Malaysia Hot Stocks-Sime, Hong Leong up on M&A talk

KUALA LUMPUR, Nov 5 - Malaysia's main stock index <.KLSE> fell on Thursday but top oil palm planter Sime Darby and sixth-ranked lender Hong Leong Bank were higher on merger and acquisition talk.

By the midday break, the FTSE Bursa Malaysia KLCI was down 0.08 percent.

Sime Darby <SIME.KL>, the largest stock on the bourse with a market capitalisation of $16 billion, gained 0.8 percent.

With China's President Hu Jintao visiting Malaysia next week, speculation is swirling the Malaysian government may finally seal a deal to sell 10 percent of Sime Darby to a Chinese group. [ID:nKLR164838]

A strategic partnership with a Chinese group would be "neutral to slightly positive" for Sime Darby, the world's biggest planter by land ownership, said CIMB Research in a client note on Thursday.

China is Malaysia's main market for refined palm products, importing about 300,000 to 400,000 tonnes of refined palm olein a month.

"Sime Darby wants to build up more potential customers in China, and it would be much easier to achieve that if you have a local partner," said a Kuala Lumpur-based palm oil trader.

Hong Leong Bank <HLBB.KL> rose 1.3 percent. Recent media reports said the bank may pay special dividends to shareholders and that it may be eyeing a stake in Public Bank <PUBM.KL>, Malaysia's third-biggest lender by assets.

Public Bank was unchanged at 10.80 ringgit.