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Author: PublicInvest   |   Latest post: Tue, 16 Jul 2019, 8:56 AM

 

PublicInvest Research Headlines - 27 Jul 2018

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Economy

US: Core capital goods orders and shipments surge in June. New orders for key US made capital goods increased more than expected in June and shipments surged, pointing to solid growth in business spending on equipment in the 2Q. The Commerce Department said that orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.6% last month. Data for May was revised higher to show the so-called core capital goods orders increasing 0.7% instead of the previously reported 0.3% gain. Economists had forecast core capital goods orders rising 0.4% last month. Core capital goods orders increased 6.8% on a YoY basis. (Reuters)

US: Jobless claims rebound from a more than 48 1/2-year low. The number of Americans filing for unemployment benefits rose from a more than 48 1/2-year low last week, but continued to point to a tightening labor market. Initial claims for state unemployment benefits increased 9,000 to a seasonally adjusted 217,000 for the week ended July 21, the Labor Department said. Claims dropped to 208,000 during the week ended July 14, which was the lowest reading since December 1969. Economists had forecast claims rising to 215,000 in the latest week. Claims data tends to be volatile around this time of the year when motor vehicle manufacturers shut assembly lines for annual retooling. (Reuters)

US: Trump says he will be happy with a GDP number with a '4' in front of it. President Donald Trump is talking up Friday's 2Q GDP release, saying he would be content with US economic growth of about 4% or more. "Somebody actually predicted today, 5.3. I don't think that's going to happen. If it has a 4 in front of it, we're happy. If it has like a 3 but it's a 3.8, 3.9, 3.7, we're OK," the president said during a speech about trade at a steel facility in Illinois. The government releases GDP numbers on Friday morning. The CNBC/Moody's Analytics GDP survey rapid update showed tracking estimates dipped to 4.1% growth. The White House typically has not talked about economic data points before their release, but the Trump has recently broken that tradition. (CNBC)

US: Kudlow says Friday's GDP number is going to be 'big'. White House economic advisor Larry Kudlow predicted that the 2Q GDP will live up to the mounting hype. "You're going to get a very good economic growth number tomorrow. Big," Kudlow, head of the National Economic Council said. While he said he could not speculate on where the number will land specifically, he did not disagree with a suggestion that it would be in the 4% to 4.5% range. "I have no reason to disagree with that, but I have no knowledge, no information," Kudlow said. "We won't hear about that until way later today." (CNBC)

US, EU: Mnuchin says Trump-Juncker talks pave way to 'resolving a lot of these trade issues. US trade negotiations with the European Union formed the basis of a "real agreement" that will reduce tensions, Treasury Secretary Steven Mnuchin said. Mnuchin spoke a day after the White House announced it had reached a general agreement with the European Union to work toward zero tariffs and reform the World Trade Organization. President Donald Trump and European Commission President Jean-Claude Juncker held talks on the trade dispute. In the wake of those negotiations, Mnuchin said the long-term goal is an elimination of all tariffs, and in the nearer term no additional tariffs and a removal of duties on steel and aluminum. (CNBC)

EU: Draghi says it's 'too early' to assess the Trump-EU trade agreement. European Central Bank (ECB) President Mario Draghi said it is "too early" to assess the impact of the recent agreement between Europe and the US over trade. But that in any case it is a "good sign." The deterioration in trade relations between the US and Europe has been closely watched not only by market players, but also by central bankers in Frankfurt. Higher tariffs and restrictions by the US could ultimately dent the euro zone economy at a time when the region has finally started to see some positivity following the sovereign debt crisis of 2011. However, President Donald Trump and the European Commission struck a deal that was welcomed by many in Europe. (CNBC)

China: Growth robust but risks are rising, says IMF. The near-term outlook for China’s economy is robust but external threats have risen and overall risks are tilted to the downside, according to the IMF. What happens with the world’s second-largest economy from now will depend on how China’s government acts. Market-based reforms could lead to sustained, stable growth, but "a reversion to credit-driven stimulus would further increase vulnerabilities that could eventually lead to an abrupt adjustment". The Washington-based IMF’s warning comes as Beijing signals that it is prepared to soften a campaign to rein in debt in order to support the economy at a time when a trade conflict with the U.S. is intensifying. (Bloomberg)

Japan: Tokyo inflation offers another reason for BOJ to cut forecasts. Inflation in Tokyo offers Bank of Japan policy makers all the more reason to lower their price forecasts when they meet next week. Tokyo core consumer prices, which exclude fresh food, rose 0.8% in July. Consumer prices excluding fresh food and energy climbed 0.5%, while overall prices gained 0.9%. While Tokyo inflation ticked up this month, nationwide price gains are still less than halfway to the BOJ’s goal of 2%. Governor Haruhiko Kuroda has said price momentum is holding up despite nationwide inflation stalling in recent months. Still, the central bank is widely expected to lower its forecasts when it issues its quarterly outlook on July 31. (Bloomberg)

Markets

Prestariang (Outperform, TP: RM1.79): Inks agreement with PTPTN to drive employability and engagement of student borrowers. Prestariang has entered into an agreement with Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) to drive employability and engagement of student borrowers. The agreement is for one year, expiring on July 25 next year, but both entities can extend the deadline further via a mutual written agreement. The group said it expected the agreement to contribute positively to its future earnings, net tangible assets and gearing. (The Edge)

Tan Chong: Forms JV in New York to distribute exports from Southeast Asia. Tan Chong Motor Holdings announced the formation of a JV company in New York to allow the group to develop new distribution channels in the US and Canada for exports from Southeast Asia. The new company, Tan Chong Warisan Resources Management, is owned on a 51:49 basis by Tan Chong's wholly owned unit TCMSC (Labuan) Pte Ltd and MAT (Labuan) Pte Ltd, a wholly-owned unit of Warisan TC Holdings. (The Edge)

MAHB: Building separate low cost carrier terminal will not help industry growth. Having a separate airport specifically to cater for low cost carriers (LCC) will increase connecting time with the existing two terminals under the KL International Airport (KLIA), says Malaysia Airports Holdings (MAHB). MAHB said the International Air Transport Association (IATA) and Airports Council International (ACI) have recommended that where feasible, existing terminals should be fully utilised before new ones are built. (The Edge)

Pantech: US trade war claims first Malaysian victim. The US trade war against China has claimed its first local victim, with Pantech Group Holdings warning that it could see a 20% reduction in revenue for the remaining months of the current FYE Feb 28, 2019 (FY19). Nevertheless, the group expects its overall performance for FY19 to remain profitable. It announced that its net profit rose by a marginal 1.1% to RM14.1m in the 1QFY19 from RM13.9m a year ago, mainly due to the increase in sales demand from both trading and manufacturing divisions. (The Edge)

Vitrox: Strong demand lifts 2Q results. Technolgy firm Vitrox said its net profit in the 2QFY18 jumped by almost a third, boosted by strong demand for its microchips inspection solutions. Earnings in the three months ended June 30 rose 30% to RM27.8m, while revenue increased 35% to RM105m. Vitrox said it is optimistic on the business prospect for the rest of financial year 2018. (StarBiz)

Property (Neutral): Gentle recovery in 1H18. The Malaysian property market saw a gentle recovery during the 1H18, following the strong economic growth momentum after the 14th General Election. Malaysia Capital Markets Executive Director, Allan Sim said the industrial property sector presented a popular alternative asset class for developers and investors, in addition to traditional residential and commercial (office and retail) markets. On the residential segment, Knight Frank said market sentiment improved during 1H18 and Kuala Lumpur remained one of the well-liked destinations for property buyers and investors. (StarBiz)

Market Update

The FBM KLCI might open with a negative bias as there were mixed fortunes for global stock markets as relief over the agreement reached by the US and the EU on defusing trade tensions contrasted with a steep fall for tech stocks after Facebook warned of slowing sales growth in the second half. The tech-heavy Nasdaq Composite retreated sharply from Wednesday’s record close and the S&P 500 edged slightly lower. But European indices rallied sharply, led by the carmaking sector, as participants welcomed the agreement between the EU and US following a meeting between US president Donald Trump and Jean-Claude Juncker, head of the European Commission. Meanwhile, the European Central Bank was in the spotlight as it left its monetary policy stance unchanged and confirmed existing plans to halt asset purchases at the end of this year, as had been widely expected. On Wall Street, the S&P 500 ended 0.3% lower at 2,837, while the Nasdaq Composite fell 1% — with Facebook shares down more than 19%. The Dow Jones Industrial Average, by contrast, rose 0.5%. And across the Atlantic, the Europe-wide Stoxx 600 index rose 0.9%, with the Xetra Dax in Frankfurt jumping 1.8%, led by BMW and Volkswagen. In London, the FTSE 100 ended less than 0.1% higher as participants digested a heavy schedule of earnings reports.

Back home, the FBM KLCI index gained 2.45 points or 0.14% to 1,766.23 points on Thursday. Trading volume decreased to 3.03bn worth RM2.73bn. Market breadth was negative with 335 gainers as compared to 618 losers. The regional markets finished lower today with shares in China leading the region. The Shanghai Composite was down 0.74% while Hong Kong's Hang Seng was off 0.48% and Japan's Nikkei 225 was lower by 0.12%.

Source: PublicInvest Research - 27 Jul 2018

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