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PublicInvest Research Headlines - 18 Apr 2018

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Economy

Global: IMF spots trouble ahead as solid world growth poised to slow. The International Monetary Fund predicted the world economy’s strongest upswing since 2011 will continue for the next two years, but warned the seeds of its demise may have already been planted. The fund on Tuesday left its forecasts for global growth this year and next at the 3.9% it estimated in Jan and raised its outlook for the US as Republican tax cuts take effect. Beyond that horizon, it was more pessimistic, projecting global growth will fade as central banks tighten monetary policy, the US fiscal stimulus subsides, and China’s gradual slowdown continues. (Bloomberg)

US: Housing starts top forecasts on multifamily construction. US new-home construction rose by more than forecast in March on a rebound in multifamily starts, giving a boost to 1Q economic growth, government figures showed Tuesday. Residential starts rose 1.9% to 1.32m annualized rate after upwardly revised 1.3m pace in prior month. Multifamily home starts rose 14.4%, single-family fell 3.7%. Permits, a proxy for future construction of all types of homes, rose 2.5% to 1.35m rate after 1.32m pace. The results show a tight job market, improved finances and consumers’ elevated confidence to purchase big-ticket items are supporting construction. That means homebuilding probably contributed to economic growth for the second consecutive quarter. (Bloomberg)

US: Factory output cools after surging in previous month. US factory production cooled in March after surging a month earlier, representing a pause in an otherwise strong manufacturing sector, Federal Reserve data showed Tuesday. Factory output rose 0.1% after an upwardly revised 1.5% increase that was the biggest since July 2009. Output at factories increased 3% from March 2017, the biggest YoY gain since June 2012. (Bloomberg)

EU: Economic institutes raise German growth forecasts. Germany’s leading economic institutes have raised their growth forecast for Europe’s largest economy to 2.2% this year from a previous estimate of 2.0%, two sources familiar with the deliberations said on Tuesday The institutes also expect the economy to grow by 2.0% in 2019, up from 1.8% previously. The institutes will announced their revised growth forecasts on Thursday. (Reuters)

UK: Growth in firms' marketing budgets slowest since start of 2016. British businesses’ marketing budgets rose at the slowest pace since the start of 2016 in the 1Q as challenging market conditions continued to put pressure on companies, an industry survey showed on Wednesday. The IHS Markit showed that 22.9% of companies increased their marketing budgets in the quarter, compared with 17.9% of firms that recorded a fall. The resulting net rise of 5% compares with an increase of 8.6% increase in the previous quarter and marks the lowest recorded by the survey for two years. (Reuters)

China: Posts strong 1Q growth, hearty consumer demand buffers trade worries for now. China’s economy grew at a slightly faster-than expected pace of 6.8% in the 1Q, buoyed by strong consumer demand, healthy exports and robust property investment. Resilience in the world’s second-largest economy will likely help keep a synchronized global recovery on track for a while longer, even as China faces rising trade tensions with the US that could impact billions of dollars in business. (Reuters)

China: March industrial output up 6.0%, misses expectations, Jan March investment growth slows. China’s industrial output grew 6.0% in March from a year earlier, missing expectations, while fixed-asset investment growth slowed to 7.5% in the 1Q, also below forecasts, data showed on Tuesday. Investment growth had also been expected to ease, to 7.6% in the first three months of the year, from 7.9% in Jan Feb. Private-sector fixed-asset investment rose 8.9% in Jan-March, compared with an increase of 8.1% in the first two months, the National Bureau of Statistics said on Tuesday. (Reuters)

Japan: Inflation gains footing as BOJ ponders future exit. Inflation is showing signs of taking root in Japan. With price gains halfway to the Bank of Japan’s 2% target, domestic demand is picking up after years in which external factors such as energy prices did most of the work. As the economy continues to grow, this could open the door for the central bank to start adjusting monetary policy as soon as later this year, and put Prime Minister Shinzo Abe in a position to declare victory in Japan’s long battle with deflation. (Bloomberg)

Malaysia: MIER ups GDP growth to 5.5% for 2018. Malaysian Institute of Economic Research (MIER), has revised upwards its real GDP growth projection for Malaysia this year by 0.1 percentage point to 5.5% from the previous 5.4%. ED, Prof Dr Zakariah Abdul Rashid, said this was made to accommodate the actual 2017 data as it became available. “We can still rely on consumer spending to drive the economy with import and export remain promising even though we experienced absolute trade reduction in Feb,” he said. Zakariah said the GDP growth, however, was likely to moderate in 2019, ranging between 4.8% and 5.3%. (Bernama)

Markets

Globaltec: Unit gets 4-year exploration extension for Muralim PSC in Indonesia. Globaltec Formation’s Australia-listed subsidiary NuEnergy Gas Ltd has secured a four-year extension for its Muralim production sharing contract (PSC) in Indonesia, where it is undertaking coal steam gas exploration. The 'Exploration Period' extension, up to Dec 2, 2020, was granted by the Indonesian Special Task force for Upstream Oil and Gas Business Activities (commonly referred to as SKK Migas), Globaltec said. (The Edge)

SHH: Buys RM10.2m freehold land in Kajang for property venture. Furniture maker SHH Resources Holdings says a unit has agreed to buy two hectares of freehold land in Kajang, Selangor for RM10.2m. The property has been earmarked for residential use. SHH said its 80% owned Rampai Pesona SB had entered into a sale and purchase agreement with Rising Charm SB on April 17 to acquire the land. (StarBiz)

Inta Bina: Bags RM97.8m job to build apartments. Inta Bina Group has bagged a RM97.8m contract to build two apartment blocks and a basement carpark in Damansara Damai, Selangor. Inta Bina said its wholly-owned subsidiary Inta Bina SB (IBSB) has accepted a letter of award from Medan Prestasi SB for the appointment of IBSB as main contractor for the proposed construction of a 21-storey block housing 260 apartment units, another 21-storey block of 260 apartment units and one basement carpark. The contract is for a period of 23 months. (The Edge)

Prestar: Varies purchase consideration of Tashin Steel en route to ACE Market listing. Prestar Resources has varied the purchase consideration for the sale of Tashin Steel SB to a special purpose vehicle which will be listed on the Ace Market later on. Prestar said the shareholders of Tashin Steel — Prestar and Formula Naga SB — have entered into a supplemental share sale agreement with the SPV Tashin Holdings to acquire the entire share capital of Tashin Steel for RM144.83m. Prestar and Formula Naga have 51% and 49% respectively in Tashin Steel. Prestar said the price of the stake was arrived at, after taking into consideration the audited net assets of Tashin Steel as at Dec 31, 2017 of RM144.83m. (The Edge)

Zelan: Gets arbitration notice from Hitachi. Zelan’s wholly owned subsidiary Zelan Holdings (M) SB (ZHSB) has received an arbitration notice from Hitachi Ltd on disputes and differences arising from a sub-contract to supply, deliver, install, test and commission a water cooled chiller. Hitachi is claiming against ZHSB, an aggregate amount of AED15.21m (RM16.11m) for the works done and materials on-site, materials off-site and subcontractor’s claims, suspension cost, demobilisation cost and interest on amounts certified. (SunBiz)

MB World: Divests stake in subsidiary. MB World Group is disposing its 100% stake in its loss making subsidiary Emas Kiara Marketing & Engineering (EKME) SB to an undisclosed buyer for RM1.66m. The group said the disposal is in line with its intention to dispose of its non-profitable and non-core businesses. “EKME has been a loss making entity for the two consecutive financial years ended Dec 31, 2016 and Dec 31, 2017. The disposal will allow MB World to cease incurring further overheads for EKME’s operations and allow the company to redirect its resources to those activities identified and in-line with the group’s strategies,” the group said. (SunBiz)

Market Update

The FBM KLCI may open higher today after hefty gains for the technology sector led Wall Street higher for a second day, as encouraging corporate earnings releases outweighed lingering concerns over geopolitics and global trade. Netflix was the standout performer following the release of its quarterly figures late on Monday, which helped the Nasdaq Composite index rise 1.7% by closing in New York. Meanwhile, the Dow Jones Industrial Average rose 213.59 points, or 0.9%, to 24,786.63 and the S&P 500 index added 28.55 points, or 1.1%, to 2,706.39. European stocks had a better day after Monday’s lacklustre performances. Germany’s DAX 30 index surged 1.6% to 12,585.57 on Tuesday. The closing level marked the German index’s best since Feb 7. Meanwhile, France’s CAC 40 index added 0.8% to 5,353.54, representing its highest close since Feb. 2. The UK’s FTSE 100 index erased an earlier loss and ended positive, up 0.4% at 7,226.05.

Back home, the FBM KLCI index gained 1.73 points or 0.09% to 1,880.49 points. Trading volume increased to 3.09bn worth RM2.79bn. Market breadth was negative with 424 gainers as compared to 506 losers. Meanwhile, Chinese stocks fell to a one year low as trade worries dominated. Official data showed Chinese GDP growth holding steady in the first quarter, although many in the markets argued that the pace of growth could slow later this year. The Hang Seng index fell 0.8% in Hong Kong while, on the mainland, the CSI 300 index of large-cap China-listed stocks was down 1.6%. Tokyo’s Topix shed 0.4%.

Source: PublicInvest Research - 18 Apr 2018

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