PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 12 Dec 2019, 9:19 AM


PublicInvest Research Headlines - 22 Jun 2018

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US: Labor market tightening. The number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to a further tightening of labor market conditions. Other data on Thursday showed a moderation in factory activity in the mid-Atlantic region in June amid a decline in new orders. Firms, however, continued to report overall increases in employment this month. The robust labor market, which is underpinning economic growth, likely will pave the way for the Federal Reserve to raise interest rates two more times this year. The US central bank last week increased borrowing costs for a second time this year and forecast two more rate hikes by the end of 2018. (Reuters)

US: Highest factory gauge since 1988 hints of inflation. The winds of US inflation picked up on Thursday after the Federal Reserve Bank of Philadelphia’s latest survey of area manufacturers. The bank’s six month outlook index for prices received by producers shot up a whopping 23 points to 56.6, the highest since the end of 1988. While the gauges are volatile and expectations often differ from reality, the increase is consistent with the trend of budding cost pressures and shows manufacturers are going to test the end-market’s tolerance of higher prices. (Bloomberg)

US, China: US weighs fresh China talks amid split on Trump trade team. Some White House officials are trying to restart talks with China to avoid a trade war before US tariffs on Chinese products take effect July 6, three people familiar with the plans said, setting up a battle with others in the administration who favor a harder line. Staff of the National Economic Council have contacted former US government officials and China experts in recent days to gauge chances for high-level talks in the next two weeks, the people said on condition of anonymity to discuss the inquiries. The outreach signals a willingness by some US officials to seek a truce before USD34bn in Chinese products are hit with tariffs rather than trigger a trade war between the world’s two largest economies. (Bloomberg)

UK: BOE gets capital injection from Treasury in new framework. The BOE will get a capital boost from the UK Treasury and take the Term Funding Scheme on to its balance sheet in a new framework for the financial relationship that BOE Governor Mark Carney called “ground-breaking.” The arrangement increases risk the central bank can take on its balance sheet, but also gives it more leeway to support commercial banks and the economy when interest rates are close to zero. In effect, it gives the BOE another permanent tool to reduce financial instability. The government will inject GBP1.2bn (USD1.6bn) into the BOE before the end of March 2019, to bring the Bank’s capital to a GBP3.5bn target, according to a memorandum released Thursday. The framework also sets a GBP0.5bn floor and GBP5.5bn ceiling, and a dividend may be payable to the government depending on the actual capital level each year. (Bloomberg)

China: To reduce US oil imports post-Sept amid trade spat. Chinese oil buyers will keep taking crude from the US through September, but plan to reduce future purchases to avoid a likely import tariff amid a trade spat between the world’s two largest economies, multiple industry sources said. Beijing has put US energy products, including crude oil and refined products, on lists of goods that it will hit with import taxes in retaliation for similar moves by Washington. Beijing did not specify when it will impose a 25% tax on oil, and that gives buyers time to adjust purchases while waiting for the outcome of trade talks, the sources said. (Reuters)

China: Accuses US of trade ‘abuses’ as India strikes back. Global trade tensions deepened Thursday with China reiterating it will hit back if the latest tariff threats from Donald Trump materialize, while India followed the European Union in slapping retaliatory levies on US goods. China is "fully prepared" to respond to any new list of US tariffs, according to a commerce ministry spokesman, who said the nation will use a combination of quantitative and qualitative measures. India raised tariffs on a slew of items in retaliation for the US imposing higher levies on some products shipped from the South Asian nation, echoing steps taken by China, the European Union and other trading partners. (Bloomberg)

Asean: Poised to slow as headwinds to exports pick up. Southeast Asia’s biggest economies are set to face stiffer headwinds to exports and investment, sapping growth momentum in 2H. The expansion in much of the Asean-5 rose further above the 10-year trend in 1Q, and most central banks in the region started to tighten monetary policy. Inflation is generally low or on target and likely to remain contained by benign domestic demand. Except where currencies have come under pressure, in Indonesia and the Philippines, scope for further tightening this year appears limited. Exports are likely to suffer from an escalating conflict between the US and its major trading partners in Asia, Europe and North America. Measures favoring US producers, if sustained long term, could shift supply chains to Asean’s disadvantage. (Bloomberg)


Aeon Credit: Doubles FY19 capex to RM120m. Aeon Credit Service (M) has doubled its capital expenditure (capex) allocation to RM120m for the FY19, against RM60m in FY18. Chief Finance Officer Lee Kit Seong said the allocation would be for branch transformation, digital marketing and strengthening of digital initiatives under its e-money platform. Lee also said two new products would be launched this financial year, namely Aeon Wallet and Aeon Member Plus Card to provide customers with payment, privileges and benefits. (Bernama)

XOX: Inks JV agreement to provide telco services in Indonesia. XOX Media SB, a wholly-owned subsidiary of mobile application services provider XOX, has entered into a joint venture agreement with Yayasan Nahdlatul Ulama, EH Integrated Systems SB and PT Nusantara Digital Telekomunikasi to provide telecommunication services in Indonesia. The new joint venture company will engage in business activities related to telecommunications and telecommunication products and services, the provision of mobile application services (Voopee), and e-wallet services in Indonesia. (The Edge)

JAG: Proposes private placement to raise RM14.4m for its property project. JAG has proposed a private placement to raise up to RM14.4m to fund its property development project in Klang. JAG said the private placement entails an issuance of up to 192.2m new shares, representing up to about 10% of its enlarged issued and paid-up share capital. Based on the indicative issue price of 7.50 sen per placement share, which would raise gross proceeds up to RM14.4m, Jag said RM13.6m will be used to fund the property development and RM450,000 will be used for working capital, while RM400,000 for the placement expenses. (The Edge)

Berjaya Food: Returns to black in 4Q on Starbucks boost. Berjaya Food returned to the black in the final quarter of its financial year 2018 with a net profit of RM837,000 against a net loss of RM3.37m in the same quarter a year ago, as revenue improved with more Starbucks cafes in operation during the quarter. In the 4QFY18, revenue grew 6% to RM160m from RM151.4m, driven by contribution from the new cafes as well as same-store-sales growth in the country. BFood declared a fourth interim dividend of one sen per share, to be paid on July 28, bringing the total dividend declared for FY18 to 4 sen per share, up 14% from the 3.5 sen per share it declared for FY17. (The Edge)

Oil and Gas (Overweight): Petronas committed to helping Sarawak become major oil industry player. Petronas is committed to support Sarawak's aspiration to become a major player in the petroleum industry and has so far invested RM183bn in the upstream sector in the state alone via production sharing contracts (PSCs). According to infographics released to Bernama, the national oil company, since 1976 and up to last year, made cash payments amounting to RM33bn to Sarawak. The infographics also explained in detail the Petroleum Development Act 1974, a Federal law enacted by Parliament, having the legislative competence under the Federal Constitution to promulgate laws relating to petroleum. The PDA 1974 gives Petronas exclusive ownership to oil and and resources in Malaysia and makes it the sole regulatory body for upstream oil and gas activities through PSCs. (Bernama)

Market Update

The FBM KLCI might trade lower at the opening today after lingering worries about global trade tensions, renewed political concerns in Italy and a fresh slide for oil prices put world stock markets under pressure and helped drive US and German government bond prices higher. The dollar had a choppy session, with the index tracking it against a basket of peers touching an 11- month high before easing back. Sterling rose as speculation mounted that the Bank of England could raise interest rates as early as August. On Wall Street, the S&P 500 fell 0.6% to 2,753 — having earlier been down 0.8% — while the Dow Jones Industrial Average shed 0.8%, its eighth successive decline. The industrial and basic materials sectors continued to suffer, although the worst performance came from energy as oil prices fell sharply. Tech stocks lost some of their recent lustre, with the Nasdaq Composite falling 0.9% from Wednesday’s record closing high. In Frankfurt, the Xetra Dax share index fell 1.4% as carmakers were hit by Daimler’s warning that Chinese tariffs on US vehicles could hit sales. The pan-European Stoxx 600 index fell 0.9%, with the FTSE 100 index in London declining by the same amount.

Back home, the FBM KLCI index lost 17.43 points or 1.02% to 1,692.32 points. Trading volume increased to 2.12bn worth RM2.68bn. Market breadth was negative with 199 gainers as compared to 748 losers. The regional markets finished mixed with the Nikkei 225 gained 0.61%, while the Shanghai Composite led the Hang Seng lower. They fell 1.37% and 1.35% respectively.

Source: PublicInvest Research - 22 Jun 2018

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