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Author: PublicInvest   |   Latest post: Mon, 22 Jul 2019, 10:32 AM

 

PublicInvest Research Headlines - 27 Jun 2018

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Economy

US: Consumer confidence falls in June despite expectations for gains. Consumer confidence fell well below economists' expectations in June, fueled by a bleak outlook for US economic conditions. The Confidence Board's index dropped to 126.4 from a revised 128.8 in May. The index was expected to hit 128.1, according to a survey of Reuters' economists. American sentiment was generally mixed about current conditions; however, positive feelings for future business conditions and income prospects decreased. “Consumers’ assessment of present-day conditions was relatively unchanged, suggesting that the level of economic growth remains strong," said Lynn Franco, Director of Economic Indicators at The Conference Board. Sentiment toward labor markets was unchanged with unemployment at an 18-year low of 3.8%. (CNBC)

US: Home price gains ease in April. The heat appears to be coming off home prices, albeit very slightly. Nationally, values rose 6.4% annually in April, down from a 6.5% gain the previous month, according to the S&P CoreLogic Case-Shiller National Home Price Index. The nation’s 10 largest cities saw price gains of 6.2% in April, down from 6.4% in the previous month. The 20-City Composite posted a 6.6% YoY gain, down from 6.7% in the previous month. “Home prices continued their climb,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. The biggest factor heating home prices is the pervasive shortage of homes for sale. Supply is increasing very slightly MoM, but is still considerably lower than one year ago. (CNBC)

US: Retaliation for Trump tariffs will send many US business operations overseas. Harley-Davidson likely isn’t the last American company to say it’s moving some operations overseas because of retaliatory tariffs, said Gary Locke, former US ambassador to China. “You’ll see many more US companies doing that because many countries all around the world are imposing tariffs on American-made products and services”. Harley said it was shifting some production overseas to offset the impact of tariffs by the European Union. Those tariffs, which are on more than USD3bn worth of US goods including bourbon, yachts and motorcycles, were enacted by the EU in response to US duties on European steel and aluminum. President Donald Trump claimed Harley was using increasing trade tensions as an excuse to justify changes that were already planned in manufacturing. (CNBC)

US: Trade advisor Navarro says no plans for investment restrictions on China, other countries. Peter Navarro, one of President Donald Trump's top trade advisors, said the market was overreacting to fears the administration would restrict foreign investment as part of its trade actions against China and other countries. The administration currently does not have any specific countries targeted. His comments came after news reports that had Wall Street reeling over the prospect that the US could prevent companies that had at least 25% Chinese ownership from buying businesses that possessed "industrially significant technology." Navarro's statement seemed to counteract much of the talk that the US was ready to take another step in its trade regime, and his comments brought stocks well off their lows for the day. (CNBC)

UK: London is dragging down UK productivity. London is at the heart of the UK’s productivity problems, according to the Resolution Foundation. The capital’s productivity has fallen over the last decade by 1%, compared to a 1.5% improvement at the national level. That’s because the capital’s expansion has been driven by rising employment and hours, rather than efficiency improvements. London, far from racing ahead, has actually been holding the country back on productivity. Britain’s sluggish performance in productivity has baffled lawmakers and monetary policy makers for years. Possible explanations include low borrowing costs keeping so-called zombie firms alive, limits in the flow of people between companies, and the UK’s reliance on services, which lag manufacturing in efficiency growth. (Bloomberg)

UK: Inflation expectations rise to joint-highest level since 2013. The British public’s expectations for inflation over the next 5-10 years have risen to their joint-highest level since Dec 2013, and shorter-term price expectations are also on the rise, a monthly Citigroup/YouGov survey showed on Tuesday. Britons’ longer-term inflation expectations rose to 3.3% this month from 3.2% in May, matching a four-year high struck in December 2017. Expectations for the year ahead rose for a second consecutive month, increasing to 2.6% from May’s 2.5%, against a backdrop of increasing fuel prices. The data is based on a survey of 2,006 British adults carried out on June 20 and June 21 by polling company YouGov. (Reuters)

China: Role as market anchor at risk with rapid yuan slide. The slump in China’s yuan is stoking fear that policy makers are less willing to temper the currency’s decline as the economy slows and a trade battle with the US worsens. That’s a sharp turnaround from just a few weeks ago, when the yuan was in effect serving as an anchor for emerging economies facing rising global interest rates and a strengthening dollar. For some, the yuan’s drop has even evoked parallels to the deliberate devaluation in 2015 that roiled global markets, though China watchers discount the idea of depreciation being deployed as an outright trade-policy tool. Selling deepened along with President Donald Trump’s threat to keep escalating tariff hikes until a potential USD450bn of Chinese shipment is targeted. (Bloomberg)

China: Economy is better than official data show. The picture of China’s economy slowing in the 2Q is misleading, or even inaccurate, with retail sales and investment actually stronger than the official data show, according to the China Beige Book. “The retail sector may be seeing a turn higher, with profit and investment growth improving,” CBB said in a report, adding that slowing seen in official data in May reflects not the current situation but weakness seen earlier this year and late last year. Similarly for investment, official statistics are lacking as they undercount retail spending, according to the private survey by CBB International, which collects anecdotal accounts similar to those in the Federal Reserve’s Beige Book. (Bloomberg)

Markets

I-Bhd (Outperform, TP: RM0.91): To sell RM700m GDV projects. I-Bhd will be selling residential and office units with a combined GDV of RM700m this year. Deputy chairman Datuk Eu Hong Chew said sales will be from units of its I-City and 8 Kia Peng @KLCC projects in Shah Alam and Kuala Lumpur respectively. “Over RM200m will be from I-City and about RM400m will be from 8 Kia Peng,” he said. The group’s unbilled sales as at March 31 stood at RM272.8m and is expected to grow in tandem with the sales of the 8 Kia Peng @KLCC project, which is expected to contribute positively in a year or two. (StarBiz)

Sunway: To dispose of stake in Singapore JV for RM118m. Sunway is disposing of its 30% stake in a JV Hoi Hup Sunway Novena Pte Ltd (HHSN) to Hoi Hup Realty Pte Ltd for SGD39.9m (RM118.2m) cash. It said the proposed disposal marks the completion of the project and will enable Sunway to exit and monetise its investment in HHSN. The exercise is expected to be completed on June 30. It said the estimated loss on disposal arising from the proposed disposal is SGD100,000, after taking into consideration the net book value of Sunway’s investment in HHSN as at March 31, 2018 of SGD40m. Notwithstanding the disposal of the stake in HHSN, Sunway said it has retained an entire floor of medical suites in Royal Square at Novena, with total floor area of 8,500 sq ft, with the aim of establishing Sunway Medical’s maiden presence in Singapore. (The Edge)

MSM: Eyes Africa and China as new export markets. MSM Malaysia Holdings (MSM) is now looking to penetrate the African and Chinese markets to make full use of the new production capacity that will come on stream once its new sugar refinery in Tanjung Langsat, Johor, commences operations next month. The options on the table now include a partnership or a direct export, group's chairman Datuk Wira Azhar Abdul Hamid said. MSM’s new sugar refinery in Johor will have an annual production capacity of 1m tonnes. MSM invested RM1.1bn in the refinery and Azhar expects the group to take six years to recoup the investment. (The Edge)

Alam Maritim: Secures O&G services contracts worth RM226m. Alam Maritim Resources has bagged several contracts related to providing offshore support vessels services in Malaysia and Middle East, worth a total of RM226.1m. Without providing detailed information, it said the contracts were awarded to Alam Maritim’s two subsidiaries: Alam Maritim (M) SB and Alam Maritim (L) Inc, which is valid for the next six months to three years. “Some of the Contracts have an extension option of one to two years exercisable by the awarders,” it added. (The Edge)

T7 Global: Welcomes price review for ECRL. T7 Global has welcomed the price renegotiation in the East Coast Rail Line (ECRL) project mooted by the new government. Chairman Datuk Seri Dr Nik Norzrul Thani Nik Hassan said the move would result in more competitive pricing and enable the company to at least know the actual cost of the project. “But to us, the cost remains the same because as long as we do our jobs and get paid with a decent profit, we will continue to do it,” he said. (StarBiz)

EA Technique, MMHE: EA Technique settles with MMHE over additional work order claim. EA Technique has agreed to provide a settlement to Malaysia Marine Heavy Engineering Holdings (MMHE) in relation to additional works done for a vessel conversion project inked in 2015. “Under the LoU, it was agreed that EA Technique pay part of the amount due to MMHE and deliver certain security for the remaining amount due to MMHE. Concurrently, both companies agreed to withdraw their respective High Court applications dated June 19 and June 21 in relation to the dispute. (The Edge)

Country View: Enters supplemental deal with UEM Sunrise. Country View is entering into a supplemental agreement with UEM Sunrise with regards to a piece of land it acquired last year. Both parties have mutually agreed to vary and supplement the terms of the acquisition. The acquisition balance sum of RM279m will be paid in two tranches. The first sum of RM62m will be paid on or before June 29, while the remainder sum of RM217m will be paid within the completion period. Despite the acquisition balance sum yet to be paid in full, Country View will take delivery of vacant possession of the land on June 29. (StarBiz)

APFT: External auditors doubt its ability to continue as a going concern. Messrs Adam & Co, the external auditors of loss-making APFT, has issued a statement expressing the material uncertainty related to the going concern of the group. Messrs Adam & Co highlighted that APFT, which has been categorised as a PN17 company, had incurred a net loss of RM67.6m during the financial period between August 1, 2016 and Jan 31, 2018, as well as a negative operating cash flow of RM8.4m as at Jan 31, 2018 (FY18). “The group’s total current liabilities exceeds its total current assets by RM31.9m. In addition, one of its subsidiaries was unable to meet its borrowings obligations during the financial period,” said the auditors. (The Edge)

Uchi Technologies: To dispose of property to major shareholder's son for RM9.5m. Uchi Technologies is planning to dispose of its property in George Town, Penang, to Kao Yen-Ping, the son of substantial shareholder Kao De-Tsan also known as Ted Kao for RM9.5m. It noted that the original cost of the property was RM7.2m, which the company bought on Dec 1, 2011. Uchi said the disposal of the property will enable the group to realise its capital gain and provide general working capital. The expected gain on disposal was noted to be RM2.1m. Barring any unforeseen circumstances, Uchi said the disposal is expected to be completed by Sept 25. (The Edge)

HLT Global: Files petition against client over RM11.4m unpaid sum. HLT Global said its unit has served a winding-up petition on Central Medicare SB (CM), as the latter had failed to make full payments for services provided by HLT Global. As at June 25, the remaining outstanding amounts that CM needed to pay is RM11.4m. The hearing for the winding-up petition has been fixed on Sept 26, HLT Global said, with further developments to be announced in due course. (The Edge)

Iris Corp: Refutes owing RM3.2m to Dole Sebiro. Iris Corp has denied and refuted the “baseless claim” made by petitioner, Dole Sebiro (M) SB, alleging that the former is indebted to them for RM3.2m being the amount due for works done by Dole Sebiro in Sarawak. It said the company, through its solicitors, shall prove that the company is actively pursuing the petitioner for a settlement under the whole projects, which has not been reached. (The Edge)

Market Update

The FBM KLCI might open higher today after US equity indices recovered some of the previous day’s sharp falls — but ended well off the day’s best levels — as tech stocks rebounded, the energy sector got a lift from rising oil prices and General Electric had its biggest one-day rise in three years. The mood elsewhere remained more subdued as lingering worries over the potential impact of mounting US-China trade tension kept participants cautious. On Wall Street, the S&P 500 ended 0.2% higher at 2,723 — having earlier been up as much as 0.6% — following a 1.4% slide on Monday. The Dow Jones Industrial Average edged up 0.1% while the tech-heavy Nasdaq Composite, which sank 2.1% in the previous session, finished 0.4% higher. Wall Street’s rally offered some support to European stock indices. The region-wide Stoxx 600 ended fractionally higher, while London’s FTSE 100 rose 0.4%, helped by a weaker pound. The Xetra Dax in Frankfurt, however, edged back 0.3%.

Back home, the FBM KLCI index lost 2.24 points or 0.13% to 1,675.86 points. Trading volume decreased to 1.88bn worth RM1.93bn. Market breadth was negative with 264 gainers as compared to 547 losers. The regional markets finished mixed with the Nikkei 225 gained 0.02%, while the Shanghai Composite led the Hang Seng lower. They fell 0.52% and 0.28% respectively.

Source: PublicInvest Research - 27 Jun 2018

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