Malaysia Consumer Price Index - Up 3.8% YoY in May as food index shot up

· Malaysia's Consumer Price Index (CPI) jumped to 3.8% in May, the strongest reading in 22-months, as the cost of food and non-alcoholic beverages shot up by 8.2% YoY. It was higher than expected.

· Following the recent fuel price hike, we may not be surprise if the inflation rate may spike up to above 6.0% in June. Inflationary pressures will be stoked further in July, when power companies introduce new electricity tariffs. Hence, we expect the CPI to remain above 5.0% for the rest of the year. Given the surprisingly higher May base, we are adjusting our CPI forecast to 5.1% from our earlier projection of 4.1% for 2008.

· The current situation may have put BNM in a difficult spot to maintain its monetary policy stance and try to hold its policy rate steady at 3.50%. However, following BNM Governor's press statement, it provides us with more reason to allocate higher probability that BNM may raise the OPR by at least 25 basis points this year.

Healthcare- Recession-proof industry

A couple went to a sex therapists office at ABC Hospital.
The doctor asked, "What can I do for you?"
The man said, "Will you watch us having sex, give your expert analysis?"
The doctor looked puzzled, but agreed. When the couple finished, the
doctor said, "There's nothing wrong with the way you have intercourse"
and charged them RM60.00.
This happened several weeks in a row. The couple would make an
Appointment, have intercourse with no problems, pay the doctor and then
leave.
Finally the doctor asked, "Just exactly what are you trying to find
out?"
The man said, "We're not trying to find out anything. She's married and
we can't go to her house - I'm married and we can't go to my house.
Shangri-la Putrajaya charges RM250.00, Mandarin Oriental charges
RM280.00, Le Meridian charges M230.00. We do it here for RM60.00 and I
get that back from "Medical Claim".......!

Pak Lah: "Oil price hike for the best benefit of rakyat"

CIMB downgrade CI to 1,290 - NEUTRAL

Petrol prices have been raised 41%, along with the price of gas sold to Tenaga. However, Tenaga will get a 18-26% electricity tariff hike from 1 Jul. IPPs will have to pay 30% windfall tax on earnings above ROAs of 9%. Plantation companies will incur 7.5-15% levies on CPO sold above RM2,000/tonne but this will be sweetened by the scrapping of the cess tax. The petrol and electricity price hikes are negative for most sectors as it will raise costs and dampen consumer sentiment. The windfall tax on IPPs is clearly negative but the impact is minimal while the net impact on plantation companies is mixed but marginally positive. Tenaga appears to be the main beneficiary as higher tariff rates should easily offset the hike in gas prices. These simultaneous price hikes and windfall taxes on investor-favoured sectors are unprecedented. We expect the market to be rattled in the short term and are lowering or end-08 KLCI target from 1,350 points to 1,290 points. Maintain NEUTRAL weighting.

Oil Price Hikes Unevitable : Life must goes on...

I'll continue to favour the following stocks despite last week's goodies from Faklah to all Malaysians:

1- KHSB - Should be a good buy at RM0.61-0.62, RM0.74 resistance
2- KUPS - Buy below RM2.20, also worth holding longer
3- Oil & Gas - Selective, theme play - i.e Ramunia, Sapcres, Kencana
4- Plantation - Tradewinds, others
5- REITS, Investment Property Players - IGB, KLCC Prop; despite weaker consumer spending ahead, rental yields would remain high.