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PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 21 Aug 2018, 09:45 AM

 

PublicInvest Research Headlines - 11 Jun 2018

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Economy

Global: With rates diving below Fed’s, Asian markets head to rare ground. With faster growing economies typically generating quicker inflation rates, emerging Asian nations usually have benchmark interest rates above those in the US. That’s changing. The Federal Reserve is all but certain to raise its key rate by a quarter point this week, meaning it will then have a benchmark above that of five counterparts in the Asia Pacific region excluding Japan. The latest to join the group will be New Zealand, whose policy rate will fall below the Fed’s for the first time since 2000. While Indonesia, India and the Philippines struggle to cope with the Fed’s tightening, investors remain comfortable with a negative differential in some cases. For Thailand and Taiwan, current account surpluses are a key buffer. For New Zealand, South Korea and Australia, real yields remain attractive. (Bloomberg)

EU: Will act against US tariffs on steel, aluminium, says Merkel. Europe will implement counter-measures against US tariffs on steel and aluminum just like Canada, German Chancellor Angela Merkel said on Sunday, voicing regret about President Donald Trump’s abrupt decision to withdraw support for a G7 communique. Trump’s announcement on Twitter, after leaving the Group of Seven summit in Canada early, that he was backing out of the joint communique torpedoed what appeared to be a fragile consensus on a trade dispute between Washington and its top allies. The summit did not mark the end of the transatlantic partnership between Europe and the US, Merkel said. But she repeated that Europe could no longer rely on its ally and should take its fate into its own hands. (Reuters)

EU: France, Germany still split on eurozone reforms, French official says. France and Germany have made progress but have yet to agree on a roadmap for euro zone reforms, French and German officials said. French President Emmanuel Macron and German Chancellor Angela Merkel have promised to present a joint reform proposal at a EU summit on June 27-28, but differences remain on euro zone issues and banking regulation. The euro zone’s two biggest economies differ on how to balance Macron’s call for more solidarity in Europe with Merkel’s insistence that tax payers in richer countries should not end up paying for government failures in poorer ones. (Reuters)

UK: Bank of England’s thesis on 1Q slump tested this week. The Bank of England is about to get some crucial economic numbers to assess -- if it believes them. Governor Mark Carney and other officials have disputed official figures showing a near stagnation at the start of the year. But that’s created tension with their pronouncements that investors should focus on the economic data to understand how the central bank will set monetary policy. After the BOE didn’t deliver on a once-expected interest-rate increase in May, the question now is when the next tightening comes. This week sees the release of inflation, wage and retail sales numbers, all of which have implications for consumer spending and the BOE’s analysis of when to take the next step on its rate-hike ladder. (Bloomberg)

China: A credit channel sees longest drop since stock crash. As policy makers tighten the liquidity screws in China, what has been a handy window for companies to raise cash could now be closing. May capped the fourth straight month of contraction in outstanding loans that publicly listed companies got from securities firms through pledging holdings of stock, Moody’s Investors Service data show. While that still left the total, at CNY1.53trn (USD240bn), near a record, it’s been the longest run of declines since the epic 2015 stock-market collapse. Given regulators’ focus on reducing leverage, brokerages are growing less keen on share-pledging deals. That threatens particular strain on smaller and medium-sized companies that had turned to this funding channel, with others constricted. (Bloomberg)

Japan: BOJ watchers see no changes this week as road ahead grows longer. Analysts were unanimous in forecasting that the Bank of Japan will leave its monetary policy unchanged at this week’s meeting, with nearly all predicting no change through the end of this year. Each of the 45 economists surveyed by Bloomberg said they expect the BOJ to stick with the current settings on its yield- curve control program and asset purchases at the end of a two-day meeting on June 15. The poll was conducted June 4-6. Recent data have strengthened the view that the BOJ will persist with its extraordinary monetary stimulus in an effort to achieve its 2% inflation target. Japan’s core inflation, which excludes fresh food, slowed to 0.7% in April. (Bloomberg)

Malaysia: Japan is back amid doubts over Chinese funding. Malaysian Prime Minister Mahathir Mohamad is set to woo investors and offer business deals during a trip to Japan that starts on Sunday, as he looks to cover a gaping debt hole and shift the country away from dependence on Chinese investments. The visit marks his first foreign trip after returning to power in a shock election result last month, and indicates a shift back to the 92-year-old’s ‘Look East’ policy to strengthen ties with east Asia, especially Japan. It is also seen as a sign of the Southeast Asian country’s move away from China, which contentiously pumped billions of dollars into the scandal-tainted previous Najib Razak administration. (Reuters)

Markets

MISC: Wins RM2.57bn contract. MISC has secured a USD645m (RM2.57bn) long-term charter contract to own and operate four specialist tankers from Petróleo Brasileiro S.A. – Petrobras of Rio de Janeiro, Brazil (Petrobras). The maritime services company said its wholly-owned subsidiary AET Tanker Holdings SB, through its vessel-owning entity, has been awarded long-term charter contracts to own and operate four specialist DP2 Suezmax size Shuttle Tankers from Petrobras for operations in international and Brazilian waters. According to a press release, the four 152,000 DWT DP2 shuttle tankers will be built by a Korean shipyard for delivery in 2020. (StarBiz)

M-Mode: Bags RM260.57m job for mixed commercial project in Sabah. M-Mode has bagged a RM260.57m contract to build a 25- storey mixed commercial development at Jalan Tun Fuad Stephens in Kota Kinabalu, Sabah. M-Mode said its wholly-owned subsidiary E&J Builders SB has accepted the letter of award from Titijaya PMC SB to appoint E&J as the contractor for the proposed project. The project is expected to be completed within three years by May 6, 2021. (The Edge)

UOA REIT: To sell Wisma UOA Pantai to CIMB Bank for RM120m. UOA Real Estate Investment Trust (UOA REIT) is disposing of Wisma UOA Pantai at Off Jalan Pantai Baru to CIMB Bank for RM120m cash. UOA REIT said the property was operating at a low occupancy rate of 19% as at April 2018 and the disposal is in line with the objective of its manager UOA Asset Management SB of maximising returns to the unitholders of the trust which includes disposal of properties. The net capital gain arising from the disposal is estimated to be RM541,000 after taking into account all related expenses on the disposal. (The Edge)

Nova MSC: Unit gets RM15.4m job. Nova MSC wholly-owned subsidiary, novaCITYNETS Pte Ltd (NCN), has been awarded a tender by the Public Utilities Board in Singapore for a contract sum of about RM15.4m. Nova MSC said under the contract, NCN will supply, deliver and implement a building information modelling checking systems for building plan submission for about 20 months and thereafter maintain the project for the next 20 months. (Bernama)

Asdion: 49%-owned associate bags Engisoul distribution right in Indo-China. Asdion said its 49%-owned associate Renox Stainless Steel Co Ltd has obtained the right to distribute automotive clean-in-place (CIP) equipment for the food and beverage industry in Indo-China for three years. Asdion said Renox had entered into an agreement with Thai turnkey engineering solution firm Engisoul Co Ltd for the CIP equipment distributor right. Under the deal, Renox will receive USD100,000 per unit for each unit sold. (The Edge)

Airlines (Neutral): Malaysia Airlines registers 2% revenue growth in 1Q. Malaysia Airlines reported a YoY revenue growth of 2% for the 1Q ended March 31, 2018, as the airline achieved an improved cost base while making progress on the execution of its recovery plan. The group, which did not provide the revenue figure, said its yield improved 6.6% YoY, while revenue per available seat kilometre (RASK) grew 3.5%. This was despite the significant competition in both international and domestic sectors, it said. The increase in yield offset the reduction in passenger load factor which stood at 75.4% compared with 79.4% in the previous corresponding quarter. (The Edge)

Market Update

The FBM KLCI might open flat today after global markets closed out last week on a cautious note as concerns over trade tensions ahead of this weekend’s G7 meeting in Canada fuelled nervous trading. US stock indices managed to eke out modest gains, after spending the morning in negative territory, while Treasury prices steadied after rising sharply on Thursday. The dollar index staged a modest rebound. On Wall Street, the S&P 500 index ended 0.3% higher at 2,779, giving it a five-day gain of 1.6%. That marked its first run of three successive weekly gains since January. The tech heavy Nasdaq Composite recovered from a fall of 0.5% to end 0.1% higher at 7,645. It set a record closing high of 7,689 on Wednesday. The Dow Jones Industrial Average rose 75.12 points to 25,316.53, a gain of 0.3%. The average posted its third straight positive session, and closed at its highest level since March. Across the Atlantic, the Euro Stoxx 600 slipped 0.2%, with the Xetra Dax in Frankfurt ending 0.4% lower, having fallen as much as 1% earlier in the session as trade war worries intensified. In London, the FTSE 100 shed 0.3%.

Back home, the FBM KLCI index lost 7.49 points or 0.42% to 1,778.32 points on Friday. Trading volume decreased to 3.10bn worth RM2.42bn. Market breadth was negative with 415 gainers as compared to 537 losers. In the region, trade concerns also hurt Chinese stocks with the CSI 300 down 1.4%, while Japan’s broad Topix index fell 0.4%. Elsewhere, Hong Kong’s Hang Seng was down 1.8%.

Source: PublicInvest Research - 11 Jun 2018

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