Key regional markets could advance on Monday, Sept 13, following positive news from China’s latest economic data and firmer close on Wall Street.
The Dow Jones industrial average gained 47.53 points, or 0.46 percent, to 10,462.77. The Standard & Poor's 500 Index rose 5.37 points, or 0.49 percent, to 1,109.55. The Nasdaq Composite Index added 6.28 points, or 0.28 percent, to 2,242.48.
According to Reuters, the latest data from China showed its factories ramped up production in August and money growth easily topped expectations, showing that the economy remained buoyant despite government efforts to clamp down on bank lending and property speculation.
Last Thursday, the FBM KLCI closed up 3.64 points to 1,437.78 at midday, supported by positive industrial production index (IPI).
Industrial output for July rose 3.2% on-year, underpinned by stronger manufacturing growth while the June IPI was revised to 9.3% on-year. The increase in July was due to the increases in manufacturing (7.2%) and electricity (4.4%).
Stocks to watch on Monday, Sept 13 in another holiday-shortened week are Loh & Loh Corporation Bhd, SP SETIA BHD [], MAH SING GROUP BHD [] and water related counters.
Loh & Loh and its joint venture partner Sinohydro Corporation Ltd secured a contract from TENAGA NASIONAL BHD [] for the RM828.33 million Hulu Terengganu hydroelectric project.
Work on the project would be within 130 days after the receipt of the letter of acceptance.
Sinohydro Corporation Ltd-Loh & Loh CONSTRUCTION []s Sdn Bhd Joint Venture is an unincorporated joint venture between Sinohydro Corporation Ltd and Loh & Loh Constructions Sdn Bhd, a unit of Loh & Loh.
SP Setia’s unit is buying 259.1 acres of land in Johor for RM169.26 million cash to replenish its land bank as the Setia Indah Johor development was at its tail-end.
SP Setia said the proposed development is expected to have a gross development value of RM1.5 billion. Development was expected to start by end of 2011 and span over eight years.
Mah Sing Group Bhd has proposed to issue up to RM325 million nominal value seven-year redeemable convertible secured bonds which would be mainly to finance land acquisitions and working capital. It said the coupon rate is up to 3.50% per annum payable in arrears on a semiannual basis.
Water-related stocks could seen trading interest with some downside pressure after the Malaysian Rating Corp Bhd (MARC) and RAM Ratings Services Bhd (RAM) had last Thursday downgraded their ratings of debt issues by various private water entities in Selangor.
MARC downgraded the ratings of 10 Selangor water-related debt issues – with some falling as much as three notches. The affected issues include Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Puncak Niaga (M) Sdn Bhd (PNSB), PUNCAK NIAGA HOLDINGS BHD [] (Puncak), RUN Holding SPV Bhd, Syarikat Pengeluar Air Selangor Sdn Bhd (SPLASH) and Viable Chip (M) Sdn Bhd.
RAM downgraded the debt ratings each for SPLASH, Destinasi Teguh Sdn Bhd and Sungai Harmoni Sdn Bhd from AA2 to BBB3.
Both the ratings agencies warned of a possibility of further ratings downgrades – should there be no concrete resolution to the protracted restructuring of Selangor’s fragmented water industry.
AmResearch said it was are not surprised by this development. Prior to this, several bondholders were believed to have been pushing for federal intervention in July to seek a solution to the long-standing water deadlock in Selangor.
More importantly, MARC’s downgrade of SYABAS’ long-term rating is reflective of the latter’s’ cash flow challenges and ability to meet its obligations to bulk water producers.
The research house said earlier reports indicated that SYABAS has only paid some 45% of its water invoices since January. This reaffirmed AmResearch’s earlier conviction that any further delays in payments would undoubtedly weaken the financial position of the water treatment operators as well – and raises the spectre of their ability to operate as a going concern over the medium to longer-term.
“While there have been fresh efforts to seek closure to water consolidation talks in Selangor by year-end, we caution that any deal would not be consummated unless the issue of control over water distribution rights in Selangor is resolved.
"Due to lingering uncertainties surrounding Selangor water impasse - we are inclined to maintain our NEUTRAL stance on the water sector. In line with our sector call, we continue to rate Puncak (FV=RM2.93) and KUMPULAN PERANGSANG SELANGOR [] Bhd (FV=RM1.61) as HOLDs,” it said.
Written by Joseph Chin
The Edge Malaysia
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