The Star Online: Business
The Star Online: Business |
- KLCI down in early trade, HL Bank, GentingM weigh
- Glove makers to invest RM300mil to RM500mil to improve automation system
- Temporary profit-taking seen as elections approach
| KLCI down in early trade, HL Bank, GentingM weigh Posted: 04 Sep 2012 06:31 PM PDT KUALA LUMPUR: Blue chips slipped in early trade on Wednesday, mirroring the cautious key regional markets, with Hong Leong Bank and Genting Malaysia among the decliners. At 9.13am, the FBM KLCI was down 2.08 points to 1,652.03. Turnover was 110.32 million shares valued at RM33.89mil. Losers beat gainers 100 to 777 while 137 stocks were unchanged. Bloomberg reported Asian stocks fell, with the regional benchmark index headed for the longest losing streak in eight weeks, as U.S. manufacturing contracted for a third month, adding to signs the world's biggest economy is slowing. At Bursa Malaysia, HL Bank fell 10 sen to RM13.40 but with only 1,900 shareas done while Genting Malaysia gave up five sen to RM3.52. Dutch Lady lost 48 sen to RM42.52 with just 100 shares done. Plantations fell, with SOP down 20 sen to RM6.61 with 100 shares done, IJM Plantations lost six sen to RM3.54 and Genting Plantations down five sen to RM9.30. GAB rose 10 sen to RM15.90 with 100 shares transacted. MNRB gained eight sen to RM3.35 while Lafarge and CIMB added four sen each to RM8.68 and RM7.81. Ingenuity climbed four sen to 26.5 sen after falling on Tuesday. |
| Glove makers to invest RM300mil to RM500mil to improve automation system Posted: 04 Sep 2012 06:26 PM PDT KUALA LUMPUR: Malaysian rubber glove makers will invest between RM300mil and RM500mil in the next five to 10 years to enhance their automation system and reduce labour costs, an industry official said. Malaysian Rubber Glove Manufacturers Association (Margma) president Lim Kwee Shyan said automation would help manufacturers reduce labour workforce by 30% in less than five years and up to 50% in a longer period. Glove manufacturers would be hiring more skilled workers like local graduates and reduce non-skilled workers, including foreigners, with better automation in production, he said after the 6th International Rubber Glove Conference and Exhibition. Currently, 30,000 out of the 50,000 to 60,000 workforce in the glove manufacturing industry were foreign workers, Lim said. The RM900 minimum wage policy, which takes effect next year, would increase labour costs. By adopting newer technology, it would help players improve productivity and reduce costs, he added. Deputy Prime Minister Tan Sri Muhyiddin Yassin said in his opening speech: "Revenue per worker annually has improved tremendously to RM300,000 to-date compared to the 1990s which only recorded a value of RM50,000." He also said the labour requirement of the industry improved 60% with only eight workers to produce one million pieces of gloves compared to 20 workers to produce the same amount in the 1990s. "The Government, through the Malaysian Rubber Board (MRB), has plans to build five new facilities to facilitate rapid development of the rubber production sector in years to come," Muhyiddin said. He added that the facilities would create a more conducive environment and opportunities for businesses in the rubber industry to generate investments and re-investments. Margma vice-president Denis Low said with re-investment, players were able to mitigate risks that arose from the hike in labour costs. Low said rubber gloves manufacturing was a mature industry as it faced stronger headwinds in 2008 when natural gas price increased by 12%, latex price was at RM7.20 and there was a shortage of foreign workers. On the disposal of Rubber Research Institute of Malaysia's land in Sungai Buloh to Employees Provident Fund's subsidiary Kwasa Land Sdn Bhd, Lim declined to comment but said "development was unavoidable". The question was raised because the divestment was deemed as contradicting MRB's aim to enhance modernisation and development of the industry. "They (MRB) are going to bring back the money (from selling the land) into the industry. "Their masterplan to build a better complex with the money would bode well for research and development in the rubber industry," he said. As for the rubber price mechanism, Lim said: "The aim of the Tripartite (International Tripartite Rubber Council) is to stabilise (rubber) price. Whatever the mechanism is, we will have to work with our clients." Low concurred, "We hope there is stability for rubber price. The mechanism should be transparent and systematic." It was reported that Thailand suggested US$2.80 (RM8.70) per kg for natural rubber while Malaysia and Indonesia proposed US$2.70 (RM8.37) per kg for the pricing mechanism. Lim said if the price of natural rubber was to rise to RM10, rubber gloves manufacturers would have to negotiate with their clients and possibly pass on the cost to them. On the outlook of rubber price, he said it was based on a free market mechanism, depending on market demand. Rubber price for the last few days was between RM7.80 and RM7.90, he said. |
| Temporary profit-taking seen as elections approach Posted: 04 Sep 2012 06:21 PM PDT PETALING JAYA: The impending general election will inspire profit-taking among investors as they intuitively brace for any political uncertainty but history has shown that the impact of elections on the market is only temporary and usually not as bad. Alliance Research said although the market could intuitively succumb to selling pressure when there was political uncertainty, past experience proved that it was not as bad as one might perceive. "Furthermore, our analysis of the last general election shows that market selldown due to political shock' is temporary and will normalise in three months," it said in its report. In Alliance Research's survey on investors' expectations on the coming elections, the research house said "market performance over the long term is dictated by fundamentals and macro outlook." It noted that investors had been risk-averse, resulting in defensive sectors such as consumer, telecommunication and real estate investment trust outperforming the FBM KLCI during the first eight months of the year. However, cyclical sectors such as construction, property and technology have significantly underperformed the FBM KLCI over the same period. Alliance's recommendation for investors who need to be more liquid or short-term oriented to stay defensive because "despite yield compression to levels not seen before, dividend paying stocks such as those in the telecommunication, consumer and real estate investment trust sectors will continue to see sustained market performance." "However, for value investors who have longer investment horizon, there are opportunities to pick up beaten down cyclical stocks. For these investors, we would like to highlight four postgeneral election investment themes. Alliance recommended exposure to the construction, utilities and gaming sectors as post-election investment themes. "Our top stock picks for the post-election theme are Gamuda, Mudajaya, Tenaga and MPHB." Conversely, the research house believed a de-rating could happen for consumer stocks after the 13th general election as investors return to higher beta plays. "Potential implementation of Government Service Tax, subsidy rationalisation and fuel cost pass through due to higher electricity tariff are de-rating catalysts for consumer stocks. From the survey, majority of investors appeared bearish on the market once the Parliament is dissolved with 68.1% expecting a decrease in the FBM KLCI. "Few were bullish that the FBM KLCI would head north once the dissolution is announced as only 6.9% expected an increase. On the other hand, 13.9% expects the FBM KLCI to remain flat while 11.1% remained unsure of the potential market direction," it reported. On the political tussle, the survey results indicate that investors are generally pessimistic that Barisan Nasional (BN) would recapture more Parliamentary seats in the 13th general election with only 12.5% expecting an increase. However, 52.8% of the respondents expect the results to remain status quo like in the previous elections with a more or less than 5% variance. On the downside, 34.7% expect BN to lose more seats. Concluding it, the survey implied that most of the respondent expects the ruling BN to form the next Federal Government. On strategy, 16.7% of respondents which included fund managers and buy-side analysts from domestic institutional funds said elections had no influence on their investment strategy. "We believe this segment of respondents is likely to consist of government-linked investment funds which tend to have a longer term investment horizon. For the majority of other investors, the results indicate that elections do influence their investment strategy," Alliance reported. Of the respondents, 40.3% said that the impending elections had caused them to avoid sectors influenced by the elections while 37.5% said that they were avoiding politically linked stocks. Alliance believes this is largely why sectors such as construction have underperformed the FBM KLCI although it also points out that even if the incumbent BN does not improve its Parliamentary seats tally, there is little risk in terms of project implementations. "We have witnessed since the 12th general election that projects still do get implemented even with a strong opposition party in place." In terms of asset allocation, 20.8% of the respondents said the elections caused them to reduce exposure to Malaysian equities. On the other hand, 26.4% said that they had been riding on the election theme by looking at "post-election plays". In terms of popular vote, there were a slightly higher proportion of investors, 16.7%, who expected BN to witness an increase. Despite this, the downside was also greater with the majority of 47.2% expected a decrease. The remaining 36.1% of the respondents expected no changes in the popular vote outcome. As for when the general election is expected to be held, 50% of the 72 respondents said it would be after Budget 2013 announcement on Sept 28 but before year-end. Only a meagre 4.2% believe that the polls will take place before Budget 2013 while 19.4% expect the polls to be called next year in the first quarter. |
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