Malaysia Stock Market Review for Week Ending 8-August-2008

888 (08-August-2008), what an auspicious number and the world's most eventful date. However, Malaysia's overall stock market last week trended lower. The KLCI lost -28.37pts (-2.5%) touching 1,120.31 on Friday's close. The fall was basically led by softening crude palm oil (CPO) prices which ultimately affected performance of plantation stocks. Poor performance of plantations stocks did not just began last week, but in fact started 3 weeks ago and was mentioned in our article dated (18-July-2008). Let's review some plantations stocks this week: IOI Corp -52sen (from RM5.50 to RM4.98); KL Kepong -110sen (RM13.20 to RM12.10); Sime Darby -80sen (from RM7.80 to RM7.00); Asiatic -45sen (RM6.40 to RM5.95); Tradewinds Plantations -38sen (from RM3.46 to RM3.08); virtually all of them were down. Like what he had previously mentioned, plantations stocks were generally facing selling pressure due to: [1] plantation stocks had performed extremely well in the last 2 years fueled by high CPO prices, so most of the investors are sitting on "deep-in-the-money" or ("un"cashed out) profit positions, hence investors sold them to unlock profit. [2] Since plantations stock are heavily owned by foreigners, a sluggish economic conditions in the domestic market and potential slowing down of global economy post Olympic 2008 would lead foreigners to unwind their investment position in Malaysia and similar emerging economies. [3] Since CPO prices had been associated with global crude oil (fossil fuel) prices (due to the bio-fuel factor) since last year, declining oil prices would also contribute to downfall of crude palm oil prices. We believe next week is going to be another down week for plantation stocks as crude oil (fossil fuel) prices dove US$4.82 (-4%) on Friday to US$115.20/barrel. Hurrahhhhh to consumers as we could expect the government to lower Malaysian petrol pump prices in the next review. Fingers crossed.

In terms of corporate news, Tan Sri Syed Moktar's proposal on related party transaction (RPT) to insert Senai Airport valued at RM1.95 billion and Aliran Ihsan Resources Bhd at RM240 million was not received well by MMC investors. MMC shares were sold down significantly by -23.4% (65sen) from RM2.78 to RM2.13 on the backdrop that the injection of these 2 businesses were not going to enhance the profitability of MMC but on the reverse putting a dent to company's profit. In fact, analysts were saying that the price tag of Senai Airport was just too high considering its loss-making situation. What more this is a related party transaction. RPT is definitely a bad word, unappealing to investors during bearish times. For the benefit of those that do not understand whats an RPT. RPT means a proposed business transaction whereby the proposing party is a buyer and a seller at the same time. For the MMC's case, Tan Sri Syed Moktar is proposing for MMC (the company where he owns 51.8% stake) to buy over Senai Airport (Syed Moktar owns 100%) and Johor's bulk water supplier Aliran Ihsan Resources (Syed Moktar is a major shareholder).

Strategy: We expect the general market again to be down this week dragged by another round of sell offs in the plantations sector. However, easing crude oil (fossil fuel) prices and commodity prices should actually be better for the general economy. This week we are downward bias, so 60% chance of market going down; 30% chance of market staying flat and only 10% of market going up.

Stocks Alert. Perhaps its time for us to give out some stock tips after several requests from our friends. Well, as opposed to calling these advise as stock tips, we shall just call it "stock we are looking at". The stocks that we list out need not necessary be a buy call, we could also highlight sell calls as well. Our picks are purely for note-taking purpose only.

"Stocks we are looking at" this week are (1) Airasia and (2) MRCB. If you would like to know why we think both stocks are on our list then you have to email us for the reasons. On that note, since its the Olympic season, Enjoy the Game, Think Green and World Peace.

YouInvest - Malaysian Investing Made Easy

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