support (see KLCI's monthly chart - A1:A2). It closed at a new all-time historical closing high of 1,466.67 yesterday.

The KLCI's daily trend staged a successful re-test of its immediate downside parallel support trendline (see KLCI's daily chart - B5:B6). It is staging a re-challenge of its overhead parallel resistance trendline (B7:B8).

The KLCI's daily, weekly and monthly fast MACDs (moving average convergence divergence) continued to stay above their respective slow MACDs. The bullish configuration of the KLCI's three time-frame MACDs will continue to drive the KLCI onto higher technical levels.

The KLCI's 14-day RSI stayed at 68.59 per cent level yeterday. Its 14-week and 14-month RSI stayed at 65.72 and 78.27 per cent levels respectively.

Last week, this column commented on the possibility of ending the year with a bang. It did. The KLCI hit a new all-time historical high of 1,452.57 on December 31, replacing its previous historical high of 1,449.70.

Following the sharp technical rally yesterday, the KLCI is likely to pause for a brief consolidation before resuming its prior technical rally. It has an even chance of staging a re-challenge of 1,490. Second liners are likely to come under some buying support.

Next week, the KLCI's overhead resistance zone will hover at 1,470 to 1,500 points while its downside support will be at 1,428 to 1,462 points

Public Mutual to launch consumer themes fund

By The edge

Public Mutual Bhd will launch its first Far-East consumer themes fund on Jan 8, enabling investors to tap into growth potential of rising consumer spending in the Far East markets.

Public Mutual chairman Tan Sri Dr Teh Hong Piow said on Jan 3 the Public Far-East Consumer Themes Fund (PFECTF) was positioned to benefit from the robust growth of consumer spending in the Far East region.

PFECTF is an equity fund that seeks to achieve long-term capital appreciation by investing in securities, mainly equities, in the consumer sector in the domestic and foreign markets.

The fund may also invest in multinational corporations in the consumer sector which sell their products in Far-East markets or have distribution outlets/establishments in the Far-East region and are listed in the US, Europe and Australian markets.

Teh said PFECTF was suitable for aggressive investors who could withstand extended periods of market highs and lows to achieve medium- to long-term capital growth for their investments.

The issue price/net asset value (NAV) of PFECTF is at 25 sen per unit during the 21-day initial offer period of Jan 8 to Jan 28.

During the offer period, a special promotional service charge of 5% of net asset value (NAV) per unit is extended to the purchase of units of PFECTF by investors.

Investors opting for the direct debit instruction with PFECTF during the offer period would enjoy a special promotional service charge of 5.25% of NAV per unit for as long as the Direct Debit is active. The minimum initial investment for the fund is RM1,000 and the minimum additional investment is RM100.

Teh said consumer spending accounted for a significant share of Gross Domestic Product (GDP) in most economies. In Asia, consumer spending accounted for about half of GDP.

In the 2001-2006 period, consumer spending in Indonesia and China grew at healthy annual rates of 13.6% and 10.4% respectively on the back of rising income and urbanisation. In South Korea, Malaysia and Thailand, consumer spending growth were also impressive at around 9.0%-9.5% per annum, backed by strong consumer confidence amidst generally buoyant economic activities.

He added in the Far East, consumer spending was fuelled by robust growth in disposable incomes, the wealth effect from rising equity and property markets, increased urbanisation, healthy tourism activities and attractive lending rates.

10-years high for ringgit malaysia

By Biz Times

The ringgit ended 2007 at a 10-year high against the greenback at close yesterday on strong commercial demand, particularly from foreign funds, dealers said.

The ringgit strengthened to 3.3090/3140 compared to Friday's closing of 3.3160/3210.

Dealers said the ringgit gained momentum on the back of speculation that the US will implement another interest rate cut to revive its economy.

"The upward trend reflects the strengthening of Malaysia's economic fundamentals, plus the weakening of the US dollar due to the subprime mortgage crisis," one of the dealers said.

The greenback also lost its appeal following the release of bearish US home sales data which raised concerns about the US economy and reinforced the expectations of another interest rate cut.

The Commerce Department on Friday reported that new home sales fell nine per cent in November from October.

The dealer said the uptrend showed the optimism of local and foreign funds in the future of the ringgit and the domestic economy.

The ringgit was lower against the Singapore dollar at 2.3008/3059 from Friday's close of 2.2906/2943 and declined against yen at 2.9524/9573 from 2.9270/9301.

The ringgit appreciated against British pound at 6.6058/6167 compared to Friday's close of 6.6177/6250 and declined against euro at 4.8672/8756 from 4.8583/8663.