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Author: PublicInvest   |   Latest post: Fri, 22 Mar 2019, 10:13 AM

 

PublicInvest Research Headlines - 6 Jul 2018

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Economy

US: Trade war threat gets real as Trump confirms China tariffs. US President Donald Trump is firing the biggest shot yet in the global trade war by imposing tariffs on USD34bn of Chinese imports, delivering on a promise to his political supporters that risks provoking retaliation and harming the world economy. The duties on Chinese goods will go forward just after midnight, Trump said. Another USD16bn of goods could follow in two weeks, Trump said, before suggesting the final total could eventually reach USD550bn, a figure that exceeds all of China’s annual goods exports to the US. (Bloomberg)

US: Industries fear worst is yet to come from Trump tariffs. US companies for months bemoaned the tariffs on Chinese imports that will take effect Friday. Now they fear the worst is yet to come in an escalating confrontation with Beijing over trade. Duties on USD34bn of Chinese goods will take effect just after midnight in Washington, President Donald Trump told reporters aboard Air Force One on his way to a rally in Montana on Thursday. China has promised to immediately impose retaliatory duties of a similar size on American goods. The US has also released a list of an additional USD16bn in products targeted for tariffs, and Trump suggested the final total could eventually reach USD550bn, a figure that exceeds all of China’s annual goods exports to the US. (Bloomberg)

US: Private payrolls miss expectations; weekly jobless claims up. US private payrolls rose less than expected in June while the number of Americans filing for unemployment benefits unexpectedly rose last week, but that did little to change perceptions that labor market conditions continued to tighten. The labor market is viewed as being near or at full employment, with the jobless rate at an 18-year low of 3.8%. The unemployment rate has dropped by three-tenths of a percentage point this year and is near the Federal Reserve's forecast of 3.6% by the end of this year. The ADP National Employment Report showed private employers hired 177,000 workers in June, less than market expectations for a 190,000 gain. Private payrolls increased by 189,000 jobs in May. (Reuters)

EU: Merkel says would back cutting EU tariffs on US car imports. German Chancellor Angela Merkel said she would back lowering EU tariffs on US car imports, responding to an offer from Washington to abandon threatened levies on European cars in return for concessions. "When we want to negotiate tariffs, on cars for example, we need a common European position and we are still working on it," Merkel said. US President Donald Trump threatened last month to impose a 20% import tariff on all EU-assembled vehicles, which could upend the industry's current business model for selling cars in the US. (Reuters)

China: Debt curbs likely hit 2Q GDP growth as trade war looms. China's 2Q economic growth is expected to have slowed slightly from the previous quarter, a Reuters poll showed, as the government's efforts to tackle debt risks crimp activity and a looming US trade war threatens exports. The economy has already felt the pinch from a multi-year crackdown on riskier lending that has driven up corporate borrowing costs, promoting the central bank to pump out more cash by cutting reserve requirements for lenders. Recent data have started to show signs of fatigue as credit expansion slowed and domestic demand ranging from government-funded infrastructure investment to consumer spending looked to be softening. This comes as a deepening trade war with the US looks set to hit China's export machine. (Reuters)

Singapore: Toughens curbs on housing market after strong price gains. Singapore announced a five percentage point rise in stamp duty for some home buyers and tightened housing loans in a bid to cool the property market and keep price increases in line with economic fundamentals. After falling for nearly four years, house prices started rising in 3Q of last year and have increased by 9.1% over the past year, the Singapore government said. "The sharp increase in prices, if left unchecked, could run ahead of economic fundamentals and raise the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply," it said. (Reuters)

Markets

Sime Darby Property (Outperform, TP: RM1.90): New launches record strong take-up rate. Sime Darby Property said it sold as much as 90% of its new launches within one week, suggesting resilient demand for both its residential and commercial products despite the soft property market. This refers to the final phase of its landed home series in Denai Alam situated at the heart of City of Elmina, dubbed Semanea Hills, which comprises a total of 162 units, as well as commercial units at 3 Avenue in Bandar Bukit Raja. The Semanea Hills superlink homes were 90% sold last weekend, while the semi-detached units were 73% sold, resulting in the combined take-up rate of 50% across the entire Elmina Green development. (The Edge)

FGV: Reiterates support for smallholders. Felda Global Ventures Holdings (FGV) has reiterated its continued support of smallholders and settler families. It is proud of its roots which run deep in Malaysia’s first smallholder programme established under the Federal Land Development Authority (Felda) and will continue to work closely and support smallholders and settler families. FGV itself has its genesis in Felda and till today, continues to work closely with smallholders and settler families, offering the critical link between farmer and marketplace. Clarifying FGV’s stance, Zakaria said: “Today, six years after FGV’s listing on Bursa Malaysia, FELDA remains our largest shareholder and an important stakeholder, as are the settlers.” (The Edge)

Maybank: Partners CGC to provide RM2bn SME portfolio guarantee scheme. Malayan Banking (Maybank) has entered into a strategic partnership with Credit Guarantee Corporation Malaysia (CGC) to provide up to RM2bn of financing to small and medium sized enterprises (SMEs) via the latter's portfolio guarantee (PG) scheme. Maybank and CGC said this is the largest ever amount under the CGC PG scheme to support local SMEs in growing their businesses further. Under the Maybank-CGC PG scheme, SMEs can apply for either Islamic or conventional financing facilities from Maybank, from a minimum of RM50,000 up to a maximum of RM1.5m and for a fixed tenure of up to seven years. (The Edge)

Avillion: Locks in 10-year contract to manage upcoming Johor Bahru hotel. Avillion announced it had signed a 10-year hotel management agreement with Bintang Kencana SB to manage and provide a direct day-to-day operation of an upcoming 153-room hotel in Bandar Baru Uda, Johor Bahru. Once the new hotel opens, the hospitality facility will be managed by its wholly-owned subsidiary Avillion Hotels International SB. The hotel management agreement is in line with Avillion group’s strategy to grow the chain of Avillion managed hotels. The contract comes with a 5-year renewal option. (The Edge)

Vertice: In talks to venture into smart hotels with Smuzcity. Vertice is contemplating to venture into the smart hotel business, which will be "unmanned" and "cashless", via a strategic partnership with a local company Smuzcity. Vertice's wholly-owned unit Vertice Construction SB inked a memorandum of understanding with Smuzcity today to negotiate on forming the strategic alliance. Under the deal, the parties want to collaborate for opportunities for qualified real properties to be considered for a structured smart hotel chain business. Via the MoU, Vertice will provide its knowledge and experience in the construction industry to contribute towards works for the design, construction and renovation for the chain of hotels. (The Edge)

Market Update

The FBM KLCI might open with a positive bias as US stocks moved higher as participants returned from the July 4 holiday in a more optimistic mood ahead of the scheduled imposition by Washington of tariffs on USD34bn of Chinese imports — and Beijing’s expected response. Sentiment was lifted by signs that President Donald Trump might abandon tariffs on the European carmaking sector in exchange for concessions. The minutes of the Federal Reserve’s meeting last month highlighted concern among US business over the potentially harmful impact of tariffs but did little to shift expectations in the market that the central bank will continue to raise interest rates gradually. Economic data in the US also attracted attention as participants awaited today’s official non farm payrolls report. ADP said 177,000 jobs were created in the US last month, after a revised 189,000 reading in May. The Institute for Supply Management’s service sector index rose in June for the first time in four months. Sterling gave back an early rise against the dollar that was largely driven by comments from Mark Carney, governor of the Bank of England that the UK economy was improving after a weather-related slowdown in the first quarter. On New York, the S&P 500 ended 0.9% higher, with the technology sector leading the way, while the Dow Jones Industrial Average rose 0.8%. The Nasdaq Composite gained 1.1%. In Europe, the pan-regional Stoxx 600 index ended 0.4% higher, with the FTSE 100 in London rising by the same amount.

Back home, the FBM KLCI index gained 2.20 points or 0.13% to 1,690.65 points on Thursday. Trading volume increased to 2.17bn worth RM1.45bn. Market breadth was negative with 405 gainers as compared to 452 losers. In the region, the CSI 300 index of major Shanghai and Shenzhen-listed stocks fell 0.6%, taking its loss for the week to almost 5%. The Shanghai Composite index fell 0.9% for the session and was about 4% lower for the week. Tokyo’s Topix fell 1%.

Source: PublicInvest Research - 6 Jul 2018

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