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Malaysia shares fall on North Korea tensions, Singapore stocks recover

CIMB leads losses on KLCI, DBS paces gains among Singapore banking stocks

SINGAPORE (Nikkei Markets) -- Malaysia shares, resuming trading after an extended weekend, fell Tuesday amid fears that North Korea's latest nuclear test will cause regional instability.

Singapore shares recovered from seven-week lows as DBS Group Holdings led banking stocks higher.

The FTSE Bursa Malaysia KLCI declined 0.2% to 1,769.63 as investors sold risk assets amid rising geopolitical risks caused by North Korea's nuclear test over the weekend. Malaysia's financial markets were closed on Monday as well as on Friday and Thursday.

The U.S. ambassador to the U.N. on Monday said Pyongyang was "begging for war" as it pushed the U.N. to adopt tougher sanctions against North Korea. In response to the latest provocation, South Korea said it was in talks with Washington for deploying aircraft carriers in the Korean peninsula. Japan is reportedly planning to evacuate its citizens from South Korea in light of the growing tensions.

"The rhetoric on North Korea has stepped up a gear, or maybe two," Rob Carnell, head of research at ING, wrote in a note. "Markets are not as panicky as you might expect against this background, though the direction is as one would expect," he said, referring to the weakness in global equities on Monday and the demand for safe-haven assets such as the yen and gold.

CIMB Group Holdings was the top loser on the KLCI, down 4.5%, as the lender pared most of Wednesday's rally.

Axiata Group was the day's best performer with 2.4% gain to close at 5.05 ringgit. Nomura upgraded the stock to "buy" with a target price of 5.7 ringgit. Morgan Stanley initiated coverage on the stock with "overweight" rating and a target price of 5.40 ringgit.

Ann Joo Resources, engaged in manufacturing and trading of steel and steel-related products, rose 4.5%, while construction engineering company Gabungan AQRS slipped 1.8%. UOB Kay Hian added both the stocks to its list of "buy" calls for September. UOB said AQRS was a leading contender for contracts under the East Coast Rail Link and LRT3 (Light Rail Transit Line 3) rail projects and Ann Joo could deliver strong second-half earnings, helped by multi-year-high average selling prices of steel.

Bonia Corp. jumped 7% after the luxury fashion retailer said fourth-quarter net profit doubled from a year-earlier period.

TRC Synergy advanced 0.6% after the construction company said Tuesday that it secured a contract from state-owned public transport operator Prasarana Malaysia worth 760.55 million ringgit ($178 million).

Singapore's FTSE Straits Times Index advanced 0.6% to 3,251.26.

DBS rose 1.7% to S$20.69. Morgan Stanley said Tuesday in a research note that it expects the lender's stock price to rise relative to the industry over the next 15 days.

"The stock has traded off recently, making short term valuation much more compelling. We think that strong loan and fee growth, plus a fall in loan-loss charges, mean DBS can deliver an above-consensus 18% 2-year CAGR (compounded annual growth rate) in EPS (earnings per share," Morgan Stanley said. The stock is down more than 8% through Monday from its recent peak at July-end.

Among other lenders, United Overseas Bank added 0.6% and Oversea-Chinese Banking Corp. advanced 1.5%.

Yangzijiang Shipbuilding Holdings rose 1.4%, ending a two-day losing spell in which the stock slumped by over 14% following a private placement of shares.

Manufacturing Integration Technology added 4.8% after receiving an order worth S$5.5 million ($3.9 million) for semiconductor and contract equipment manufacturing services.

-- Nimesh Vora and Kevin Lim

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