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PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 14 Jun 2019, 12:18 PM

 

PublicInvest Research Headlines - 4 Sept 2018

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Economy

Global: OECD sees no easy ride as monetary policy shifts off crisis mode. The exit from crisis-era stimulus by the world’s central banks won’t be an easy ride, and previous market turmoil could well be repeated, according to the Organization for Economic Cooperation and Development. It sees “elevated” risks ahead in the financial system, citing the shift in monetary policy, high levels of public debt and leverage in China’s banking and shadow-banking businesses. The US Federal Reserve has already begun raising interest rates, and others are following, but the prospect of returning to pre-crisis normality is daunting. Central-bank balance sheets in the US, the euro area, the UK and Japan stood at around USD15trn at the start of this year, an almost fivefold increase from 2007, the OECD said. (Bloomberg)

EU: Finance ministers to be told not to fear rising ECB rates. Europe’s finance ministers have no need to worry that the European Central Bank’s exit from years of loose monetary policy will provoke financial turmoil, according to an upcoming study. “Higher interest rates do not need to be the harbingers of wider financial-market instability,” Daniel Gros, director of the Brussels-based Center for European Policy Studies, wrote in a paper. The findings will be presented at a meeting of finance chiefs and central bankers in Vienna on Friday. For Gros, the end of quantitative easing and the ECB’s plan to raise rates only very gradually, potentially starting in late 2019, will have both positive and negative effects. (Bloomberg)

EU: Euro zone manufacturing growth eases on trade war worries. Euro zone manufacturing growth slowed to a near two-year low in August as optimism dwindled amid growing fears of an escalating global trade war, a survey showed on Monday. However, this edition of the survey should be treated with some caution. It only represents about 70% of the usual sample size as swathes of European factories take a break over the summer months. IHS Markit’s August final manufacturing PMI dropped to a 21-month low of 54.6 from July’s 55.1, unchanged from an initial reading, yet still comfortably above the 50 level that separates growth from contraction. An output index, which feeds into a composite PMI due on Wednesday and is regarded as a good gauge of economic health, nudged up to 54.7 from 54.4. (Reuters)

UK: Consumers plan to get thrifty after summer spending spree. Britons are planning to rein in their spending after splurging during the summer heatwave. With worries growing over rising prices and higher interest rates, a third of consumers say they intend to spend less, Barclaycard said in a report published Tuesday. The warning comes after households made the most of the sweltering summer months, with the value of spending in August alone rising 4.5% from a year earlier. “Brits have been feeling confident enough in their spending power to enjoy summer events and evenings out,” said Esme Harwood, director at Barclaycard. (Bloomberg)

UK: Manufacturing growth slows to 2-year low as exports falter. UK manufacturing growth unexpectedly slowed to the weakest in two years last month as export orders contracted amid a weakening of the global economy. IHS Markit’s PMI fell to 52.8 in August, the firm said Monday, down from 53.8 a month earlier, and below the 53.9 forecast by economists. A gauge of new orders for exports fell below the 50 level that indicates expansion for the first time since April 2016. (Bloomberg)

China: August manufacturing growth slows to 14-month low Caixin PMI. China’s manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month and employers cutting more staff, a private survey showed on Monday. The gloomy findings reinforce views of a further cooling in China’s economy in coming months, as the US ramps up tariffs on Chinese goods. That is likely to prompt more spending and other growth boosting steps from Beijing. The Caixin/Markit Manufacturing PMI fell to 50.6 in August from July’s 50.8, matching economists’ forecasts. (Reuters)

Markets

AirAsia (Outperform, TP: RM4.14): To continue expanding footprint in China. AirAsia will continue expanding its footprint in China, while looking at increasing flight frequency across the country, despite the collapsed deal to establish a low-cost carrier terminal (LCCT). AirAsia Executive Chairman and AirAsia X Co-Group CEO Datuk Kamarudin Meranun said the airline might revisit its plan to establish a LCCT in China, but only "when the time is right." "We are still developing our China market, but will develop it without a local licence. The only thing we are restricted at is, we cannot do domestic flights. We are quite a significant player in China and will remain one," he said. (StarBiz)

Lotte Chemical Titan: Rolls out polypropylene production plant. Lotte Chemical Titan Holdings has commenced commercial operations of its new polypropylene production plant, it said. The plant has an annual capacity of 200 kilotonnes and will cater for both the domestic and export markets. Construction of the plant began in March 2018 with mechanical cimpletion achieved in June 2018. "Polypropylene is a thermoplastic polymer used by our customers to fabricate a wide variety of products including automotive parts, medical equipment and woven bags," said Lotte. (StarBiz)

FGV: Embarks on turnaround plan as it 'cleans house'. FGV Holdings, which is still not done cleaning house, announced that it will embark on a turnaround plan to be overseen by two independent directors and a transformation officer in an effort to bring the embattled agri-commodities giant back on its feet and improve its finances. FGV chairman Datuk Wira Azhar Abdul Hamid said several members of the board and management, past and present, are being investigated as part of its probe into transaction and investment decisions and business practices. (SunBiz)

Supermax: Says fire-hit factory fully covered by insurance. Supermax Corp said its factory in Sungai Buloh, which caught fire on Aug 24, is fully covered by insurance against all risks, including consequential loss claims. “At Supermax Group level, the financial and operational impact would be minimal as this plant is dedicated to a specific product which contributes to less than 1% of the group’s sales turnover,” added the rubber glove manufacturer. (The Edge)

DBE Gurney: Biggest shareholder offers to buy remaining shares at 3.5 sen each. DBE Gurney Resources has received a conditional mandatory takeover offer from its largest shareholder, Doh Properties Holdings SB, at 3.5 sen per share or a total amount of RM62.79m. DBE Gurney said it received the takeover offer after Doh Properties, through open market acquisitions, increased its shareholding in the integrated poultry group to 33.02% from 32.89%. Under the Capital Markets and Services Act, Doh Properties is obliged to extend a mandatory takeover offer to acquire the remaining shares and warrants it does not own. (The Edge)

Vertice: Joint-venture company wins RM815m contract in related party deal. Vertice's 50:50 joint venture (JV) company with Vizione Holdings, Buildmarque Construction SB was awarded an RM815m contract by Consortium Zenith Construction SB to undertake construction works for Package 2 of the Penang Mega Infrastructure Project. The award is for the construction of a 5.7km by-pass from Bandar Baru Ayer Itam to Lebuhraya Tun Dr Lim Chong Eu, to be completed within 36 months. The parties of the JVA are in the midst of arranging for the subscription of shares in Buildmarque (currently wholly owned by Vertice). (SunBiz)

Market Update

The FBM KLCI might open without much fanfare today as Europe’s main stock gauge finished little changed Monday due to uncertainty over global trade tensions. Trading could be somewhat muted as U.S. investors take a break for Labor Day. In Europe, the Stoxx Europe 600 closed up by less than 0.1% at 382.51, after Friday’s 0.8% drop that left it down 2.4% for August. Germany’s DAX 30 shed 0.1% to end at 12,346.41, while France’s CAC 40 tacked on 0.1% to 5,413.80. The UK’s FTSE 100 UKX, +0.97% rose 1% to end at 7,504.60, getting a lift from the pound’s tumble, which came as a key European Union official criticized Britain’s Brexit plan.

Back home, the FBM KLCI index lost 6.08 points or 0.33% to 1,813.58 points on Monday. Trading volume increased to 2.65bn worth RM1.68bn. Market breadth was negative with 723 losers as compared to 267 gainers. The regional markets finished lower today with shares in Japan leading the region. The Nikkei 225 was down 0.69% while Hong Kong's Hang Seng was off 0.63% and China's Shanghai Composite gave away 0.17%.

Source: PublicInvest Research - 4 Sept 2018

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