PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 17 Oct 2019, 8:57 AM


PublicInvest Research Headlines - 24 Sept 2018

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Global: The global economy is vulnerable and central banks aren’t ready. The global economy is looking shaky and the economics chief at the Bank for International Settlements says central banks may be powerless if it all goes awry. Claudio Borio, a long-time critic of loose monetary policy, used the BIS’s latest Quarterly Review to highlight again that central bankers were overburdened after the global financial crisis. He said side effects are inevitable, including market turmoil such as that seen in emerging markets in response to Federal Reserve tightening and dollar appreciation. Given their depleted firepower, it also means that policy makers are unprepared for the next downturn. Last week, the OECD warned that trade tensions and emerging market volatility mean that global growth has plateaued, though it said the recovery will continue. Borio’s view is whatever happens, the path won’t be smooth, and that’s payback for years of excessive stimulus. Continuing his health metaphor, he said the recent market ructions “are akin to a patient’s withdrawal symptoms.” (Bloomberg)

US, China: Tariff deadline nears as China cancels trade talks with US. The US and China are hours away from a new round of tariffs on each other’s goods, with no improvement in relations between the two rivals in sight. In a significant escalation, USD200bn of Chinese products will be subject to tariffs from 12:00 am Washington time on Monday, on top of the USD50bn in goods already slapped with tariffs actions in the year. The combined USD250bn in products facing levies is almost half the value of imports from China last year. Meanwhile, USD110bn of goods from the US will become subject to Chinese tariffs around the same time, or about 70 % of the value of goods it bought from America in 2017. China on Saturday called off planned trade talks with US officials. The US State Department’s sanctions against China’s defense agency and its director on Thursday contributed to the decision, according to people familiar with the situation. (Bloomberg)

EU: ECB on runway to rate liftoff considers what should happen next. European Central Bank officials are starting to discuss priming investors for the euro area’s first interest-rate increase since 2011, a conversation that could see them putting the US experience of three years ago under the microscope. With the Governing Council indicating borrowing costs will stay at record lows “at least through the summer of 2019,” two of President Mario Draghi’s lieutenants are already talking about what happens after that. Executive Board members Benoit Coeure and Peter Praet want to communicate more on the pace of increases to avoid stirring up markets. Concerns over the impact of tighter policy are likely heightened by the memory of the two increases in 2011 being swiftly undone as the euro zone tipped into recession. Officials insist the economy is now strong enough to face global risks from trade protectionism to Brexit, but also regularly cite market volatility as a risk. That makes a so-called dovish hike an attractive goal. (Bloomberg)

EU: Eurozone private sector growth weakens on manufacturing. Eurozone private sector grew at the second-weakest pace since late- 2016 as manufacturing growth was subdued by stagnating export orders, flash survey data from IHS Markit showed Friday. The composite output index fell to 54.2 in Sept, while the score was forecast to remain unchanged at 54.5. Although the reading was well above the 50.0 no-change level, it was the lowest since Nov 2016 with the exception of last May. The slowdown was driven by weaker growth in the manufacturing sector as export orders failed to grow for the first time since June 2013. Meanwhile, the service sector output growth picked up momentum for a second successive month to reach a three-month high. (RTT)

EU: Germany's private sector growth moderates in Sept. Germany's private sector growth moderated from a six-month high in Sept, survey data from IHS Markit showed Friday. The composite output index fell to 55.3 in Sept from a six-month high of 55.6 in August. Nonetheless, the latest reading was still the second-best seen since Feb. The expected reading was 55.4. Data showed a contrast in performance between the two main areas of the German economy, with services gaining growth momentum and overtaking a slowing manufacturing sector. The services Purchasing Managers' Index rose to 56.5 from 55.0 in August. The score was expected to remain unchanged at 55.0. (RTT)

EU: France GDP expands at steady pace as estimated. France's economy grew at a steady pace, as previously estimated, in the 2Q, detailed figures from Insee showed Friday. GDP advanced 0.2% sequentially, the same rate as seen in the 1Q, and in line with the second estimate published on August 29. The expenditure-side breakdown of GDP showed that household consumption dropped 0.1% after rising 0.2%, whereas total gross fixed capital recovered sharply, up 0.8%, following a 0.1% rise. Overall, final domestic demand excluding inventory contributed 0.2 points to GDP growth, the same as in the 1Q. (RTT)

UK: Budget deficit widens as government spending rises. The UK budget deficit increased in August on higher expenditure amid subdued income growth, data from the Office for National Statistics showed Friday. Public sector net borrowing, excluding public sector banks, rose by GBP2.4bn from last year to GBP6.8bn in August. Borrowing was expected to fall to GBP3.4bn. This was the largest August borrowing for two years and the first annual increase for August in three years. At the end of August, public sector net debt excluding public sector banks totaled GBP1.78trn or 84.3% of GDP. Debt increased by GBP15.9bn from a year ago. (RTT)

UK: Bank of England officials step out in force after August hike. Bank of England policy makers have the chance this week to share their thoughts on interest rates now that Governor Mark Carney has said he’s sticking around for longer. Four members of the Monetary Policy Committee are making public appearances -- including the first speeches by Dave Ramsden and Gertjan Vlieghe since officials voted to hike interest rates in August. While it’s been anything but a quiet few weeks for the BOE -- with Carney making headlines by both extending his term and giving the UK cabinet dire warnings about a no-deal Brexit -- investors have heard little on the outlook for interest rates beyond policy makers repeating their “limited and gradual” mantra. With Brexit talks still showing little signs of progress, most expect officials to stay on hold until after the UK’s March deadline for leaving the EU. (Bloomberg)

Japan: All industry activity remains flat in July. Japan's all industry activity remained stable in July, figures from the Ministry of Economy, Trade and Industry showed Friday. The all industry activity index remained flat on month, following a 0.9% fall in June. Economists had forecast a marginal 0.1% rise. Among components, construction activity fell 0.6%, but slower than June's 2.4% decrease. Likewise, industrial production slid 0.2% after easing 1.8%. (RTT)


TM (Neutral, TP: RM3.83): Discussing with stakeholders to address Streamyx concerns. Telekom Malaysia (TM) has initiated discussions with major stakeholders as it works on a definitive solution to deliver better broadband experience nationwide. It aims to deliver better broadband experience nationwide by exploring various fit-for-purpose technologies. TM reiterated its support of the Government's aspirations of improving the reach and experience of broadband services in Malaysia, and its commitment to address the issues faced by Streamyx and its loyal customers in a more comprehensive manner. (The Edge)

Country Heights: Proposes ICO, to issue 'Horse Currency'. Country Heights Holdings wants to embark on an initial coin offering (ICO) to issue its own cryptocurrency, tentatively called "Horse Currency". The company is seeking endorsement from its shareholders for the venture at its upcoming extraordinary general meeting on Nov 8. The main and defining difference of the Horse Currency and all the other cryptocurrencies available in the Malaysian market is that this currency is backed by the company's assets, and in short is an ABC (asset-backed cryptocurrency). (The Edge)

United Plantations: Buys agricultural land in Perak for RM414m. United Plantations is acquiring seven pieces of agricultural land totalling 8999.13 acres in Daerah Hilir Perak, together with palm oil mill, workers; living quarters and a site office, from Pinehill Pacific Bhd’s group of companies for RM413.57m in cash. The proposed acquisition is consistent with its growth plan to continue expanding its land bank, when good business opportunities arise. The Proposed Acquisitions are expected to increase the Group’s Malaysian plantation land bank by almost 10%, from approximately 40,821 ha to 44,463 ha. (The Edge)

Utusan Melayu: Offers VSS to more than half its workers, say sources. Utusan Melayu (Malaysia) is offering a voluntary separation scheme (VSS) to more than half of its 1,500 workers as part of its restructuring exercise to reduce overall costs due to the company's financial constraints, according to sources. The decision came following a closed-door briefing held between the group's executive chairman Datuk Abd Aziz Sheikh Fadzir and its staff at its headquarters in Jalan Utusan, Off Jalan Chan Sow Lin. About 800 staff (members) at Utusan have received the letters and they have the option to either accept it or not. (The Edge)

KESM: 4Q net profit down 16%, proposes 6sen dividend. KESM Industries Bhd saw its net profit fall 15.6% to RM11.32m in the 4QFY18 from RM13.4m a year ago, mainly due to lower demand for burn-in, testing and electronic manufacturing services. Nevertheless, the group proposed a final dividend of 6sen per share amounting to RM2.6m for FY18, to be approved by shareholders at the next annual general meeting on Jan 10, 2019. (The Edge)

Automotive (Neutral): Contribution to GDP to more than double. The automotive sector is projected to more than double its contribution to the country’s GDP from the 4% recorded in 2017, thanks to the re-introduction of the sales and services tax (SST), said Entrepreneur Development Deputy Minister Dr Mohd Hatta Ramli. He said the sector was on track to contribute 10% to the GDP by 2020. In 2016, the sector contributed 3.6% or RM40bn to the GDP. (The Edge)

Market Update

The FBM KLCI might start higher today after global equities ended last week on a positive note, with the S&P 500 and Dow Jones Industrial Average reaching fresh intraday record highs and the FTSE Emerging Market index rising for a fourth successive session, as concerns over the US-China trade dispute receded. Across the Atlantic, the Stoxx 600 Europe index enjoyed its sixth successive daily advance and the FTSE 100 had its best day for three months as sterling came under severe pressure from the latest Brexit developments. Tariffs imposed by Washington this week on Chinese imports were not as punitive as many had feared. On Wall Street, the S&P 500 ended less than 0.1% lower at 2,929, after earlier hitting a record 2,940. For the week, the index rose 0.8%. The Dow ended 0.3% higher at 26,727, after peaking at 26,769, and rose 2.2% over the five days. But the tech heavy Nasdaq Composite fell 0.5%, leaving it with a weekly drop 0.3%. In Europe, the Stoxx 600 index rose 0.4%, with the Xetra Dax index in Frankfurt gaining 0.9% and London’s FTSE 100 jumped 1.7%.

Back home, the FBM KLCI index gained 6.94 points or 0.38% to 1,810.64 points on Friday. Trading volume increased to 2.07bn worth RM3.61bn. Market breadth was positive with 477 gainers as compared to 389 losers. The regional markets also finished broadly higher on Friday with shares in China leading the region. The Shanghai Composite was up 2.50% while Hong Kong's Hang Seng added 1.73% and Japan's Nikkei 225 rose 0.82%.

Source: PublicInvest Research - 24 Sept 2018

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