Stocks in Malaysia continue to slip even after the poor performance from last week. The KLCI, benchmark index erased –16.13pts to 1,190.54 falling below the critical level of 1,200. TM International (which holds Celcom and telecoms operations in Indonesia, Sri Lanka and India) was the biggest losser this week after it announced possible merger of Spice Telecom (its India unit) with Idea Cellular. This deal could see TM International paying RM5.9bn. Investors reacted negatively to this deal triggering them to sell their shares to avoid any potential earnings dilution in the future. The YouInvest team also agrees that TM International is overpaying and the economics of the deal does not stack up. Among other stocks that were sold down were IOI Corp and PLUS. Negative external factors also contributed to the overall bad performance of global stock markets. Amongst these negative factors are inflationary pressures, sub-prime crisis in the US and higher oil prices (touched US$140/barrel when writing).
Recommendations: We remain defensive and cautious at this juncture due to economic pressures (inflation) surrounding us.
YouInvest will be starting the [Unit Trust Investment] segment in July, remember to follow as we explore the wonders of unit trust investment and how it can help you overcome lowering value of RM (or inflation pressure) and potentially make money in the long term.
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