All eyes on Baghdad


  • Business
  • Saturday, 05 Apr 2003

BY ERROL OH

 

WHAT is it the economists say about the world catching cold when the United States sneezes? Well, the US is too busy leading a war on Iraq to fret over minor ailments, but a large section of the world has indeed fallen ill. And the bug is a deadly. 

The Severe Acute Respiratory Syndrome (SARS) outbreak has hit Malaysia too. At press time, there has been no confirmed local cases of SARS, but we are nevertheless starting to see the impact on business and the economy. 

So much so that the long-awaited stimulus package will reportedly be higher than expected so as to better shield the economy from the effects of SARS and the Iraq war. 

Earlier, acting Prime Minister Datuk Seri Abdullah Ahmad Badawi had been widely expected to unveil the package on Monday.  

However, news emerged yesterday that this would be deferred to May to allow more time to assess the situation. 

Also a separate StarBiz report yesterday quoted sources as saying the additional spending stemming from the package would be RM5 billion instead of the previous estimates of RM1.5 billion to RM3 billion. 

Institutional funds may well take this as a signal to accumulate stocks of companies that should benefit from the measures in the stimulus package. 

However, the postponement of the announcement may disappoint investors who were banking on the package giving the Kuala Lumpur Stock Exchange (KLSE) some direction next week. In any case, some observers feel that the share market may need more than the announcement to boost sentiments. 

For one thing, the Iraq war is a gigantic cloud looming over the global economy. In particular, the business world is concerned that the conflict will take longer to end.  

All eyes will be on Baghdad next week. Once the US-led forces takes control of the Iraqi capital, it is reasonable to believe that the US has firmly gained the upper hand. 

Meanwhile, there will be a lot of wait-and-see on the local bourse. The blue chip buying yesterday, spurred by Merrill Lynch's upgrading of the Malaysian equity market to overweight, may still supply some impetus. 

Another thing to look out for is the possible rise in shares transactions involving second board counters.  

On Monday, all second board shares will be traded in standard board lots of 100 units. The idea is to enhance market liquidity and encourage the participation of retail investors. 

It was a seesaw week on the KLSE. The Kuala Lumpur Composite Index (CI) was the only major Asian index that rose on Monday. But it ended almost 9 points lower on Tuesday. It rebounded slightly the day after and fell again on Thursday. Yesterday, the CI ended the day at 631 points, down from the previous week's closing of 635 points. 

AMMB HOLDINGS BHD's new warrants (AMMB-WB) were listed on Wednesday. Offered to shareholders at 12.37 sen each, the warrants shot up to RM1.05 yesterday. Even at this price, some analysts consider the conversion premium reasonable. 

Among counters reeling from the SARS effect are those in the travel and tourism trade, including GENTING BHD, Resorts World Bhd and Malaysian Airline System Bhd. Their share prices plunged on Monday. The prices have bounced back somewhat but developments relating to the SARS outbreak may continue to exert downward pressure. 

On Monday, shares of companies in the Lion Group were requoted after suspension since March 5. This marked the completion of the group's massive restructuring scheme. 

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