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PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 18 Apr 2019, 9:43 AM

 

PublicInvest Research Headlines - 26 Jul 2018

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Economy

Global: The world's major emerging economies could end up benefiting from global trade tensions. The bloc of emerging economies known as BRICS have long struggled to establish a unified voice on the international stage, but US President Donald Trump may be providing them with an unlikely boost. As the leaders of Brazil, Russia, India, China and South Africa gather in Johannesburg on Wednesday for their annual meeting, the issue of trade protectionism is set to dominate talks amid Trump's proposed tariffs on the European Union and Beijing. BRICS members have an interest in developing a world with multiple countries filling leadership roles, so they will be looking to take advantage of tensions to build up the profile of BRICS. (CNBC)

US: Trump reportedly considering 25% tariff on foreign-made cars. Despite warnings from fellow Republicans and business leaders, White House advisors believe President Donald Trump has plans to impose a 25% tariff on roughly USD200bn in foreign-made cars this year. Business executives and GOP members have said such a move could lead to political chaos and damage the economy, but Trump has told advisors to simply trust his business acumen. The US president is scheduled to meet with European Commission President Jean-Claude Juncker to negotiate trade. The EU has already imposed USD3.3bn worth of tariffs on US goods in response to a decision to impose a 25% and a 10% duty on steel and aluminium from Europe. (CNBC)

US: 2Q economic growth may have been helped by increased activity to get ahead of tariffs. Economists say expectations for strong 2Q growth may have gotten slightly higher due to exports and inventory building that appears to have been done ahead of the onset of trade tariffs. Growth in the quarter is expected to be the best since 2014, with Thomson Reuters' consensus forecast at 4.1%, though some economists see growth above 5%. In fact, President Donald Trump tweeted Tuesday that the US has the "best financial numbers on the planet," several days ahead of Friday's report on 2Q GDP. While economists agree pre-emptive activity around the tariffs may have been a factor, they do not agree how much it contributed to growth in the quarter. (Reuters)

US: New home sales at eight-month low, housing slowing. Sales of new US single-family homes fell to an eight-month low in June and data for the prior month was revised sharply lower, the latest indications that the housing market was slowing down. The moderation in housing is largely driven by supply constraints, but there are concerns that persistent weakness could eventually spill over to the broader economy, which appeared to have grown robustly in the 2Q. Housing has been plagued by rising building material costs and shortages of land and labor, which have put a squeeze on the supply of homes available for sale and kept prices elevated. The new home sales decreased 5.3% to a seasonally adjusted annual rate of 631,000 units last month. (Reuters)

EU: Ahead of Trump meeting, the EU readies new US tariffs worth USD20bn. The US could face another wave of tariffs from Europe if President Donald Trump signs off new duties on carmakers, the EU’s trade chief told the Swedish newspaper Dagens Nyheter Wednesday. The EU is trying to prevent Trump from imposing a 20% tariff on cars from the region. Just hours ahead of a meeting with Trump at the White House, Cecilia Malmstrom, who leads the EU’s trade policy, told the Swedish newspaper that the bloc is preparing new counter-tariffs on USD20bn worth of American goods. She added that the tariffs would not be applied to specific US states, but instead to general items, such as agricultural goods, machinery and high-tech items. (CNBC)

EU: Germany’s economy is showing ‘signs of fear’ over US trade dispute, data show. Trade tensions between the US and Europe could be damaging economic momentum in the region’s biggest economy, Germany. The latest data sets from the country released paint something of a mixed snapshot of the economy. Germany’s composite purchasing manager’s index (PMI) — an indicator of the economic health of the country’s manufacturing and service sectors — hit a five month high in July, coming in at 55.2, up from June’s 54.8. The increase was driven by a stronger rise in manufacturing, IHS Markit, which collates the data, said. Services, meanwhile, hit a two-month low. (CNBC)

China, India: Launch investment spree in Africa ahead of key summit. Chinese President Xi Jinping and Indian Prime Minister Narendra Modi have continued to lend in tandem to African countries ahead of a major emerging markets summit in Johannesburg, South Africa, beginning on Wednesday. Xi, arriving in South Africa on Tuesday, pledged USD14.7bn of investment to the country. His South African counterpart Cyril Ramaphosa is attempting to reboot the country’s economy after years of mismanagement and stagnation under former President Jacob Zuma. Ramaphosa’s target is to raise USD100bn in foreign investment. USD2.8bn of China’s cash will be siphoned off into South Africa’s primary state utility Eskom. (CNBC)

Japan: China, Vietnam help Japan ease labor crunch now but not forever. As Japanese companies struggle with a severe labor shortage, workers from lower-wage countries in Asia have been filling the gap. People from China, where pay is about one-third the level of Japan, still make up the biggest group of foreigners in the labor force. But they aren’t nearly as dominant as they were a decade ago, as workers from even lower-wage countries pour in at a faster rate. The number of workers from Vietnam, who see their pay jump more than 10-fold by working in Japan, has grown at least 40% in each of the past five years. Filipinos employed in Japan get a similar pay bump and have increased by double-digit percentages each year over the same period. But this deep pool of workers keen to work in Japan may not always be so big. (Bloomberg)

Markets

Mega First (Outperform, TP: RM4.74): Its dam project in Laos is unaffected. Mega First Corp, the developer of the Don Sahong hydroelectric plant in Laos, said its project is unaffected by the dam breach incident at a nearby development. The company said after having made the enquiries with the management of Don Sahong Power Company (DSPC) and its consultants. DSPC is a subsidiary of Mega First. “At this juncture, the board concurs with the management of DSPC and its consultants that the incident is unlikely to result in any delay in the completion of the Don Sahong project or a material change in the overall cost of the project,” Mega First said. (StarBiz)

JAKS (Neutral, TP: RM1.30): Latest injunction application against Star to be heard on Friday. Star Media Group confirmed that it has been served with a fresh Erinford injunction by JAKS Resources. The Court of Appeal has fixed Friday to hear the injunction, the media group said. JAKS said it has filed a fresh injunction in the Court of Appeal to restrain two banks from releasing a RM50m guarantee to Star Media. (The Edge)

Marine & General: Bags RM17m contract to supply vessel. Marine & General (M&G) said its unit has been awarded a contract worth RM17m, to provide a straight supply vessel (SSV) in support of a client's operations. M&G said the contract, which was awarded by Hess Exploration and Production Malaysia B.V. to its unit Jasa Merin (Malaysia) SB (JMM), will commence on Aug 1. The contract is for a primary duration of three years, with two annual extension options for Hess. (The Edge)

D'nonce: To diversify into property and construction for added income streams. D'nonce Technology (DTB) has entered into a development rights agreement for the sole and exclusive rights to carry out development on freehold land measuring 6,774 sq m in Seberang Perai Tengah, Penang for RM10m cash amid plans to diversify into property and construction for additional income streams. The board anticipates the group's new business activities in property development and construction to contribute 25% or more of the group's net profits, or cause a diversion of 25% or more of its net assets. (The Edge)

AEON Co: Ordered to pay RM2.4m per month to WCT as rental for Bukit Tinggi mall. AEON Co (M) has been ordered by the High Court to pay RM2.4m per month, equivalent to the current monthly rental, to WCT Holdings' indirect wholly-owned subsidiary Gemilang Waras SB following a court battle on the lease renewal for AEON Mall Bukit Tinggi. Subject to the payment, AEON shall remain in possession of AEON Mall Bukit Tinggi until the disposal of the Notice of Appeal. (The Edge)

Cuscapi: Sets up unit to operate cryptocurrency exchange in the Philippines. Cuscapi has set up a wholly-owned subsidiary with the intention to operate a cryptocurrency exchange in the Philippines, upon obtaining a licence from the Cagayan Economic Zone Authority (CEZA). Cuscapi said the subsidiary Cuscapi Blockchain SB will also conduct other information technology related businesses. (The Edge)

APFT: Shareholder fails in bid to stop AGM. A shareholder of APFT has failed in his bid to obtain an injunction to stop the group from holding its AGM. The injunction application by Hisham Mustaffa was dismissed by the High Court, the group said. (The Edge)

Market Update

US markets ended the day higher after a deal was announced between the US and Europe, one which will see the latter expanding on its imports of US liquefied natural gas and soybeans while both sides will lower industrial tariffs. The Dow Jones Industrial Average and S&P 500 gained 0.7% and 0.9% respectively in “celebration”. This positive outcome is a welcome development and also comes amid a bunch of earnings reports, some of which reflected the impact of recent trade threats. General Motors cut its profit forecasts on surging metal prices, its share prices tumbling unsurprisingly, similarly for Fiat Chrysler. Technology-based stocks are likely to be in for a torrid session when markets in the US re-open following Facebook’s big earnings miss which consequently saw its share price slump about 20% in after-hours trading. European markets eased off earlier in the day given the uncertainties surrounding Jean-Claude Juncker’s meeting with Donald Trump while government bond prices rose ahead of the European Central Bank meeting later today. Basic resources and autos were the worst performers on the day given their link to trade. Germany’s DAX, UK’s FTSE 100 and Spain’s IBEX 35 fell 0.9%, 0.7% and 0.7% respectively while France’s CAC slipped 0.1%. Asian markets were mixed as investors waited on fresh leads, the most noticeable and immediate being President Trump’s just-concluded meeting with the European Commission President on tariff-related issues. Chinese equities stalled after a 3-day rally driven by signs of a shift toward stimulus, with the Shanghai Composite Index slipping 0.1%. The Hang Seng and Straits Times indices jumped 0.9% and 1.0% however as the FBM KLCI only gained a muted 0.1%.

Cuscapi has set up a wholly-owned subsidiary to operate a cryptocurrency exchange in the Philippines upon obtaining a licence from the Cagayan Economic Zone Authority (CEZA). Uzma has secured a five-year umbrella contract from Petronas Carigali Sdn Bhd for the provision of drilling fluids and associated services, with no disclosed values however. Please refer to the accompanying report today for details. Mega First Corporation said the construction of its Don Sahong Hydropower Project (DSHP) in Laos has not been affected by the recent collapse of the Xepian Xe Nam Noy dam there.

Source: PublicInvest Research - 26 Jul 2018

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