Gamuda 2Q net profit up 38% to RM68m

GAMUDA BHD's earnings rose 38% to RM68.03 million in the second quarter ended Jan 31, 2010 from RM49.05 million a year ago, boosted by the strong performances in all its divisions.

It said on Thursday, March 25 the revenue was RM603.24 million compared with RM591.73 million. Earnings per share were 3.37 sen versus 2.45 sen.

For the first half, net profit was RM131.05 million versus RM104.09 million in the previous corresponding period. Revenue was RM1.22 billion compared with RM1.20 billion.

"With the existing CONSTRUCTION [] projects progressing on schedule and the recovery of the property market, the Group's performance is expected to perform well in the remaining quarters of the current financial year," it said.

On the electrified double track project, it said work progress haf improved and to-date 93% of the land has been handed over to the project company. The work progress is expected to accelerate in the next two quarters.

As for the new Doha International Airport project in Qatar, it said the project is progressing on schedule with 80% of the works completed. Progress payments from the Qatar Government continue to be on time.

On the Yenso Park and sewage treatment plant projects in Vietnam, it said they were progressing well. The recent devaluations of the Vietnamese Dong had no significant near term impact on the group.

As for the group's property division, it added that it continued to benefit from improved market sentiments, with semi-detached houses and bungalow homes in gated and guarded parcels in great demand.

"The property division's performance is expected to improve further in the remaining quarters of the financial year," it said.

This good financial result should support Gamuda to move upward amid rising world stock markets. There are a few Gamuda call warrants listed on KLSE, namely Gamuda-ch, Gamuda-ci, Gamuda-cj and Gamuda-ck. Among these 4 call warrants, i would pick Gamuda-ch as my favourite due to its low premium of 2% amd gearing 3x. The maturity day is 24/9/2010.  The other 3 Gamuda call warrants have ridiculously high premium of between 10%-25%.

Ok, good luck.

GOon

IJM-WB up 14%

Macquarie Equities Research reiterated its buy call on IJM and raised the target price to RM6.00 from RM5.50 following a review of the company's prospects. 


IJM is one of the broker's top picks in Malaysia, saying that the firm will be a key beneficiary of infrastructure spending, both domestically and in international markets such as India and the Middle East.

Potential catalyst to IJM's share price could be the award of the Besraya extension job in fourth quarter this financial year, new construction wins and successful property launches.

"We see IJM as a beneficiary of India's aggressive road spending plans, given its track record. Recent press reports indicate the Indian government's plans for US$50 billion (US$1 = RM3.41) worth of road projects over the next two years.

"Any potential wins in India are positive for the company and would add to IJM's existing orderbook of RM4.4 billion. In total, we have assumed RM1 billion worth of new jobs in financial year 2010 and RM2 billion in financial year 2011," Macquarie said in a January 22 report.

In addition to potentially clinching key domestic projects via its construction division, IJM's building materials division, ICP (Industrial Concrete Product), may also benefit from the increased construction activity, it noted. 

IJM-WB (warrant) up 14% since I last talked about it last Saturday. What makes it more interesting is IJM-WB still comes with a discount of 3.6%. It is trading at RM1.17. With a gearing of 4.06, it should moves up another 14% (3.6% X 4.06) or RM0.16 to RM1.33 to eat up all the discount. It still has another 148 days before it expires. Sooner or later, the discount has to be realized.

GOon

Malaysia raises 2010 GDP forecast

Malaysia’s central bank raised the country’s 2010 economic forecast, pledging that its monetary policy will continue to support growth even as it begins to “normalize” interest rates amid an “uneven” global recovery.

Southeast Asia’s third-largest economy may expand 4.5 per cent to 5.5 per cent this year after shrinking 1.7 per cent in 2009, Bank Negara Malaysia said in its annual report today. The high end of the forecast matches the median estimate of seven economists surveyed by Bloomberg News. The government said in October that gross domestic product would expand 2 per cent to 3 per cent in 2010.

“Growth is expected to be driven by greater private-sector activity and robust external demand from the regional countries,” the central bank said. Bank Negara said it will maintain an “accommodative monetary policy stance” as the world’s economic rebound may be “gradual and uneven.”

Governor Zeti Akhtar Aziz raised interest rates for the first time in almost four years on March 4, joining nations from Australia to India in withdrawing stimulus. A strengthening economy may help Prime Minister Najib Razak cap the budget deficit this year, forecast by the government to narrow to 5.6 per cent of GDP from a revised 7 per cent in 2009, which was a 22-year high.

“As far as monetary policy is concerned, I think Bank Negara has factored in whatever it needs” and will increase borrowing costs by a further half point at most this year, Gundy Cahyadi, an economist at IDEAglobal in Singapore, said before the report. “The government is set to slowly withdraw its stimulus and go back to aiming for a balanced budget in the coming few years.”

Recession Ends

Malaysia emerged from its first recession in a decade last quarter as exports such as Sime Darby Bhd. palm oil and Unisem (M) Bhd. semiconductors recovered. The economy should “improve further” in 2010 after growing 4.5 per cent last quarter, Zeti said in the report today.

Agriculture, mining, manufacturing and services are forecast to perform better this year, the central bank said. Unemployment may ease to 3.6 per cent of the labor force from 3.7 per cent in 2009, as companies boost hiring and salaries.

Mah Sing Group Bhd., a Malaysian property developer, said it’s “on track” to meet its 2010 sales target of 1 billion ringgit ($302 million), with revenue in the first three months tripling to 516 million ringgit from 170 million ringgit a year earlier.

Currency Climbs

“We believe that the expected economic expansion, improvement in the employment market, high savings and healthy affordability levels will contribute to higher demand for properties in the coming months,” Group Chief Executive Leong Hoy Kum said.

The ringgit has climbed 2.8 per cent this year, the third- best performer among 10 Asian currencies outside Japan, as Asia’s recovery drew funds to the region and Malaysia moved ahead of most of its neighbors in raising borrowing costs.

Malaysia may increase interest rates further to avert asset bubbles and discourage risky investments, even as inflation will likely remain “modest” this year, Zeti said in a March 12 Bloomberg Television interview. Bank Negara this month increased the benchmark rate to 2.25 per cent from a record-low 2 per cent.

Inflation is forecast to average 2 per cent to 2.5 per cent this year, accelerating from 0.6 per cent in 2009, the central bank said, citing improving economic conditions and “possible adjustments to administered prices and subsidy restructuring by the government.”

Inflation Contained

Najib’s government has said it plans to reduce spending by revamping subsidies on fuel and essential items from sugar to flour. Such goods are sold at below market rates in Malaysia because the state pays suppliers to keep prices low. Still, a plan to limit fuel subsidies to benefit the nation’s poorest consumers by May has been delayed to later this year, the consumer affairs ministry said this month.

While the price increases may push up inflation, “given that demand conditions are not expected to exert strong pressures on consumer prices, the impact is likely to be transitory and contained,” the central bank said.

Najib, who boosted government spending and eased investment rules last year to revive growth, is due to unveil policies next week to help Malaysia become a high-income economy. The leader, facing the strongest opposition presence in parliament since the nation’s independence in 1957, said yesterday he’ll keep rolling back policies that favor the country’s biggest ethnic group and sell stakes in state companies to lure investment.

Market Friendly

“Affirmative action will be more market friendly, more transparent and will be more merit-based,” Najib said in an interview in Hong Kong yesterday.

Najib last year increased the foreign ownership limit in Malaysian banks and stockbrokers and opened up services industries.

“The more competitive global environment creates urgency for Malaysia to transition to a high value-added, high-income economy,” the central bank said. Building a high-quality workforce and “competition-driven markets” are priority areas, as “protectionist policies undermine the fundamental incentive structure needed for a thriving entrepreneurial society,” according to the report.

Financial Blueprint

Malaysia is working on a new blueprint for the financial industry to meet the nation’s changing needs as it seeks to become a high-income and developed economy, the central bank said today.

The central bank will also pursue “progressive deregulation of rates and commissions” in the insurance industry to promote competition and innovation, Bank Negara Malaysia said in its Financial Stability and Payments Systems Report released in Kuala Lumpur.

Prime Minister Najib Razak, who boosted government spending and eased investment rules last year to revive growth, is due to unveil policies next week to help Malaysia become a high-income economy. He said he’ll keep rolling back policies that favor the country’s biggest ethnic group and sell stakes in state companies to lure investment.

Najib last year increased the foreign ownership limit in Malaysian banks and stockbrokers and opened up the services industries to overseas investors.

The country is reviewing existing legislation governing financial institutions to further clarify the central bank’s powers, Bank Negara said. The review will emphasize board oversight and governance while giving greater flexibility to well-managed companies, the bank said.

“An important consideration in the review is to promote a market-based environment for players to thrive and innovate while maintaining sufficient safeguards with adequate legislative powers for the bank to ensure that financial stability is preserved at all times,” Bank Negara said.

The government plans to enhance the country’s pension system, which will create opportunities for financial companies to provide retirement products, the central bank said.

LNG Exports

Malaysia, the world’s second- biggest exporter of liquefied natural gas, reduced shipments of the fuel last year as the global recession cut energy demand.

Exports fell 3 per cent to 22.2 million metric tons from a year earlier, Bank Negara Malaysia, the central bank, said in its 2009 annual report released today. The value of shipments dropped 23 per cent to 31.2 billion ringgit (US$9.4 billion).

Energy consumption slowed as the deepest recession since World War II cut the use of oil, coal and gas last year. The average price of Malaysia’s LNG exports tumbled 21 per cent to 1,406 ringgit a ton last year, the central bank said.

There was “lower external demand and the shutdown of several oil and gas facilities during the year for maintenance,” Bank Negara said.

Malaysia’s crude oil and condensates production dropped 4.1 per cent to 660,000 barrels a day last year, while natural gas output fell 3.7 per cent to 5.67 billion cubic feet a day. The declines led to a 3.8 per cent contraction in the country’s mining industry, according to the annual report.

Oil reserves rose to 5.52 billion barrels, equivalent to 22 years of current production. Gas reserves were at 14.66 billion barrels of oil equivalent, sufficient for 36 years based on current output.

Tapis crude oil, Malaysia’s benchmark grade, averaged US$65.42 a barrel last year, down from US$103.69 a year earlier, according to data compiled by Bloomberg News. Prices, which reached a record US$153 on July 15, 2008, closed at US$82.68 yesterday.

Malaysia is the largest LNG exporter in the world after Qatar. Condensate is a type of light oil produced in association with gas

GE-C1 comes with disount of 5.6%

General Electric Company (NYSE:GE) is a mammoth company and can often provide a good gauge for the overall market. That is, when GE goes higher, the overall market often follows suit. GE has been making some recent highs and that bodes well for investors, and may be marking the end of the concerns about loan losses.

Rising Dividend Investing had these comments to add about GE:

"GE has recently broken above a several-month trading range on high volume. GE has many qualities that make it something of a microcosm of the US economy. Thus, its price breakout suggests that worries about its loan losses and perhaps loan losses for financial companies in general might be peaking.

GE has been in the middle of the financial crisis, and for it to power to a new post-crash high is big news. We've watched price graphs long enough to know that some very big money has just made some very big bets that the news for GE is going to get better over the coming months.

Additionally, because GE's business is so multi-faceted, there is reason to believe that good news for GE is probably good news for the whole economy and stocks.

Interestingly, GE had a couple of big days right after their CFO announced that the company was considering a dividend hike in 2011. In this regard, their message is similar to the one we suggested in last week's post about the banks. That is, companies, even companies in the financial services sector, appear to feel comfortable with their current levels of capital reserves. When GE starts talking about dividend hikes, it sends a clear message: they don't have any dilutive equity capital underwritings in the works. That is good news, but even more importantly, if they are talking dividend hikes, it follows that they must see an end to their loan losses. That's even better news."

Currently, there is a GE call warrant (GE-C1) listed on KLSE. In my humble opinion, it is one of the best and most attractive call warrants available in KLSE. The main reason i am saying this is because of its discount. Currently, GE-C1 comes with a discount of 5.6% and gearing 3.9. GE-C1 is trading at RM0.13. To erase all the discount, GE-C1 should move forward 22% (5.6 x 3.9) or RM0.03 (RM0.13 x 22%) to RM0.16. There are still another 2 months before it expires, soon or later the discount has to be realized. Since GE-C1 is a European style call warrant, we cant convert it now, not until its maturity date. GE's recent gain is supported by its fundamental, i think it still has the strength and momentum to move forward further.

GOon

IJM unit wins RM600mil job

IJM Corp Bhd’s wholly owned subsidiary Road Builder (M) Sdn Bhd has received a letter of award from another subsidiary, Besraya (M) Sdn Bhd, to extend the Besraya Highway for a fixed sum of RM600mil.

The construction period for the project, known as Sungai Besi highway link, was 36 months, the company told Bursa Malaysia yesterday.

This is a good catalyst for IJM to jump. Currently, there an IJM warrant, IJM-WB listed on KLSE. IJM-WB is at a discount of around 2% and gearing of 4.5.

Good luck.

GOon

Housing bubble coming to Malaysia?

The ever-rising prices of property in Penang are not just down to scarcity of land but are partly due to speculators, strong demand from investors and a low-interest rate environment.

Dr Michael Lim Mah Hui, senior fellow of Socio-economic and Environmental Research Institute (Seri), a think tank, said the investors comprise wealthy Malaysians and foreigners.

The price rise is making property increasingly out of reach for the average Penangites. The strong demand means that developers were putting more expensive price tags on their projects.

Lim, a banker who worked with Credit Suisse, Standard Chartered Bank and the Asian Development Bank, said from 1999 to 2008, the prices of property in Penang rose 40 per cent.

This increase is a tenth more than that for the whole country, and it is still going up.

Terrace houses in Penang now average RM700,000 to RM1.2 million, against RM445,000 to RM520,000 two years ago.

"Condominiums cost RM250 per square feet in 2008 but now the price is RM350 to RM500, depending on the location," Lim said during Seri's roundtable on housing affordability gap in George Town last week.

However, it is not surprising if entire development projects are sold out in two days now as buyers are easily taken in by attractive down payments as low as 1 per cent and the low interest rates for housing loans, he said.

The public may not fully understand the risks of adjustable-rate mortgage (ARM) when they sign up for loans, for example. An ARM gives low rates at the start of a loan but the rates go up after the promotional period.

"Such a situation can result in a (real estate) bubble, which nobody can tell when it will happen," Lim said.

He said certain developers were not helping the situation by reserving the best units for their "special customers".

"Some developers let their prime customers and insiders cherry pick the units they want first before everyone else.

"When the average house buyers visit the developers' sales galleries at the project launch, they find many units had already been sold, encouraging many of them to quickly make down payments for the remaining units as well," he said.

Lim expressed concern that there is a mismatch of supply and demand for properties in the state with many houses, flats and apartments vacant.

He said in 2000, there were 355,436 housing units in Penang but only 284,969 households, indicating an oversupply of 20 per cent.

"Since then, more units have been built. If you go round at night, you will notice that many homes are unoccupied, especially super-condominiums that are beyond the affordability of average households.

"This is also an indication that there is an undersupply of affordable housing in the state," Lim said.

He proposed that the state government study how Singapore's Housing and Development Board managed its public housing. Penang Development Corp should also undertake more land reclamation to develop more affordable homes.

S&P Rally Slowed by Fastest Cash Depletion Since 1991

Equity mutual funds are burning through cash at the fastest rate in 18 years, leaving them with the smallest reserves since 2007 in a sign that gains for the Standard & Poor’s 500 Index may slow.

Cash dropped to 3.6 percent of assets from 5.7 percent in January 2009, leaving managers with $172 billion in the quickest decrease since 1991, Investment Company Institute data show. The last time stock managers held such a small proportion was September 2007, a month before the S&P 500 began a 57 percent drop, according to data compiled by Bloomberg.

For Parnassus Investments and Janney Montgomery Scott LLC, depleted reserves is a sign returns will fall from last year, when the S&P 500 rose 23 percent, the most since 2003. Bulls say any pullback is a buying opportunity because investors have $3.17 trillion in money-market funds and may return to stocks after putting 16 times more money into bonds since last March.

“It’s not a red light, but it’s a flashing yellow light that the strongest part of the rally is probably over,” said Jerome Dodson, who oversees $3.6 billion as president of Parnassus in San Francisco and estimates the S&P 500 will climb 6 percent to 9 percent this year. “There’s not as much buying power out there.”

Investors are trying to gauge how much money is left to move shares after the S&P 500 surged 70 percent in the 10 months starting in March 2009, and then began an 8.1 percent slide on Jan. 19. The drop, which matches the average size of 117 “moderate corrections” tracked by Birinyi Associates Inc. since 1945, may herald a second phase of the bull market after last year’s advance surpassed every rally since the 1930s.

Bouncing Back

The S&P 500 has recovered almost 90 percent of the retreat that started in January, the biggest plunge in almost a year. The index recouped its year-to-date loss last week, rising 3.1 percent to 1,138.70 between Feb. 26 and March 5, following smaller-than-projected job losses and U.S. consumer spending that topped economists’ estimates.

U.S. stocks fluctuated today as American International Group Inc. increased following its $15.5 billion sale of a unit, while drugmakers sank as President Barack Obama embarked on a final push to overhaul the health-care system. The S&P 500 lost 0.1 percent to 1,137.94 at 11:47 a.m. in New York.

Cash in mutual funds slipped to 3.6 percent of assets in January, the second-lowest level on record, compared with 5.7 percent a year earlier, ICI data show. As reserves fell, the S&P 500 rallied 30 percent.

Weaker Economy

While declines in equity prices this year won’t be as severe as during the credit crisis, stocks may slump should data show the economy is weaker than analysts forecast, says Mark Luschini, chief investment strategist at Janney Montgomery. Economists project U.S. gross domestic product will increase 3 percent in 2010, up from a forecast of 1.8 percent a year ago, according to the median of 68 estimates compiled by Bloomberg.

The percentage of cash held by funds “suggests that you want to be wary of who’s left to do the buying,” said Luschini, who oversees $1.5 billion in Philadelphia. “With this recovery still relatively fragile, it would not take much to set the market up for a sizable snapback.”

The S&P 500 will rally 8.4 percent from last week’s close to 1,234 through the end of 2010, according to the average in a Bloomberg survey of 13 strategists. They recommend investors keep 7.8 percent in cash, down from 9.1 percent at the same time last year.

Cash as Harbinger

Changes in reserves foreshadowed moves in equities in the past, according to data compiled by Bloomberg and ICI. The S&P 500 lost 16 percent on average the last three times managers boosted reserves. The index doubled on average when they cut.

The index rose threefold as cash dropped in April 1993 from 9.5 percent to 4 percent in March 2000. It sank 12 percent in the next eight months as the levels jumped to 6.5 percent. The S&P 500 gained 14 percent while balances shrank from 6.5 percent in November 2000 to 3.5 percent in June 2007.

Losses of 5 percent during bull markets have usually given way to gains, according to Westport, Connecticut-based Birinyi. The 117 retreats comparable to the one that began Jan. 19 have averaged 8.5 percent over 45 days before a rebound began, the data show. The index plunged more than 10 percent 26 percent of the time.

Redeploying Assets

Stocks will rally this year as the prospect of higher interest rates lures cash from fixed-income securities to equity accounts, says Mark Bronzo at Security Global Investors. Data from ICI, the Washington-based lobbying group for professional money managers, show investors have pumped $369 billion into bond funds since March 2009 versus $23.4 billion for equities.

There’s a 57 percent chance that the Federal Reserve will raise its target rate for overnight loans between banks at its November meeting, according to data on futures trading compiled by Bloomberg. Fed Bank of Atlanta President Dennis Lockhart said in New York on March 3 that he’s “uncomfortable” with a long period of unusually low borrowing costs while still endorsing the policy of record-low rates.

“There’s so much money in the fixed-income market and there’s so much money in money-market instruments paying almost nothing,” said Bronzo, whose firm oversees $21 billion, in an interview from Irvington, New York. “If that money shifts to stock funds, it’s going to be very bullish.”

Equities may be boosted by investors deploying some of the $3.17 trillion held in money-market funds tracked by ICI. While $754.3 billion has moved from the accounts in 14 months for the fastest decline on record, Bronzo says more cash will be withdrawn as investors gain confidence in the economy.

0.04% Return

The 100 largest money-market accounts returned an annualized 0.04 percent last week, according to data compiled by Westborough, Massachusetts-based Crane Data LLC.

Valuations relative to earnings may make gains harder. While the S&P 500 is cheaper than at the end of 2009, it still trades at 18.2 times profit from the past year, the highest level since 2005.

Stocks would get cheaper should earnings rise 26 percent this year, the average estimate from analysts tracked by Bloomberg. The S&P 500 has a multiple of 14.6 based on estimated 2010 income, below the average of 16.6 from the past 55 years.

Leo Grohowski, who oversees $154 billion as chief investment officer at BNY Mellon Wealth Management, says the S&P 500 will climb 5.4 percent to 1,200 by the end of the year, matching the index’s average annual gain since 1928. He’s buying PepsiCo Inc., the second-largest soda maker, because the shares are less expensive than the index and have a higher dividend yield. The Purchase, New York-based company has a price-to- earnings ratio of 17.4 and pays 2.8 percent of its share price in dividends, compared with 1.98 percent for the S&P 500.

“It’s going to be at best a slow and steady commitment of capital to equities,” Grohowski said from Boston. “It’s going to be harder to scratch out attractive returns.”

What is General Electric (GE) Worth?

Once considered a venerable blue chip stock, the credit crisis exposed General Electric's (NYSE: GE) mortality. The madness which started in 2007 saw GE shares enter into free fall, before recovering over the past year. The crisis also saw the company cut its hefty dividend to a fraction of what it once was.

Much of the concerns about GE has centered around the Capital Finance unit, which provides commercial lending and leasing in addition to consumer lending and real estate. With defaults and delinquencies surging and with no end in sight, shares of GE plunged. The concerns about the finance unit were so great that shares traded to as low as $5.87 on March 4th - a year ago tomorrow. This was down from the $30s before the crisis hit.

Some were calling GE shares worthless. One analyst even placed a low $2 per share target on the stock.

With the settling down of the credit crisis, due to massive stimulus from the U.S. and countries around the world, these bearish calls proved to be a bottom for the stock and they have since recovered 175% to their current price of $16.19 per share.

While GE is clearly not out of the woods, with earnings returning to normal levels, regular valuation metrics appear to be proper again. So what should the stock of GE be worth now?

Currently the shares trades at 16.4x the 2010 EPS consensus of $0.99 and 13.5x the 2011 EPS consensus of $1.20.

Here is what analysts are saying on the stock's value:

• Goldman Sachs thinks the stock is worth $21 per share, based on 16.5X 2011 Industrial EPS of $0.95 and 1.5X GECS tangible book value of $3.60. They rate the stock a Buy.
  
• JP Morgan has a price target of $22, based on 12x normalized (2013E) earnings of $1.80. The note shares of GE currently trade at 9x their normalized 2013 EPS estimate of $1.80, or a a 25% discount to EE/MI peers. They rate the shares Overweight.
  
• Deutsche Bank has a $19 price target on GE. They said a DCF-based model values the industrial businesses at $16 and they continue to value GE Capital at $3 per share based on a multiple of 1.2x TBV ($38b). They rate the shares Hold.

Economy grows at 5.7 pct pace, fastest since 2003

The U.S. economy grew at a faster-than-expected 5.7 percent pace in the fourth quarter, the quickest in more than six years, as businesses made less-aggressive cuts to inventories and stepped up spending.

The Commerce Department said on Friday its first estimate put fourth-quarter gross domestic product growth at its fastest pace since the third quarter of 2003. The economy expanded at a 2.2 percent annual rate in the third quarter.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 4.6 percent rate in October-December period.

"Wow, great number. It's very solid and gives us a running start into the second half of the year when we can't rely on government stimulus," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

"That's part of the plan, to get us moving as fast as possible so when life support is removed we'll have a pulse."

U.S. stock index futures extended gains on the data, while Treasury debt prices deepened losses. U.S. dollar rose against the yen.

Getting the economy on a sustainable growth track remains one of the key challenges facing President Barack Obama, who on Wednesday outlined a raft of measures to create jobs and nurture the recovery.

Growth was boosted a sharp slowdown in the pace of inventory liquidation, a factor that could mask the strength of the economic recovery from the longest and deepest downturn since the Great Depression.

But even stripping out inventories, the economy expanded at an annual rate of 2.2 percent, accelerating from the 1.5 percent increase in the third quarter, reflecting relatively strong performance from other segments of the economy.

Business inventories fell only $33.5 billion in fourth quarter after dropping $139.2 billion in the July-September period. The change in inventories alone added 3.39 percentage points to GDP in the last quarter. This was the biggest percentage contribution since the fourth quarter of 1987.

For the whole of 2009, the economy contracted 2.4 percent, the biggest decline since 1946, the first year after the end of World War II.

In the last three months of 2009, consumer spending increased at a 2 percent annual rate, below the 2.8 percent annual pace in the prior quarter when consumption got a boost from the government's "cash for clunkers" program.

In the fourth quarter, consumer spending contributed 1.44 percentage points to GDP.

Consumer spending, which normally accounts for about 70 percent of U.S. economic activity, has been held back by the worst labor market in a quarter century.

Business investment in the fourth quarter grew for the first time since the second quarter of 2008 as the drag from the troubled commercial real estate was offset by robust spending on equipment and software.

The growth of spending on new home construction braked sharply in the fourth quarter to an annual rate of 5.7 percent from an 18.9 percent pace in the third quarter. Home building has received a lift from a popular tax credit for first-time buyers, but recent data have hinted at some weakness starting to creep in.

Export growth outpaced imports, leaving a trade gap that contributed half a percentage point to GDP growth in the last quarter.

Separately, employment costs in the United States rose 0.5 percent in the fourth quarter, Labor Department data showed.

Analysts polled by Reuters had expected the Employment Cost Index to increase 0.4 percent in the three months ending in December 2009, after it inched up an unrevised 0.4 percent in the prior quarter.

Wages and salaries, which make up about 70 percent of compensation, and benefits were both up 0.5 percent, the Labor= Department said.

Also, business activity in New York City expanded in January for the sixth straight month, reaching its highest level in over three years, according to an industry report released on Friday.

The Institute for Supply Management-New York's seasonally adjusted index of current business conditions rose to 72.6 in January from an upwardly revised 64.5 in December, originally reported as 59.7.

It was the group's highest current conditions reading since November 2006.

Perception and Royal Reality in Malaysia

The King is Dead. Long Live the King, so to speak

Iskandar was one of the worst of Malaysia's sultans, a violent, often brutal and impulsive man who seemingly knew no bounds to his behaviour. He was lucky to be a sultan at all.

Asia Sentinel

Malaysia has gone into mourning for the Sultan of Johor, Mahmud Iskandar Almarhum Sultan Ismail, who died Friday at 77. He was buried in an elaborate ceremony on Saturday. In Malaysia's oddball rotating kingship, which allows each of the country's nine sultans to wear the king's hat for five years, Iskandar became Malaysia's Yang Di-Pertuan Agong, or king, in 1984, relinquishing the title in 1989.

Najib Tun Razak, the prime minister, cut short a visit to India to extend his condolences and issue a statement: "On behalf of the government and people. I express sadness and extend condolences to Her Royal Highness Sultanah Zanariah and her children as well as the royal household on the demise of His Royal Highness the Sultan of Johor."

The massive Iskandar development project in Johor across from Singapore was named for him.

Muhyiddin Yassin, the deputy prime minister, said that Iskandar's death "is a big loss to the people of Johor, and also of Malaysia, because of his priceless contributions during his lifetime."

But it is difficult to see just what those priceless contributions were. Despite the encomiums, the Johor sultan embodied just about everything that was ill-starred about Malaysia's system of royalty.

Both The Star, owned by the Malaysian Chinese Association, and the New Straits Times, owned by the United Malays National Organisation, issued respectful obituaries. To most Malaysians, the New Straits Times said, "the Sultan will be remembered for his mercurial ways, as well as his inadvertent role in the constitutional crisis of 1993 which dramatically ended the legal immunity of the country's nine hereditary monarchs."

Iskandar's role was hardly inadvertent but it was certainly mercurial. In fact it was integral to it and it stemmed from his brutal beating, along with members of his staff, of a field hockey coach. And although the end of legal immunity was pushed through 17 years ago, today Malaysian royalty pretty much act any way they want without facing arrest. Several have left huge gambling debts in London casinos to be picked up by Malaysian state governments. Recently there have been incidents reported of fistfights between rival royals in Malaysian night clubs.

In recent months, in fact, UMNO, the country's leading political party, has led a charge to report to the police anyone who dares criticize the royalty. Several critics have been charged with sedition.

Iskandar was one of the worst of Malaysia's sultans, a violent, often brutal and impulsive man who seemingly knew no bounds to his behaviour. He was lucky to be a sultan at all. He was ignominiously dismissed as the Tunku Makhota, or prince regent of Johor, by his father, Sultan Ismail Ibrahim, in 1961 after he reportedly chained two policemen into a dog kennel for a day after they displeased him. He was later reported to have attacked a young couple with Mace after they allegedly offended him. In 1972, he was charged for Macing two men because their car had had overtaken his on the highway.

He regularly patrolled Johor roads with a red light and siren on the top of his Rolls Royce and a shotgun strapped to the dashboard, pulling over speeders and ordering them to perform enjut ketampi, the Malay term for squat jumps, until they fell over. Any driver who inadvertently passed the sultan's car on Johor's roads or obstructed him was subject to exorbitant fines. His staff was petrified by him. Once, at a diplomatic reception for example, he was seen to simply hold out his glass when it was empty and drop it as a terrified servant raced across the room to catch it before it shattered on the marble floor.

In 1971, he got into real trouble by shooting and killing a trespasser whom he took to be a smuggler walking near his private helicopter. He was charged with manslaughter but his father intervened, as the sultan did repeatedly at other times, and granted him a pardon despite his disapproval of his actions. Iskandar's family wasn't much better. His eldest son, Tunku Ibrahim Ismail, shot a man dead in a nightclub but was also pardoned.

There was considerable speculation in Kuala Lumpur that despite the fact that the kingship rotated on a set basis, his fellow sultans would block him because of his behaviour. But they elected him Agong in 1983. Prime Minister Mahathir Mohammad promptly fomented a constitutional crisis by ramrodding through a series of actions in the Dewan Rakyat, or Parliament, that removed the power of the royalty to veto legislation, along with closing other loopholes within the Malaysian constitution.

That didn't slow down the sultan much. In 1987, after he became the Agong, he allegedly clubbed a caddy to death at the Cameron Highlands golf club for laughing when the sultan missed a putt. He also was said to have maimed the caddy's brother, who suffered a mental breakdown from seeing the incident and had to be restrained in a mental hospital.

Although the killing was given wide currency among Kuala Lumpur's political and social circles, Iskandar was never arrested. It remained out of the government-controlled press. It so distressed the retired Tunku Abdul Rahman, the country's first leader after independence, that he publicly condemned the assault without naming Iskandar. The Tunku, however, also pointed out that as a sultan, Iskandar was immune from prosecution.

In 1992, following Iskandar's departure from the kingship, his son, Tunku Abdul Majid Idris, assaulted the goalkeeper of the Perak hockey team after Perak won a match with a penalty stroke. The goalkeeper lodged a police report against the son, who ultimately was convicted and sentenced to a year in prison. The charges were dropped on grounds of immunity. Later the sultan himself was involved in the other field hockey controversy that finally made Malaysia say enough. He called a local coach to his palace over a minor dispute. He and his bodyguards assaulted the coach, who had to seek medical attention for injuries to his face and body. The coach also filed charges. This time, the press reported on both incidents.

Despite the fact that the sultan had won Mahathir's approval by firing Mahathir's nemesis, Tun Salleh Abbas, the highly respected lord president of Malaysia's highest court, which brought an end to the independence of the country's judiciary, the assaults were enough for the prime minister. He led a campaign in the parliament to remove legal immunity from prosecution for the royalty that passed resoundingly.

Iskandar reportedly finally calmed down in later years, and lived a life largely out of the public prints. None of his misdeeds made the Malaysian press after his death. One blog cheerily said he would "always be remembered as Malaysia's unconventional King. He preferred to drive his own car or pilot his own helicopter. He also loved sports, especially golf and was not afraid to lose in a game."

Or a caddy. He was called "a King with the common touch."

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