Steel Sector : Clever strategy to fill earnings vacuum Overweight
Scrap prices in Asia have breached US$300/tonne since beginning of this month. New offers for imported scrap in East Asia are up US$5/tonne to US$10/tonne, according to Steel Business Briefing. This validates our growing conviction that regional steel demand is set to accelerate from 4Q09 onwards - on top of a present rebound in price of iron ore. Domestic steel prices have remained relatively stable at the RM1,950/tonne-RM2,000/tonne level over the last three months despite muted local demand. However, we expect prices to re-accelerate moving into 2010. On the supply side, we are positive about the Chinese Government’s renewed commitment to consolidate its steel industry. We maintain our OVERWEIGHT rating on the steel sector. Ann Joo remains our top pick. Focusing primarily on long steel products, its structural repositioning puts the group in a sweet spot as an early beneficiary of accelerated infrastructure spending - with an added capacity kicker from its new blast furnace project.
QUICK TAKE
Construction : More progress made on Klang Valley LRT works Overweight
NEWS HIGHLIGHTS
Parkson Holdings : Parkson Retail Q3 profit gains 5.7%
CIMB Group Holdings : CIMB Niaga eyes 20% loan growth
Star Publications (M) : To develop former HQ site at PJ
Energy Sector : Bakun reservoir - 695 sq km - ready to be filled
AMFRASER RESEARCH
Swiber Holdings : Supported by sale & leaseback gains Buy
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