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PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 21 Mar 2019, 10:17 AM

 

PublicInvest Research Headlines - 25 Jun 2018

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Economy

US: Trump administration's new tariffs hit US consumers less. The latest round of tit-for-tat tariffs hits US consumers less but American companies more, an analysis shows. Consumer goods account for just 1% of items on the June 15 lists from the Office of the US Trade Representative, down from 12% on the April 3 list. The portion of the latest lists set for July 6 implementation also did not include cell phones, personal computers and laptops, while televisions, air conditioning and aluminium were deleted. The revisions follow public pushback and come as Republicans try to hold their majority in Congress during Nov's midterm elections. Last Friday, the US and subsequently China said a first round of additional 25% tariffs, each targeting about USD34bn worth of imports from the other, is set to take effect July 6. (CNBC)

US, China: Trade tensions are the biggest risk for the euro zone, the IMF says. The on-going tensions over international trade are the biggest economic risk to the euro zone. Though the euro area enjoyed an economic expansion "above potential" in 2017, "the momentum is slowing down a bit at the moment, Christine Lagarde, managing director of the IMF told reporters in Luxembourg, adding that it is likely the Fund will be "modestly" lowering its economic forecasts in July. The Fund doesn't expect the economic slowdown to be "sharp," partly because monetary policy will continue to support growth in the 19-member region. But, according to Lagarde, there's a series of economic risks. The first of them is trade tensions. "First on the list of risks is clearly the series of trade tensions that has been initiated by the tariff increase on steel and aluminium," Lagarde said. (CNBC)

US, China: Increased threat of a trade war is ramping up fears of a 'full-blown recession'. Even as growth ramps up to what could be the fastest rate since before the financial crisis, economists are worried that a trade war could tip the US into a significant slowdown or even a recession. Fears over a GDP pullback come as President Donald Trump threatens another, more severe round of tariffs aimed both at China and the European Union. Specifically, the worry is that the duties could spark a larger global trade war that triggers inflation and kills US growth just as it appears to be accelerating out of its post-crisis malaise. A decline in confidence and supply chain disruptions could amplify the trade shock, leading to an outright recession. The probability of a full blown trade war is low but the risks are rising and it remains a key uncertainty to our outlook. (CNBC)

EU: Eurozone 2Q growth likely decent but trade concerns rising. Eurozone economic growth likely put in a decent performance in the 2Q with private businesses growing faster than expected in June, but trade worries knocked manufacturing growth to the weakest in 18 months. News of faster overall expansion this month, including in two of its biggest economies Germany and France, along with rising price pressures will likely be welcomed by policymakers at the European Central Bank. Just last week the ECB signalled that its crisis-era bond buying program will end this year and that interest rates will rise in the 2H2019. IHS Markit’s Euro Zone Composite Flash PMI, seen as a good guide to economic growth, climbed in June to 54.8 from 54.1 in the previous month and above 53.9 predicted in a Reuters’ poll. (Reuters)

EU: Italy aims to respect EU call for 2018 budget correction, says minister. Italy intends to accept a request from the European Commission for additional belt-tightening measures to lower this year’s budget deficit, but recent economic developments will also be taken into account, its economy minister said. “The intention is obviously to try to respect (the request),” Giovanni Tria told reporters. “There could be some slight deviation,” he added, due to the fact that the economy is now slowing down. The Commission has asked Italy to lower its structural deficit - adjusted for the business cycle and one-off items - by an additional 0.3ppt of GDP this year. In other remarks, Tria said proposals from France and Germany for reforms of eurozone economic governance had received a mixed reception from other European governments. (Reuters)

China: Economic growth seen holding up. China’s growth this year shows no signs of slowing, despite rising tensions with the US over trade and disappointing economic data in May, according to a Bloomberg survey. The economy will grow 6.5% this year, the median estimate of 60 economists’ shows. That’s exactly what the government is targeting, and hasn’t changed since mid-Jan. The result shows confidence in the resilience of the economy, especially considering the deterioration in relations with the US, the world’s largest economy and China’s biggest trading partner. Economic expansion is seen slowing to 6.3% next year and 6.2% in 2020. The forecast for economic expansion this quarter was raised on the expectation of higher factory-gate prices and better exports and imports. GDP will grow by 6.7% in the 2Q. (CNBC)

China: To unleash USD108bn in reserve cut for some banks. China’s central bank will cut the amount of cash some lenders must hold as reserves, unlocking about Y700bn (USD108bn) of liquidity, as it seeks to control leverage and support smaller companies. The required reserve ratio for some banks will drop by 0.5ppt, effective July 5, the People’s Bank of China said on its website Sunday. The aim is to support small and micro enterprises, and to further promote the debt-to equity swap program. The cut will apply to major state-run commercial banks, joint-stock commercial lenders, postal banks, city commercial lenders, rural banks and foreign banks. Such a reduction had been widely expected, especially after China’s cabinet said that it would use monetary policy tools, including cutting reserve ratios for some banks, to boost credit supply to smaller companies. (Bloomberg)

Japan: May data shows BOJ stimulus barely moving price dial. Japan’s core inflation remained subdued in May, yet again highlighting how far off the central bank is in hitting its 2% price goal despite over 5 years of massive stimulus. The stubbornly weak inflation is also another reason why the Bank of Japan is widely expected to take some time before exiting its ultra-easy money policy, even as the Federal Reserve and the European Central Bank are far down the road in rolling back crisis-era policies. The core CPI, which includes oil products but excludes volatile fresh food prices, rose 0.7% YoY in May, unchanged from April, and matching economists’ median estimate, Ministry of Internal Affairs and Communications data showed on Friday. The data came after the central bank last Friday cut its inflation assessment. (Reuters)

Markets

Green Packet: To raise up to RM53m via rights issue with free warrants. Green Packet plans to raise as much as RM52.6m via a renounceable rights issue on the basis of one rights share for every five existing shares held, together with warrants on the basis of three warrants for every one rights share. It said the proposal will see 150.2m rights shares and 450.6m warrants issued. "Barring any unforeseen circumstances, the proposed rights issue with warrants is expected to be completed by the 4Q of 2018," it added. (The Edge)

Comfort Gloves: Buys 39-acre Perak land for future expansion. Comfort Gloves is buying 38.92 acres of leasehold land in Daerah Kinta, Perak, from Nestle (Malaysia) for RM13.2m cash. It said its wholly-owned subsidiary Comfort Rubber Gloves Industries SB (CRGI) had entered into a sale and purchase agreement with Nestle Manufacturing (M) SB for the acquisition of the land measuring 157,500 square metres. The lease on the land expires on Nov 7, 2058. The group said it will finance the acquisition via internally generated funds and that the proposed acquisition is in line with its future expansion plans. It estimated the proposed acquisition, which does not require shareholders’ approval, would be completed within four months. (The Edge)

Icon Offshore: Bags RM23m contract to supply vessel. Icon Offshore’s wholly-owned subsidiary Icon Offshore Group SB has bagged a RM23m contract to provide a utility vessel to Hess Exploration and Production Malaysia BV for its operations. Icon said the contract will commence from the date of the letter of award and will expire at the end of three years from the vessel’s on hire date, with two extension options of one year each. “It is expected to contribute positively to the earnings, order book and net assets of Icon for the FYE Dec 31, 2018 and beyond,” it added. (The Edge)

Fitters: Ups stake in Molecor to 72.3%. Fitters Diversified has upped its stake in Molecor (SEA) SB to 72.3% from 65%. Fitters said it had subscribed for an additional 60m new shares in Molecor for 50 sen per share or RM30m by offsetting the amount owed by Molecor to the group as at April 30, 2018. Following the subscription, the total number of issued shares of Fitters in Molecor stood at 79.5m shares. (The Edge)

Willowglen: Bags RM8.6m maintenance contract. Willowglen MSC's subsidiary Willowglen Services Pte Ltd has bagged a RM8.6m contract to undertake maintenance of 30 document management solutions (DMS) product data management (PDM) systems and the upgrade of 22 PDM system workstations. It said the contract was awarded by SP PowerAssets Ltd. The three-year contract will end on June 20, 2021. It added that the contract is expected to contribute positively to the group's earnings and net assets per share for the FYE Dec 31, 2018 to 2021. (The Edge)

PIE: Embarks on biggest expansion plan. PIE Industrial is embarking on its biggest expansion exercise ever. The move is in response to growing interest in the group’s printed-circuit-board assembly (PCBA) products and box-built equipment. Group MD Alvin Mui said it is now in negotiations for several new major contracts. “We are also getting feedback that our orders will continue to grow this year,” he said. “If the deals are finalised, we will produce in Penang data transmission equipment and electronic component for the automotive industries,” Mui said. (StarBiz)

Market Update

The FBM KLCI might start the week with a positive note today after hefty gains for energy stocks provided support to US and European equity markets at the end of last week as oil prices rallied after Saudi Arabia struck a deal that will see OPEC and its allies increase oil production. Broadly encouraging survey data in the Eurozone lent further support to the region’s stocks, with the mood also helped by news that Greece’s creditors had finally brokered a long-awaited debt relief deal for the country. But simmering concerns over global trade tensions remained a thorn in the side of equity bulls, particularly after President Donald Trump threatened to slap a 20 percent tariff on all cars imported from the EU. But it was the oil markets that hogged the headlines after news that major producers would increase output by about 1m barrels a day, a smaller increase than some participants had feared. On Wall Street, the S&P 500 ended 0.2% higher at 2,754 — having earlier been up more than 0.5% — while the Dow Jones Industrial Average rose 0.5%, snapping an eight-day run of losses. The Nasdaq Composite fell 0.3%. Across the Atlantic, the Euro Stoxx 600 index ended 1.1% higher. The Xetra Dax in Frankfurt saw a gain of 0.5%. Strong gains for BP and Royal Dutch/Shell helped the FTSE 100 in London outperform as it rose 1.7%.

Back home, the FBM KLCI index gained 1.83 points or 0.11% to 1,694.15 points on Friday. Trading volume decreased to 2.01bn worth RM2.23bn. Market breadth was positive with 480 gainers as compared to 350 losers. The regional indices also found support after heavy selling earlier in the week. China’s Shenzhen Composite regained 1.2%, trimming its loss for the week to about 4%. Hong Kong’s Hang Seng bounced up 0.2% and Seoul’s Kospi was up 0.8%.

Source: PublicInvest Research - 25 Jun 2018

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