Steel stocks rise on Chinese rebar price gains

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KUALA LUMPUR (April 2): Steel stocks began the new quarter today with sharp gains, as recent prices on the Chinese steel market offer clues to a higher profit margin for local players here.

Among listed steel players on the local bourse, manufacturer of steel bars and billets Malaysia Steel Works (KL) Bhd (Masteel) stood out from the rest as it gained 12% or nine sen to settle at 84 sen at the midday break.

Meanwhile, long steel products manufacturer Lion Industries Corp Bhd gained 7.96% or seven sen to settle at 95 sen. Other steel players too ended today's morning session higher, with Southern Steel Bhd and Ann Joo Resources Bhd both gaining 14 sen each, to settle at RM1.85 and RM3.14 respectively.

Mycron Steel Bhd went up 5.26% or two sen to 40 sen, while CSC Steel Holdings Bhd gained 2.19% or three sen to RM1.40.

Meanwhile, YKGI Holdings Bhd edged up one sen or 2.67% to settle at 38.5 sen in heavy volume, with a total of 3.17 million shares transacted for a market capitalisation of RM134.26 million by the noon break.

SJ Securities Sdn Bhd senior remisier Goh Kay Chong told theedgemarkets.com that the bout of optimism in steel stocks today could be attributed to the price difference between local and imported steel bars from China, which will fatten the profit margin of local steel companies.

"There is a price difference of 26% from local steel bars and China-imported steel, based on the latest steel bar prices quoted in the China market on Friday," said Goh.

"Local factories will then set their selling price closer to that of steel bars imported from China so as to be competitive and also to increase their profit margin. So technical indicators that showed volume and price movements are curving up, reflecting a buy for steel counters," he added.

Kenanga analyst Lum Joe Shen shared when contacted that steel stocks may now be attracting bottom-fishing buyers, given the year-to-date weakening in their share prices.

To illustrate, Masteel has declined 33% year to date from its closing price of RM1.27 on Dec 29, while Southern Steel and Ann Joo have both shed about 18% since the end of last year.