Interest rates, rally to be in focus

KUALA LUMPUR: Interest rates and the Bersih rally would be in the minds of investors going into this new week after the FBM KLCI rose to fresh historic highs last Friday.

Investors could also see some profit taking after four out of five straight days of gains on Bursa.

The FBM KLCI closed at a fresh high of 1,582.94 last Friday and for the week, it was up 18.28 points or 1.16% from 1,564.66 on June 24. However, the broader FBM 100 outperformed the KLCI, rising 1.2% from 10,513.45 to 10,639.7.

The KLCI would need to build a firmer base and see more buying of blue chips before moving higher.

Bank Negara Malaysia’s (BNM) monetary policy committee (MPC) will be on Thursday and there are expectations of another rate hike and the timing would be a close call between July and September.

CIMB Economics Research is maintaining its expectations that BNM will raise interest rate by 25 basis points (bps) to 3.25% in the third quarter.

It also expects another 100bp rise in the statutory reserve requirement (SRR) to 4% in July.

On the political front, there is concern about the current political scenario as the organisers seem bent on having the Berish 2.0 rally on Saturday. This comes despite tightening security measures to avert while businessmen decry the negative impact from a rally which goes out of control.

In the US, economic data due are the May factory orders, the June job cuts data, consumer outlook index for July and initial jobless claims as at June 25.

Meanwhile, OSK Research said in its July outlook report that it remains overweight on the KLCI with an unchanged year-end target of 1,680.

For July, OSK Research’s favourites are banks (Malayan Banking Bhd), construction (Gamuda Bhd), property (UEM Land Bhd) and oil and gas (Dialog Group Bhd).

Stocks to watch today following fresh corporate news are Tanjung Offshore Bhd, Wah Seong Corporation Bhd, Petronas Gas Bhd, Notion VTec Bhd and DRB-Hicom Bhd.

Tanjung Offshore Bhd has secured a RM50 million contract from Petronas Carigali Sdn Bhd to provide three offshore support vessels for periods ranging between one and three years.

The contract was to provide the ships for the primary period from June and July 2011 respectively with options to extend between one and two years.

Wah Seong secured a US$45 million (RM135 million) contract from Australia Pacific LNG Pty Limited to provide pipeline coatings for the Australia Pacific LNG project in Australia.

The contract secured by its pipe-coating business unit on June 29 involved coating of over 700km of pipes. Wah Seong said contract was to commence in the fourth quarter of 2011 and be completed in 2012.

The controlling shareholders of Notion Vtec had abandoned negotiations to dispose of their business/equity interest after talks with the interested party fell through, just two weeks after it said negotiations were still on-going.

Petronas Gas inked a shareholders’ agreement with NRG Consortium (Sabah) Sdn Bhd (NRG) to provide operation and maintenance services to a 300-megawatt gas power plant and its related facilities and infrastructure in Kimanis, Kota Kinabalu.

The service would be provided through a joint venture company.

Meanwhile, DRB-Hicom Bhd completed its acquisition of a 32.21% stake in Pos Malaysia Bhd from Khazanah Nasional Bhd for RM622.8 million (based on the price of RM3.60 per Pos Malaysia’s share).

DRB-Hicom targets to boost Pos Malaysia’s growth by increasing its market share in the highly competitive courier segment.

Its plans also include turning around its retail business by becoming a virtual retail network and revitalising its logistic business as well as tapping on the significant logistic business.