September 7, 2009.

WEEKLY MARKET OUTLOOK.

Friday Market Closing Prices.

FBMKLCI 1178.74 up 5.08.
November FCPO RM2,197.
Ringgit 3.5240.
DJIA 9,441.27 up 96.66 or 1.03%.
Crude Oil US$68.02.
Natural Gas US$2.73.
Gold US$996.70.

STOCK MARKET OUTLOOK.

Bursa Malaysia is expected to resume the upward march, after a brief period of consolidation, toward the 1200 level and above again. This is due to improved external factors such as a rebound in the U.S and China markets last week, due to better than expected economic data.

In the U.S, employers kept Americans working hours near a record low in August, indicating that economic growth is poised to reward companies with added profits while postponing any recovery in the job market. A measure of unemployment which includes the part time workers (9.8m up 278,000 from July) who would prefer full time position and people who want work but have given up looking, reached 16.8 percent last month, the highest level in data going back to 1994.

The U.S economy probably will not start adding job until the second half of 2010 year and unemployment will reach 10 percent by the end of 2009. The jobless rate climb 9.7 percent last month, the highest since 1983, from 9.4 percent in July.

Meanwhile, China is set to raise limit on stock investments by foreign funds by US$1 billion.

G20 policymakers which gathered in London last week, vow to sustain stimulus plans such as extra government spending and low interest rates to boost the global economy. At the same time, they also discuss the exit plan but clash over how to stop another banking crisis such as plan to get banks to hold more capital and tougher curb on bankers pay.

The policymakers agreed they must keep spending the US$5 trillion already earmarked as economic stimulus and delay any unwinding of emergency fiscal and monetary measures until economies are sturdy enough to stand on their own. So, this will reduce the risk of a double dip recession.

G20 also said they would work with the IMF and Financial Stability Board to develop cooperative and coordinated exit strategies.

Moreover, the IMF raises 2010 global growth forecast to 2.9% from 2.5% but downgraded its forecast for global economy in 2009, to shrink by 1.4%, instead of 1.3%.

For the global financial markets, the investors want to know when they can expect governments to start withdrawing trillions of stimulus pumped into economies, or raise interest rates.

Furthermore, 35 trade ministers in New Delhi last week has agreed to resume the Doha Round trade negotiations which had stalled since July 2008 when developing and developed nations failed to compromise on certain issues including the special safeguard mechanism to protect emerging markets and the non- agricultural market access.

The Doha Round was initiated in 2001 to enhance global trade and to encourage developing countries to increase their exports by reducing trade barriers.

STOCK MARKET STRATEGY.

Investors should continue to BUY and ACCUMULATE FBMKLCI linked stocks and quality stocks to position for further stock market recovery due to better than expected and positive outlook for the economics and earnings numbers locally and globally.

Reiterated the FBMKLCI upside potential is at least 1200 in 2009, 1331 in 2010, 1525 in 2011 and a new high of 1661 before the next General Election based on forecast average earnings growth of between 15% to 30% and dividends rate that are better than bank savings rate.

FBMKLCI TECHNICAL OUTLOOK.

Strong Support Level at between 1150 to 1160.

Resistance Level remain at 1200 level.

Next Target Level at 1331.

Long Term Target Level at 1525 and 1661.

STOCKS RECOMMENDATION.

TNB BHD RM8.05, BUY rating, (Forecast 09 EPS 40.46 sen, PER 2009 19.9X, Forecast DPS 20 sen or 2.48% yield, P/BV 1.34X) and the consortium laying a submarine transmission line linking Sarawak and Peninsular Malaysia will issue the first tranche of a RM10 billion (US$2.84 billion) bond programme next year.

Investment bank CIMB BHD, BUY rating for CIMB Bank holding company BCHB BHD RM10.22, (Forecast 2009 EPS 73.78 sen, PER 2009 13.8X, forecast DPS 30 sen or 2.9% yield, P/BV 1.97X), is the financial adviser for the project.

Other members of the consortium are Sarawak Energy Bhd and Ministry of Finance. The cable project involves laying a 730km high-voltage direct current (HVDC) transmission line and 670km undersea cable for the 2,400MW Bakun hydroelectric dam.

The RM10 billion would represent the debt portion while another RM2.5 billion would make up the equity portion for the financing that would be raised on a project finance basis.

By 2015, the first line is expected to be ready for transmission of 800 to 1,000 MW of hydroelectricity to peninsula followed by another 800 to 1,000MW by 2017 when the second line is completed.

ANALYSIS.

Based on cost to benefit analysis, the project is definitely commercially not viable at all considering for RM12.5 billion on the total transmission cost plus the Bakun Dam cost itself, we can build at least 5 power plant to generate 2,400 MW of electricity each anywhere in Malaysia either using coal, natural gas (environmental friendly and cheap as gas only cost US$2.73 or RM9.60 per btu now) or even nuclear reactor which is the cheapest in term of cost without having to worry about the project execution risk.

SINCERELY BY :- Kamel Bin Mohd Yusoh, Institutional Dealer, Kenanga Investment Bank Bhd, 013-6306544 or 03-21634549/50.