Thursday 28 Mar 2024
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KUALA LUMPUR: The sharper-than-expected contraction in the economy in the first quarter could see investors turning cautious, while they digest the recent swathe of weaker corporate earnings as the financial crisis takes its toll.

Economists said the 6.2% contraction year-on-year was worse than expected and was likely to continue into the second and third quarter, albeit a less sharp decline, before reaching positive growth in the fourth quarter.

Manufacturers continued to see sharp contraction as output fell, triggered by the sharp contraction in the importing countries for products including electrical and electronics products.

The overnight fall on Wall Street would also reduce investors' risk appetite for equities. US stocks fell sharply on May 27 as investors worried that General Motors Corp. might file for bankruptcy while losses in Treasurys also impacted the equities market,

However, the rally on soybean futures, which rose to the highest in eight months, and firm crude palm oil price could shore up sentiment for plantations. Oil and gas (O&G) related companies could attract interest after light crude oil rose to US$62.

KL Kepong posted net profit of RM112.68 million for the second quarter (2Q) ended March 31, 2009, down 52% from RM236.66 million a year ago, as profits from plantation and manufacturing divisions fell.

However, KLK was positive in its outlook for the year, expecting its core plantation business should continue to perform “reasonably well” with the group’s favourable forward sales of its palm products.

Meanwhile, Resorts World saw its 1Q earnings fall 7% to RM275.44 million from RM297.36 million a year earlier, dragged down by the impairment of its investment in Star Cruises Ltd of RM30 million.

Resorts and Genting could attract attention following the sale of a 9.5% stake in Genting Singapore by the Lim family.

Parkson reported 3Q net profit of RM76 million, down sharply from RM295.1 million a year ago due to higher operating costs and absence of RM231 million gain from the dilution of its retail operations,

Rising prices of property and commodities could provide the impetus for mosaic and ceramic tiles manufacturer Malaysian Mosaics. It is expecting a better second half amid a recovering tile industry, due to the uptick in the construction industry.

O&G players like KNM Group are seeing signs of a pick-up in demand is picking up after a crude-price rally triggered a revival of exploration projects.

In RCE Capital, the company proposed a private placement of up to 71.09 million shares of 10 sen each –or about 10% of its paid-up capital --  to investors to be identified to raise funds for working capital.

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