Maybank IB Views

MARKET STRATEGY
GLC divestments
Market friendly "strategic reforms"

Long-term positive. Prime Minister Najib yesterday unveiled six Strategic Reform Initiatives (SRI), being the core enablers to 12 existing National Key Economic Areas (NKEA) under the Economic Transformation Programme (ETP). Of particular interest to the equity market is the divestment and listing plan relating to government-linked companies (GLC) which, in our view, is positive in raising liquidity, the quality of listed companies and attractiveness of the Malaysian bourse.

ECONOMICS
Malaysia: Strategic Reform Initiatives
Another key ingredient the "change" recipe...

SRIs - a commitment to reforms… Prime Minister unveiled the Strategic Reform Initiatives (SRIs) on 5th July 2011 which serves as the enablers to boost the country's competitiveness, on top of complementing the twin transformation programmes i.e. Government Transformation Programme (GTP) and Economic Transformation Programme (ETP). Essentially, SRIs are the other half of ETP i.e. in addition to the 12 National Key Economic Areas (NKEAs).

External Trade, May 2011
Lower than expected export growth

Exports growth in May '11 came in below expectations as it moderated to +5.4% YoY (Apr '11: +11.1% YoY; Maybank IB: +9.0% YoY; Consensus: +11.0% YoY) while imports growth eased to +5.6% YoY (Apr '11: +9.4% YoY; Maybank IB: +5.3% YoY; Consensus: +8.6% YoY) bringing in a trade surplus of RM 8.5b. MoM, both exports and imported contracted by -4.7% and -0.4% respectively. Our forecast for 2011 is for exports to grow by +8.4% YoY (YTD May'11: +6.2%; 2010: +15.6%) and imports to gain by +10.8% YoY (YTD May'11: +10.3%; 2010: +21.7%) with a trade surplus of RM106.9b (YTDMay'11: +RM51.3b; 2010: +RM110.2b).

Technicals
The FBM KLCI closed lower by 0.50 points at 1,581.85 yesterday. Its resistance areas of 1,581 and 1,589 may cap market gains, whilst the firm support areas are located at 1,566 and 1,579.

Trading idea is a Short-Term Buy on LBS

Other Local News
MBM Resources: On expansion drive. MBM Resources Bhd plans to build several showrooms and service centres in Johor Baru, Perak and Penang by 2015 to expand its automotive business. The Johor Baru project will be completed in the next 12 months and will be similar to the company's showroom in Glenmarie, Shah Alam. (Source: Business Times)

MRCB: Unit gets KL land for 3 projects in Brickfields. Country Annexe Sdn Bhd (CASB), a 70% subsidiary of Malaysian Resources Corp Bhd (MRCB), will be given land in Kuala Lumpur with a potential RM1b gross development value, in consideration for undertaking three projects in the city's Brickfields area. The projects consist of Little India, Pines Bazaar and Ang Seng Development. (Source: The Star)

Guan Chong: To double capacity by 2Q12. Guan Chong Bhd plans to double the capacity at its Batam plant by 2Q12, which will boost its annual cocoa grinding capacity to 200,000t. It has fully sold for the entire 2011 due to rising demand for its cocoa ingredients of butter and powder. (Source: The Edge Financial Daily)

Yinson: Eyes RM800m worth of jobs. Yinson Holdings Bhd is set to bid for more contracts worth RM800m. It is currently bidding for FSO, PSV and AHTS jobs locally and abroad particularly in Vietnam. Yinson's current orderbook stands at RM1.2b. (Source: The Edge Financial Daily)

Plantation: Sarawak palm oil industry earmarked for major expansion.. Sarawak's plans to double the land earmarked for oil palm plantations to two million hectares will act as a key driver for the state's economic development. (Source: The Edge Financial Daily)