Sector Update
Banking: Underweight
–NPLs yet to peak. Underweight

Be cautious into 3Q. 1Q09 results of the six banking stocks we cover were generally in line, with combined net profit down 2.1% QoQ and 13.1% YoY. However, the weak 1Q09 GDP suggests growing stress in system loans over the coming months. We remain cautious on banks’ profits, especially from 3Q09. Underweight the sector.

Company Update
Berjaya Sports Toto RM4.80: Buy
–Special draws are good news. Buy

Special draws positive. B Toto has been awarded 12 special draws, two more than expected. While earnings accretion is minimal, we are encouraged that the government has chosen to raise revenues by more special draws rather than raising gaming tax and/or betting duty. Buy.

Comment On News
S P Setia RM4.10: Sell
– Knocking on China’s door

Signs MoU with Chinese party. S P Setia entered into a co-operation agreement with Hangzhou Ju Shen Construction Engineering Ltd (HJS) for a joint mixed real property development on a 25-acre land (initial development: 5 acres) in Hangzhou, China. While LT positive, there is no immediate earnings impact. At pricey valuations, S P Setia is a Sell.

Economics
External Trade, Apr ‘09
– A mixed bag of data…

YoY drop in exports returned to above-20% in Apr 09 after slowing in the preceding two months. It fell 26.3% YoY compared with the slower declines in Feb 09 (-16% YoY) and Mar 09 (-15.7% YoY) after the plunge in Jan 09 (-29% YoY). High base effect last year (Apr 08: +20.9% YoY – one of the three months of over-20% YoY increase in 2008), mostly from sharp gains in commodity prices last year was a factor.

Other Local News

PLUS: To set aside RM800m for dividends

PLUS: Gets this year’s first compensation of RM92m

Celcom: Expects 500,000 AirCash users by year-end

Boustead: Gets letter of intent for navy contract

Sime: Ramunia extend date again

MAHB: MAHB and JSC agree to terminate pact.

Outside Malaysia

US: Jobless claims fell last week by 4,000 to 621,000

US: Same store sales excluding Wal-Mart fell 4.6% YoY in May

Eurozone: Apr’s retail sales up MoM for the first time in seven months

Japan: Companies slashed spending by record in 1Q09 as profits slumped

UK: Bank of England (BoE) left the benchmark interest rate at a record low of 0.5%

UK: House prices unexpectedly rose in May

India: More liberalization measures coming

Russia: The central bank, Bank Rossii, cut the main interest rates for the third time in six weeks

Iceland: The central bank lowered the benchmark interest rate by a percentage point

Crude oil: Price rose to a seven-month high

Technicals