Malaysia Stocks to Fall on Earnings, Dilution, AmResearch Says

By Tien Hin Chan

March 4 (Bloomberg) -- Malaysia’s benchmark stock index may drop another 7.5 percent by year-end to a five-year low as the global recession batters earnings and more companies seek funds from shareholders to boost capital, AmResearch Sdn. said.

The research unit of AMMB Holdings Bhd. cut its year-end target for the Kuala Lumpur Stock Exchange Composite Index to 800 from 850. The gauge is headed for its lowest level since May 26, 2004, as corporate earnings will shrink 7 percent this year, AmResearch strategist Benny Chew wrote in a report today. The index was at 864.44 at 11:59 a.m. local time.

Malayan Banking Bhd. and TM International Bhd. last week sought a combined 11.3 billion ringgit ($3.1 billion) from shareholders to boost capital. The race to “de-leverage” balance sheets by selling additional stock will be led by banks, carmakers, airlines and producers of oil, gas and building material, risking a dilution of equity, AmResearch said.

“The global trend of companies resorting to rights issue has only recently caught on with Malaysian companies,” Chew wrote. This is “due to the belated acceptance of a more prolonged economic downturn and a tougher funding environment, where capital is scarce or competed away.”

Malayan Banking, known as Maybank, has slumped 5.1 percent since it announced the sale of new shares to existing shareholders on Feb. 27. TM International has lost 11 percent since Feb. 26, after its 5.25 billion ringgit rights offer.

“Current valuations would still need to be significantly diluted to reflect growing risk of rights issues,” AmResearch said. “Valuations are already depressed.”

“Risk aversion” also means the price of the stock sale needs to be attractive to entice demand, signaling that the share price discount “would likely be steep,” Chew said.

To contact the reporters on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net

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Malaysia Stocks to Fall on Earnings, Dilution, AmResearch Says

By Tien Hin Chan

March 4 (Bloomberg) -- Malaysia’s benchmark stock index may drop another 7.5 percent by year-end to a five-year low as the global recession batters earnings and more companies seek funds from shareholders to boost capital, AmResearch Sdn. said.

The research unit of AMMB Holdings Bhd. cut its year-end target for the Kuala Lumpur Stock Exchange Composite Index to 800 from 850. The gauge is headed for its lowest level since May 26, 2004, as corporate earnings will shrink 7 percent this year, AmResearch strategist Benny Chew wrote in a report today. The index was at 864.44 at 11:59 a.m. local time.

Malayan Banking Bhd. and TM International Bhd. last week sought a combined 11.3 billion ringgit ($3.1 billion) from shareholders to boost capital. The race to “de-leverage” balance sheets by selling additional stock will be led by banks, carmakers, airlines and producers of oil, gas and building material, risking a dilution of equity, AmResearch said.

“The global trend of companies resorting to rights issue has only recently caught on with Malaysian companies,” Chew wrote. This is “due to the belated acceptance of a more prolonged economic downturn and a tougher funding environment, where capital is scarce or competed away.”

Malayan Banking, known as Maybank, has slumped 5.1 percent since it announced the sale of new shares to existing shareholders on Feb. 27. TM International has lost 11 percent since Feb. 26, after its 5.25 billion ringgit rights offer.

“Current valuations would still need to be significantly diluted to reflect growing risk of rights issues,” AmResearch said. “Valuations are already depressed.”

“Risk aversion” also means the price of the stock sale needs to be attractive to entice demand, signaling that the share price discount “would likely be steep,” Chew said.

To contact the reporters on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net

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