Brent near 5-month low below US$105

SINGAPORE: Brent crude inched up on Thursday, but prices held near a five-month low under US$105 a barrel as the market braced for a rise in Libyan supply after the government moved closer to a deal with rebels to reopen oil ports.

A more than US$3 drop in Brent prices this week has closed its gap with the US oil benchmark - a closely watched and heavily traded spread - to the narrowest since September.

Brent crude rose 11 cents to US$104.90 a barrel by 0306 GMT, after falling nearly US$1 on Wednesday to close at US$104.79, the lowest since early November.

US crude, or the West Texas Intermediate (WTI), fell 23 cents to US$99.39 a barrel, hovering near a one-week intraday low of US$98.86 hit in the previous session.

Hopes for an end to an eight-month standoff that dried up petroleum revenue in Libya were lifted as a government spokesman said an agreement with rebels to reopen key oil ports could be finalised in two to three days.

The restart of Libya's eastern oil ports could release about 600,000 barrels per day (bpd) of crude, although some analysts remained cautious.

"I won't rule out the possibility that it might be another empty promise but it definitely has an impact on market sentiment," Phillips Futures analyst Tan Chee Tat said.

Goldman Sachs analysts said the ports' restart will have a limited impact on global oil balances because Libya's production is significantly below the bank's forecast of 500,000 bpd.

Libya's crude output has fallen to around 150,000 bpd from 1.4 million bpd in July when a wave of protests started across the vast north African country, whose proximity to Europe just across the Mediterranean makes it a strategic energy supplier.

In the short term, demand for Libyan oil is likely to be limited due to reliability issues while shipping and insurance costs are expected to rise in light of the recent hostilities, the bank's analysts led by Jeffrey Currie said in a note.

"We note that in that previous episode of negotiations, a final deal was not reached and as such we remain cautious to the possibility that the recent announcement simply reflects a change in bargaining power rather than a structural move toward consensus," Goldman Sachs said.

US crude losses were checked by a surprise drop in inventories last week and as stockpiles at WTI's delivery point in Cushing, Oklahoma, fell for the ninth week, Energy Information Administration data showed.

Brent's premium to WTI stood at US$5.51, off US$4.81 reached on Wednesday - its narrowest in more than six months.

Oil may draw support from data showing US companies stepped up hiring in March, offering fresh evidence the economy was regaining momentum after a weather-driven lull over the winter.

A key senator called upon Washington to allow the shipment of condensate that has become abundant during the country's energy boom in an ongoing debate on a 40-year ban on most US crude exports.

Separately, Iran and Russia have made progress toward an oil-for-goods deal that sources said could be worth up to US$20 billion and enable Tehran to boost vital energy exports in defiance of Western sanctions, people familiar with the negotiations told Reuters. 

Kenanga neutral on healthcare sector

KUALA LUMPUR: Kenanga Research has maintained a 'neutral' call on the healthcare sector's outlook this year and believes it will continue to enjoy stable growth in Malaysia.
The research house said the industry will be supported by the growing healthcare expenditure, rising medical insurance and aging population demographics.
"The healthcare services sector is considered defensive for its predictability factor and captive earnings streams," it said in a statement today.
However, it said both IHH Healthcare and KPJ Healthcare shares are currently trading at lofty valuations, relative to their net profit growth potential for financial years 2014 and 2015.
Kenanga has maintained its "market perform" call on IHH Healthcare, on a take profit target of RM3.86.
For KPJ Healthcare, it reiterated the "underperform" recommendation with take profit target of RM2.67, opining that both shares are trading at rich valuations, while offering low dividend yields at current levels

Kenanga keeps neutral on automotive sector

KUALA LUMPUR: Kenanga Research has maintained its 'neutral' call on the automotive sector with selective buys, although the growth rate for the 2014 total industry volume is seen moderate at two per cent year-on-year.

It said this is due to rising living costs which could dampen consumer spending behavior, especially on durable big-ticket items such as cars.

"We are mildly positive on the announcement of the revised National Automotive Policy earlier this year, which aims to further liberalise the sector and resolve the structural issues.

"But we reckon that the fruition will not be seen in the short-term given the gestation period for the restructuring," Kenanga Research said in a note.

The research house said consumers will be more sensitive to pricing, preferring cheaper car models and coupled with the ongoing stiff competition, these are pointing to the trend of continual margin erosion for the automotive players.

"On sales breakdown, we believe the non-national segment will continue to gain traction on the assumption of more completely-knocked down energy efficient

vehicles (EEV) being introduced in conjunction with the government's initiatives in promoting Malaysia as the EEV regional hub," it added.

Its 2014 sales mix assumption of national and non-national segments is at 52:48.

Kenanga Research said in the absence of an immediate re-rating catalyst in the pipeline, coupled with the moderate growth expectations, it is maintaining

its 'neutral' rating on the sector .

Tan Chong Motor Holdings Bhd remains as our only 'buy' stock as we prefer its strong Nissan franchise expansion and long-term regional growth story," it added.

Kenanga Research also prefers Berjaya Auto, for which Kenanga has a 'trading buy' call with a target price of RM1.92 for the retail product segment, with investment merits backed by its superior growth prospects from low a base on the back of strong pipeline of exciting models

KL shares turn mixed mid-morning

Shares on Bursa Malaysia turned mixed at mid-morning today with gains limited by losses in selected heavyweight stocks, dealers said.

At 11am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.88 of a point to 1,851.12, after opening 2.32 points higher at 1,854.32.

Among heavyweights, Tenaga Nasional dropped 34 sen or 2.9 per cent to RM11.40, with the total volume transacted at 11.07 million, accounting for 3.47

points of the index.

In terms of market breadth, the gainer-to-loser ratio was 317 to 307, while 292 counters were unchanged, 690 untraded and 14 others suspended.

A total of 719.73 million shares valued at RM728.77 million were traded.

On the scoreboard, the Industrial Index fell 13.29 points to 3,185.84, and the Plantation Index lost 18.16 points to 8,909.26, but the Finance Index jumped

66.47 points to 16,772.01.

The FBM Emas Index eased 0.61 of a point to 12,833.33, and the FBMT100 Index declined 2.53 points to 12,480, but the FBM 70 advanced 10.46 points to

14,051.37, while the FBM Ace gained 30.28 points for 6,806.5.

Among actives, Ingenuity Consolidated was flat at 9.5 sen, Asian Pac rose two sen to 23.5 sen, Insas increased one sen to RM1.32 and Sona Petroleum earned

half a sen to 55 sen.

As for the heavyweights, Maybank was flat at RM9.67, CIMB went up three sen to RM7.24, and Sime Darby was one sen higher at RM9.27, while Axiata lost two

sen to RM6.71.

Ananda's oil sukuk debut spurs Malaysia surge

Malaysia's Bumi Armada Bhd plans to sell a debut Islamic bond, adding momentum to issuance that's surged 80 per cent this year in the world's biggest sukuk market.

Billionaire T. Ananda Krishnan's oil and gas company is setting up a RM1.5 billion (US$459 million) sukuk programme in its first debt offering, a stock exchange filing showed. Bumi Armada's shares have rallied to a seven-week high after it won a US$2.9 billion contract in Angola, and CIMB Group Holdings Bhd predicts further gains through 2014.

Investor confidence in emerging markets got a boost this week after Federal Reserve Chair Janet Yellen said the US economy will need monetary stimulus for some time, sending dollar-denominated debt yields in developing nations to a five- month low. Islamic bond offerings in Malaysia climbed to RM18.7 billion in 2014, with RM6 billion completed in the past two weeks, data compiled by Bloomberg show.
"Bumi Armada's plan to tap the sukuk market is a recognition that bodes well for Islamic finance," James Lau, who helps manage US$300 million as director of investment at Pheim Asset Management Sdn Bhd in Kuala Lumpur, said in a telephone interview yesterday. "The company is a well-known major player in the oil and gas field and hasn't disappointed the market."
The sukuk, which aren't yet rated, will be sold via the special purpose vehicle Bumi Armada Capital Malaysia Sdn Bhd, according to the March 26 filing. The funds will used to finance capital expenditure and day-to-day costs for the group's projects, it said, without providing details on maturities.
Assuming it's a top-rated bond, the company may have to pay 80 basis points to 90 basis points more than similar-maturity non-Islamic government notes given the prospect of rising interest rates, according to Manulife Asset Management Sdn Bhd.
Yields on three-year corporate non-Shariah-compliant notes, rated the highest investment grade of AAA, have climbed 15 basis points this year to 3.86 per cent, a level last seen in July 2009, a Bank Negara Malaysia index shows. The 10-year equivalent rose 33 basis points, or 0.33 percentage point, to 4.79 per cent.
"While current market conditions are stable for issuers, Bumi Armada will still have to pay a premium," Elsie Tham, a senior fund manager at Kuala Lumpur-based Manulife Asset, who oversees more than US$1 billion, said in an phone interview yesterday. "This is because investors want to be compensated for a possible rate increase."
The Fed has trimmed its bond-purchase program, which had driven cash into emerging markets, in US$10 billion increments this year to US$55 billion from US$85 billion in 2013. Yellen said March 19 that US interest rates could start rising about six months after the stimulus ends later this year.
One-year interest-rate swaps in Malaysia have climbed 10 basis points in 2014 to 3.50 per cent, signaling the central bank will raise borrowing costs by as much as 50 basis points from the current three per cent.
The Fed's most recent outlook cut yields on developing- market debt by two basis points in the first three dais of this week to 5.86 per cent after Yellen's latest comments, adding to a 19 basis point drop in the five days through March 28, according to JPMorgan Chase & Co.'s Emerging Markets Bond EMBI Global Index. Yields reached 5.83 per cent on April 1, the lowest since November.
Global sales of sukuk, which pay returns on assets to comply with Islam's ban on interest, rose 5.4 per cent in 2014 to US$13.8 billion from a year earlier, after reaching US$43 billion last year and an unprecedented US$46.5 billion in 2012, data compiled by Bloomberg show.
CIMB Group, the top Islamic bond arranger this year, forecast last week that worldwide issuance could exceed the record in 2014 as Asia and the Middle East ramp up development spending to build roads, ports and railways.
The Bloomberg-AIBIM Bursa Malaysia Corporate Sukuk Index, which tracks the most-traded ringgit-denominated notes, dropped 0.1 per cent in the first three days of this week to 104.691. It's fallen 0.4 per cent since December 31.
Bumi Armada has appointed Maybank Investment Bank Bhd as the lead manager for its bond offering. The company secured a contract from Italy's Eni Spa this week for a floating production, storage and offloading facility in Angola.
CIMB predicted on April 1 that Bumi Armada's shares will rise to RM4.56 in 12 months citing good earnings "visibility," which would represent a 13 per cent increase from RM4.04 in Kuala Lumpur as of 10.11a.m. Alliance Research Sdn Bhd., a unit of Alliance Bank Malaysia Bhd, said the same day it has RM4.50 price target and recommends buying the stock.
The company is forecast to report a 44 per cent increase in net income to RM621.5 million in 2014, according to average estimates of 20 analysts surveyed by Bloomberg News.
Bumi Armada generated RM786 million in revenue from Asian markets excluding Malaysia in 2012, compared with RM290 million domestically, data compiled by Bloomberg show. Africa, was its second-biggest market with RM473 million, followed by Latin America with RM110 million.
"The fact Bumi Armada opted for the ringgit sukuk market instead of the international one shows that Malaysia's Islamic industry has matured," Mohd. Effendi Abdullah, head of Shariah-compliant markets at Kuala Lumpur-based AmInvestment Bank Bhd, said in a phone interview yesterday. "This will encourage more local and foreign companies to issue locally.

S&P 500 ends at another record

NEW YORK: The S&P 500 closed at another record high on Wednesday as signs of steady private-sector hiring suggested that the economy was slowly building momentum after a winter-related pullback.

That also put more focus on Friday's government jobs data, which is among the most widely watched economic indicators.

"There's positioning ahead of that report," said Bucky Hellwig, senior vice president of BB&T Wealth Management in Birmingham, Alabama.

He also said "there was money moving in at the end of the quarter so now there's an upward bias."

The jobs report is expected to show that employers added 200,000 to nonfarm payrolls in March, the largest gain in four months, according to a Reuters poll of economists.

Eight of 10 S&P 500 sector indexes ended in positive territory, led by the consumer discretionary sector index , up 0.7 per cent.

Wednesday's data from payrolls processor ADP showed US private-sector employers added 191,000 workers in March, slightly below the 195,000 forecast, while gains in the previous month were revised to 178,000 from a previously reported 139,000, signaling that a winter-related impact on job growth earlier this year was easing.

Orders for long-lasting manufactured goods jumped 1.6 per cent in February, the biggest rise since September and above a 1.2 per cent estimate, the Commerce Department said. January's durable goods orders were revised to show a larger drop of 1.0 per cent instead of the previously reported decline of 0.7 per cent.

The Dow Jones industrial average rose 40.39 points or 0.24 per cent, to end at 16,573. The S&P 500 gained 5.38 points or 0.29 per cent, to finish at 1,890.90, a record closing high. The S&P 500 also hit an intraday record high of 1,893.17.

The Nasdaq Composite added 8.416 points or 0.20 per cent, to close at 4,276.456.

Shares of MannKind Corp soared 73.9 per cent to end at US$6.99. US health advisers recommended approval of the company's inhaled diabetes drug on Tuesday.

Among the day's decliners, fertilizer company Agrium Inc said a late start to spring and railroad-related backlogs will result in first-quarter earnings per share just above breakeven. Its shares lost 1.4 per cent to US$96.15.

In another weather-related announcement, Delta Air Lines said flight cancellations reduced its March quarter profit by US$55 million. Shares dipped 0.1 per cent to US$35.70.

Apollo Education Group Inc tumbled 8.8 per cent to US$32.06. The company reported lower-than-expected quarterly revenue. Apollo also said it had received a subpoena from the US Department of Education's Office of Inspector General, seeking information about the operations of the Northeast region of the University of Phoenix.

DFC Global Corp gained 5.2 per cent to US$9.45. The pawn and payday lender said it would be acquired by private equity firm Lone Star Funds for about US$1.3 billion, including debt.

About 6.2 billion shares changed hands on US exchanges, slightly below the 6.5 billion average so far this month, according to data from BATS Global Markets.

Advancers beat decliners on the New York Stock Exchange by 1,721 to 1,289 and on the Nasdaq by 1,473 to 1,150. -

KL shares open higher

Share prices on Bursa Malaysia extended yesterday's gains to open slightly higher today on continued mild buying interest, dealers said.

At 9.15am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) was 0.86 of a point better at 1,852.86 after opening 2.32 points higher at 1,854.32.

HwangDBS Vickers Research said the local bourse may continue to trend sideways but with a slight positive bias, possibly advancing towards the

immediate resistance level of 1,860 ahead.

"The key US equity barometers posted new record levels last night when they climbed between 0.2 and 0.3 per cent at the closing bell. Essentially, sentiment

was lifted by expectations of rising job creations in the economy.

"With Wall Street still on the rise, the upbeat mood could be felt on our local bourse too," it said in a research note today.

Gainers outpaced losers 178 to 92, while 191 counters were unchanged, 1,147 untraded and 14 others were suspended.

Turnover stood at 181.75 million shares worth RM128.08 million.

On the scoreboard, the Industrial Index slipped 9.02 points to 3,190.11 but the Plantation Index garnered 14.42 points to 8,941.84 and the Finance Index

climbed 68.16 points to 16,773.7.

The FBM Emas Index advanced 9.99 points to 12,843.93, the FBMT100 Index added 7.86 points to 12,490.39, the FBM 70 jumped 17.04 points to 14,057.95 and

the FBM Ace declined 32.5 points to 6,808.72.

Among actives, Ingenuity Consolidated was flat at 9.5 sen, Insas rose four sen to RM1.35 while Asian Pac and Xidelang earned half-a-sen each to 22 sen and

27.5 sen, respectively.

As for heavyweights, Maybank was flat at RM9.67, Tenaga Nasional declined 30 sen to RM11.44, Axiata eased one sen to RM6,72 but CIMB increased three sen to RM7.24