Reports » Malaysia

Malaysia stock market and companies daily report (September 19, 2012)

Contributed by Shares Investment

The Effects of QE3 to the Local Equity Market Expected To Be Minimal
The local Market is unlikely to react significantly towards the release of the third round of asset buying announced by the Federal Reserves (Fed) – namely the Quantitative Easing 3 (QE3). Under the scheme, the Fed agrees  to buy mortgage backed securities of up to RM122.4 billion per month, nonetheless the scale of QE3 is consider small compared with the QE1 and QE2 that injected approximately RM260.4 billion and RM807.3 billion per month. The monetary stimulation conducted by both the US Fed and European Central Bank (ECB) will devalue the US dollar resulting in cheaper liquidity globally – hence more hot money inflow into Asian equities. Since the past QE programmes have already benefited Asian equities, the positive impact this time round will not be clear-cut as the economic conditions are different. When QE1 was first introduced in 2008, the earnings valuation was about 11 times, which indicated a relatively cheaper financial market. QE2 was 14 times and currently the market is trade at slightly lower than the all-time high of 1,655.06 with average valuation for the benchmark index of approximately 15.3 times. Thus market is not expected to rise significantly this time as investors are reacting defensively.
Significance: The plantation sector might be the beneficiary from QE3 as there is a strong possibility that crude palm oil prices and other soft commodities might recover. Cheaper credit will flavour the property and banking sector as well.

AirAsia Demands More Allocation For The DCA In The Upcoming Budget
AirAsia has urged the government to allocate more funding to the Department of Civil Aviation Malaysia (DCA Malaysia) in the upcoming budget 2013, which takes place late September. As the growth of the aviation sector has expanded the country’s tourism sector, the increase in airlines and frequencies have made air traffic in Malaysia far more complex. The injection of funds for DCA Malaysia will boost the efficiency of air traffic management as AirAsia pilots have encountered difficulties with air traffic control at Malaysia airports. The issue has become pronounced especially during the peak periods with the increasing flight movements at the airport. With the allocation of more funds, new monitoring system can be setup to handle the intricacies caused by increased airline frequencies. Such system can minimise the delays such as those encountered by our neighbouring nation, and promote an efficient aviation industry for the country. For the first six months of 2012, a total of 11.6 million tourists visited Malaysia, a growth of 2.4% over the same period last year.
Significance:  AirAsia’s requests for the allocation of funds are likely in reaction to the announcement of LionAir stepping into our country. The improved efficiency of air traffic management will enable AirAsia to handle more flights at the same time achieve lower cost efficiency, which in line with its business strategy.

Tun Razak Exchange To Benefit WCT, IJM And Mudajaya
Property developers who are involved in the developments located near the soon to be developed Tun Razak Exchange (TRX) are likely to become the beneficiaries of the development introduced by the 1Malaysia Development Bhd (1MDB). The large-scale development is expected to generate a gross development value (GDV) of RM26 million in the next 15 to 20 years.  Besides being as a critical enabler and vital catalyst for the Government’s Vision 2020 and Economic Transformation Programme (ETP) initiatives, the TRX development will also serve as a new infrastructure and transportation facility. WCT Berhad has a great chance to be awarded from this project due to its expertise and track record from its previous jobs in Iskandar. Other companies such as IJM Corporation and Mudajaya Group Berhad which have sound reputations in this field are also got highly likely to secure the project. Developers, such as Sunway and Boustead Holdings Berhad who have developments or land bank around the area are might also gain huge benefits from the appreciation of value of their property located in the vicinity. Currently the ground clearing works have already started and physical construction of the first phase is expected to kick off by mid-2013 with an estimated GDV of RM5 billion to RM6 billion.
Significance: This project is considered as a pre-election development. As such, real estate developers will likely take this opportunity to plan their projects in these areas to attract local and foreign buyers.