Market flushed with newsflow from Bursa; share prices to trade higher this week

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KUCHING: Last week was an interesting period for market observers flushed with newsflow generated by announcements from Bursa Malaysia.

Take the country’s largest chain of professional eyecare centres, Focus Point Holdings Bhd (Focus Point) as an example. After a prior hyped-up plan to enlist on Bursa Malaysia’s ACE Market, the group declared last Tuesday that it had deferred the exercise pending further announcement.

Focus Point’s listing exercise on the ACE Market involved a public issue of 41.2 million new shares and an offer for sale of up to 15.8 million shares to identified investors at 39 sen per share.

A clarification note from the group two days later explained that “the last-minute deferment notice on its listing exercise made on Tuesday morning was unavoidable as matters had evolved only at the 11th hour.”

It added that the group had been cooperating with the regulatory authorities “to address the malicious allegations against the company and believed that everything would be sorted out in just a matter of time.”

However, the news did not go down well with investors. An analyst from an investment bank-backed research house pointed out that unless another more transparent explanation was given, investors would definitely lose confidence and in turn, this would be detrimental to Focus Point.

“As what MIA (Malaysian Investment Association) had highlighted last week, transparency on the matter was highly important considering that the initial public offering (IPO) itself had involved investments from the public.

“As a reason, minor administrative issues just don’t cut it. Hopefully, Focus Point will make true of its words to address the malicious allegations against it.”

Another noteworthy mention on the Bursa was suspension of shares trading for Tanjong Public Ltd Company (Tanjong) and Measat Global Bhd (Measat) last Wednesday, both controlled by billionaire T Ananda Krishnan.

Two days later, the billionaire announced plans to buy out satellite operator Measat and intended for a similar proposal for power and gaming player Tanjong, dubbed possibly as the nation’s largest corporate deal for the year.

Estimated value for both deals could reach a hefty RM6 billion (US$1.9 billion).

The deals mirrored many of Krishnan’s ‘enlist/de-list/re-list’ practices such as his buyout of Maxis Communications Bhd for RM16 billion in 2007. The company was restructured and relisted on Bursa Malaysia last year as Maxis Bhd.

More recently, Krishnan privatised pay-TV operator Astro All Asia Networks Plc early this year, buying out the 27.1 per cent minority shareholders for about RM2.5 billion.

Not that the proposal was bad for both companies. With its last traded price of RM3.80 per share prior to the suspension, Measat closed on the board last Friday at a strong RM4.06 per share.

Tanjong’s trading of shares, however, would only resume today due to the cancellation of its standard listing on the London Stock Exchange at 7.5 pence per ordinary shares. Prior to its suspension on Bursa Malaysia, Tanjong’s shares were last traded at RM17.58.

For this week, share prices on Bursa Malaysia are expected to trade higher with the key market barometer lingering between 1,350 and 1,395 points, pushed by continued buying in selected heavyweights .

However, dealers have observed that any gains this week would be restricted by some profit-taking activities, as cautious sentiments are still prevalent among investors over data from the US indicating that the recovery has been slowing down.

“The local market remains well supported with rotational play on lower liners. Continued buying in selected heavyweights will help the FBM KLCI to stay above the 1,350 points level,” one dealer said.

OSK Research Sdn Bhd said based on gains seen in the FBM KLCI last week, the immediate technical outlook would remain bullish this week. The FBM KLCI finished 15.24 points better at 1,360.92 from 1,345.68 last Friday.

On the foreign exchange front, sentiments turned positive for Europe as the recently conducted bank stress test results revealed that only seven banks had failed. Estimated amount of fresh capital needed totalled euros 3.5 billion, much lower compared with market estimates of between euros 38 billion and 85 billion. The results, coupled with German business confidence which rose to the highest level since July 2007, precipitated a rally in euro/US$ to an 11-week high, above the 1.3000-level.

The rally in euro also precipitated in a recovery in the British pound with £/US$ soaring above the 1.5600-level. Outlook on the UK economy improved after its second quarter’s gross domestic product (GDP) expanded by a better than expected 1.6 per cent, reversing the decline of 0.2 per cent in the previous quarter.

As mentioned earlier, US economic data remained weak with consumer confidence falling to a five month low in July amid continued weakness in the labour market. Durable goods orders in June were weaker than expected at a minus one per cent against market expectations of plus one per cent. The grim outlook on the US economy would continue to weigh on the greenback, culminating in the US dollar index to decline by 1.2 per cent.

Against the ringgit, US dollar was expected to trade within the range of RM3.175-RM3.215, with a strong possibility of a re-test of the psychological RM3.1800-level.

Regionally, export growth in Asian region remained resilient despite the recent global headwinds. South Korea, Thailand, India and Taiwan all had reported strong export figures in June. Given such resilient Asian fundamentals, coupled with abating concerns on Europe’s debt crisis, this week should witness a prompt in gains across all Asian currencies.