Maybank Research lowered its call on Malaysian steel stocks to underweight from overweight due to pressure on margins and demand as producers from China grab market share.

Maybank Research said in a research note that "Despite our expectation of stronger domestic demand, Malaysian steelmakers are facing a more challenging outlook in the second half of 2012 and 2013."

Maybank said that dumping activities from China will depress sales volumes for Malaysian producers. It added that "In Malaysia, there has been an influx of wire rods from China over the last three months, and local steelmakers are selling wire rods at breakeven."

Maybank added that steel bars too are expected to succumb to supply pressure from China, resulting in a margin squeeze.

It said that "Though Malaysia's Ministry of International Trade and Industry is investigating the alleged dumping activities, a clear measure may take time to materialize."

Maybank lowered Ann Joo Resources Berhad to sell from hold but maintained its hold rating on Kinsteel.

Source - www.btimes.com.my

(www.steelguru.com)