Ahad, 7 Julai 2013

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The Star Online: Business


For stocks, there's no need to fear good news

Posted:

NEW YORK: Wall Street doesn't hate good news after all.

The June jobs figures were stronger-than-expected and caused a big sell-off in the bond market. That further underscored expectations that the Federal Reserve will be chopping back its big bond-buying programme sooner rather than later. This kind of occurrence in the past would have caused the stock market to freak out.

But the three major US stock indexes climbed 1% on Friday, possibly pointing the way to more gains ahead.

The stock market has been in an odd spot for some time. Fear that the Federal Reserve would reduce its monthly bond-buying stimulus, designed to boost borrowing demand and help the US economy, put investors in the position of rooting for just-OK data, the kind of figures that would keep the spigot open while still pointing to decent growth.

This report may have definitively changed that outlook. In June, a total of 195,000 jobs were created – much stronger than the forecast for 165,000. Government data also showed that the US labour force has increased for three straight months now. The 10-year US Treasury note's yield jumped to a two-year high above 2.70% from 1.60% in a matter of weeks.

In that time, equities have barely budged. Sure, the S&P 500 has drifted off its all-time closing high of 1,669.16 reached on May 21. It's still less than 3% from that mark despite the sharp rise in interest rates. Light volume in the stock market, however, means that the move up should be taken with a grain of salt. And it makes the next several days that much more important.

"Good news is good news, but there's so much uncertainty about how payrolls could impact markets," said David Kelly, who helps oversee US$400bil as chief global strategist for JPMorgan Funds in New York. "The market is schizophrenic about this."

Good news in the form of bullish economic data has recently been taken as a negative, causing market selloffs on the theory that it means the Federal Reserve will slow its stimulus. While comments from Fed officials helped relieve those concerns last week, June's strong payrolls data refocused investors' attention on the uncertainty.

The June non-farm payrolls report raises the stakes for Federal Reserve chairman Ben Bernanke, who will be speaking on Wednesday before the National Bureau of Economic Research. Investors will closely scrutinise his comments for any hint about whether the jobs report could mean a faster end to the Fed's bond-buying stimulus programme.

Some strategists said the bond market's sell-off was in part because of thin volume exacerbating wild swings. Because of that, "it is unlikely that (yields) will rise any more than they already have," said Alec Young, global equity strategist at S&P Capital IQ in New York.

"That means that if we get good news, it will come without an accompanying rise in rates, which is great for stocks."

Major signals for the market will come from areas with an outsized sensitivity to macroeconomic growth and higher interest rates. Those areas have done relatively well since May 21, when the Dow and the S&P 500 ended at record highs. Small-cap stocks jumped in their best week since mid-May, with the S&P 600 small-cap index closing on Friday at 568.15, an all-time high.

Financial stocks were the strongest sector on Friday, with the S&P financial sector index up 1.8%. Regional banks such as SunTrust Banks were among the S&P 500's biggest percentage gainers because those companies benefit from rising rates because it boosts their ability to profit from lending at higher rates while borrowing at lower rates.

In search of clarity

On Wednesday, the Federal Reserve will release the minutes from its June 18-19 meeting. Those minutes are likely to attract heightened attention from Wall Street since they are coming out on the same day that Bernanke speaks to the National Bureau of Economic Research. The consensus on when the Fed will start cutting back its stimulus sits firmly in September of this year, with 11 of 16 primary dealers believing that, according to a Reuters poll, compared with seven of 17 in the June 19 Reuters poll.

On May 22, Bernanke said the quantitative easing programme would be slowed if economic growth met the Fed's targets. Investors interpreted that as an indication of an early exit, sparking a steep slide in stocks and a surge in US Treasury yields that prompted Goldman Sachs to close its recommendation that investors buy rate-sensitive names.

"The market is so inundated with voices from Fed officials – some far more reassuring than what we heard from Bernanke - that there's a lot of confusion," said Kristina Hooper, head of portfolio strategies at Allianz Global Investors in New York.

"Hearing him next week will settle things, especially on the heels of the jobs report," she said. "This is such a data-driven environment that to get a sense of how the Fed is viewing things is critical."

Stocks have stabilisd after the recent decline. On Friday, the S&P 500 closed above its 50-day moving average for the first time since June 19.

For the week, the Dow Jones industrial average rose 1.5%, the S&P 500 gained 1.6% and the Nasdaq jumped 2.2%.

The Fed probably will be the major driver for equities next week, although geopolitical tensions will also be in focus. The unrest in Egypt has generated concerns about oil supply, pushing crude prices to 14-month highs.

Fundamentals will return to the forefront as companies begin to release second-quarter results next week. Expectations call for S&P 500 earnings growth to rise 1.6% in the second quarter from a year ago, while quarterly revenue is forecast to increase 2.9% from a year ago, according to Thomson Reuters data.

Dow component Alcoa Inc will post results after the market closes on today. JPMorgan Chase & Co and Wells Fargo are also set to report results later in the week.

Second-quarter revenue outlooks for S&P 500 companies – with three negative forecasts for every one that's positive – are among the most negative of the economic recovery, according to Thomson Reuters data.

"We think companies will exceed and beat that low bar. So while Bernanke can always change the conversation, we think the news flow next week should be decent," S&P's Young said. – Reuters

Telekom Malaysia joining 4G bandwagon

Posted:

PETALING JAYA: Telekom Malaysia Bhd (TM) has made no secret of its interest in the mobile business despite having demerged it from its operations a few years ago.

The telecom giant had said in the past that it was not ruling out the possibility of collaborating with industry players to offer mobile broadband. This time, however, TM is venturing on its own to join the long-term evolution (LTE) or 4G bandwagon.

In its pre-request for proposal briefing in May, TM said it would invite tender for LTE deployment, with the letter of award to be prepared in mid-September.

"TM is currently exploring the expansion of its wireless broadband services in underserved areas, looking at the best technology evolution path in the optimisation plans for our current Code Division Multiple Access (CDMA) network, and in line with our broadband services delivery strategy for the nation," TM said when contacted.

According to a document made available to StarBiz, TM said the network provider would propose an end-to-end network and IT solution with some integration to existing TM infrastructure for the deployment of the LTE. In addition, TM will opt for the establish-operate-transfer (EOT) model for the network and IT infrastructure for at least 24 months.

The document also revealed the timeline for the deployment of the 4G services. The first commercial service is expected to be rolled out by Feb 12, 2014, with the end of rollout slated for Oct 15, 2014. TM plans to use 800MHz as its LTE frequency band, providing it with better signal transmission.

In addition, TM aims to have 100,000 users by 2014 and more than one million by 2017.

Telco analysts said the time was right for TM to enter the 4G scene now, as deployment would take a while. They said TM's focus had always been on fixed lines and its high-speed broadband Unifi. Eventually, TM will have to look for opportunities to extend its reach to enlarge its market.

"We think that TM is looking at wireless broadband to complement its fixed broadband, thus posing a credible threat to the incumbents," CIMB Research analyst Kelvin Goh said.

He said TM would pose a "credible threat" to the incumbents in wireless broadband. However, it was unlikely that TM would make much headway into mobile voice, at least in the near term, given the limited penetration of LTE-enabled phones, he added.

"We believe TM's 4G roadmap would likely get clearer when the contract is awarded," an analyst said, adding that competition was going to be fierce and could not be avoided in relation to TM's impending entry into the 4G arena.

Analysts said TM currently complemented its fixed data and broadband services with a host of wireless solutions, including WiFi, fixed wireless technology via CDMA as well as Evolution Data Optimised.

Cellular operators like Celcom Axiata Bhd, Maxis Bhd and DiGi.Com Bhd have sizeable grasp on the local scene, while Axiata Group Bhd has leverage in the regional arena. Futhermore, Maxis and Celcom have already introduced their 4G services, and DiGi is expected to do so this month.

Celcom has also entered into a master collaboration agreement with Puncak Semangat Sdn Bhd for its 4G service rollout.

Fitch Ratings expects TM to face stiffer competition in the fast-growing, increasingly important data segment this year, especially from the resellers. The rating agency said competition in the Malaysian data segment would intensify, as the LTE spectrum owners, who won spectrum in December 2012, would start launching their respective services in 2013.

CIMB's Goh said TM's extensive fibre optic network would allow it to roll out a wireless network in a quick and cost-effective manner.

He pointed out that TM had two 10MHz blocks at the 850MHz level, which is covered by the LTE standard, with superior in-building and geographical coverage. The other telcos are launching LTE at 1800MHz and 2.6GHz, which have inferior propagation qualities. However, without the optimal 2x20MHz block, TM's LTE speed would not be able to reach the theoretical peak download speed of 300Mbps.

"The impact on the incumbent celcos is likely to be limited because wireless broadband contributes to 4%-6% of their revenues," Goh said.

Time and tide waits for no man, important to meet targets once set

Posted:

TIME never stands still: its passage is unmercifully relentless. It's hard to believe that already half the year is gone and before we know it, it will be December, the festive season and yet another year would have passed.

And since time never stands still, we have to move along with it. Much has been said about national reconciliation and more about its lack. But we must realise that we have to put aside the divisiveness of the general elections, do what's best and move on from there. Really there is a lot of work to be done.

In times such as these, it helps to remind ourselves of the aims under the Government and economic transformation programmes specifically set out by the Prime Minister and endorsed and supported by the Cabinet and most people in the country to take this country to developed status.

The true north of transformation is to become a developed country by 2020, and the yardstick, the measure for this, is to achieve a per capita gross national income of US$15,000 by the year 2020.

The other important corollary of this is that this is done in an inclusive manner and in a sustainable way. Inclusiveness means that all communities and all sectors, and particularly the poor and disadvantaged, benefit from this increase in income, so that prosperity is reflected among all Malaysians.

When we say sustainable, we refer to developing and stretching our resources and maximising their returns so that future generations will also benefit from our wealth. That also means giving due consideration to the environment and the quality of life of all Malaysians.

The Performance Management and Delivery Unit or Pemandu, which I head, is the body which coordinates and facilitates the implementation of specific measures aimed at reaching our goal of becoming a developed country by the year 2020 together, including fostering seamless and effective working relationships between the civil service and private sector players.

Credit must be given where it is due, and the true heroes of our nation's transformation are both these civil service and private sector players who make things happen in line with the needs of the country.

In explaining Pemandu's approach to the work that we do, there is nothing that we help coordinate and facilitate which has not been agreed to by the Prime Minister and the Cabinet. Pemandu always and unambiguously acts according to and under the instruction of the Prime Minister at all times. Anyone who says otherwise is not telling the truth and simply does not understand how things work.

The scope of work we carry out is very clear and together with our counterparts in civil service, and stakeholders from various segments of the corporate sector, we are all collectively committed to the cause in helping Malaysia achieve a developed nation status.

Indeed, I am firmly convinced that the broad aims of the transformation programmes are good for everyone – for all Malaysians whatever their creed and colour and whatever their political ideology.

Is it not good if we achieve developed status by meeting the high-income target? Is it not great if all Malaysians benefit from increased income and the poor benefit more than others? Should we not think about increasing the quality of life for Malaysians now and for future generations by using up our resources sustainably and taking care of our environment and wellbeing?

And as a good government should we not constantly get feedback from the public and do our best to fulfill all legitimate demands of the general public?

Going forward, there are five areas that we need to focus on where this is concerned:

·We must stop and reverse the polarisation of the nation. The best way to do this is to focus on what we agree on and move forward from there. People may disagree that we are meeting the targets of transformation but few will disagree with the targets that we have set. If we collectively agree and do whatever we can to achieve our targets, we are already getting there.

·We must have an education system which meets the expectations of the rakyat while fulfilling national aspirations. No matter the medium of instruction, we want education to be of great quality and useful. If we need the quality of English to rise to improve the employability of our graduates, let's just do it.

·We must take whatever measures necessary to reduce further the incidence of crime and corruption. The public wants crime levels to be as low as those in the most developed and safe of countries in the world. We as a Government need to look at this deeply and come out with more solutions instead of fighting among ourselves our inconsequential things.

·We need to deal with public distrust of our key institutions. If we need to rebuild them up from bottom to top, so we must. Without public trust in all government institutions, without the public belief in these bodies, much of what the Government wants to do cannot be achieved.

·We need to be clearer and more consistent in our communications so that the public is not confused by the different signals coming from different parts of the Government. As far as possible, the Government needs to speak with one voice.

Acknowledging that we need to improve in some areas to meet with public demands is not a weakness. It reflects maturity and will to make changes, so necessary for any government to improve and move forward as ours is clearly committed to do.

That means we will continue to coordinate and facilitate all that is necessary to reach our transformation goals. And as we continue on our journey, we will have feedback loops to ensure that we stay focused on our eventual, agreed targets.

As they say, time and tide waits for no man and we really have to get a move on to get to where we want to go and meet the targets we have set for ourselves.

Datuk Seri Idris Jala is CEO of Pemandu and also Minister in the Prime Minister's Department. All fair and reasonable comment is most welcome at idrisjala@pemandu.gov.my

Kredit: www.thestar.com.my

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