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Author: PublicInvest   |   Latest post: Thu, 23 May 2019, 10:28 AM

 

PublicInvest Research Headlines - 19 Oct 2018

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Economy

US: Weekly jobless claims data bolsters labor market outlook. New applications for US unemployment benefits dropped last week and the number of Americans on jobless rolls fell back to levels last seen in 1973, suggesting a further tightening in labor market conditions. The labor market strength was also underscored by another report on Thursday from the Philadelphia Federal Reserve showing manufacturers in the mid-Atlantic region boosting employment and increasing hours for workers in Oct. (Reuters)

US: Fed's Quarles eyes more dovish rate path, US productivity boost. The Federal Reserve should continue with its gradual rate hikes but must be prepared to slow the tightening if US productivity breaks out of a several-year lull, as it may be poised to do, an influential Fed governor said on Thursday. Randal Quarles, who rarely discusses monetary policy, painted a somewhat more optimistic picture than his colleagues on the economy’s longer-term capacity, and said he favored a bit more dovish path than most others at the US central bank. (Reuters)

UK: Retail sales decline on food sales. UK retail sales dropped more than-expected in Sept reflecting the biggest decline in food store sales in almost two years, figures from the Office for National Statistics revealed. Retail sales including auto fuel fell 0.8% MoM in Sept, due mainly to a large decline of 1.5% in food stores, which was the largest food store sales fall since Oct 2015. Economists had forecast retail sales to fall 0.4% offsetting Aug's 0.4% rise. A similar bigger decline was last seen in March. At the same time, non-food store sales gained 0.1%. (RTT)

China: 3Q GDP growth set to hit weakest since 2009 amid trade war strain. China’s 3Q GDP data on Friday is expected to show growth slipped to its weakest pace since the global financial crisis, as domestic demand faltered and exporters started to feel the pinch from a bitter Sino-US trade dispute. A Reuters poll of analysts underscored the dimming outlook for the world’s second biggest economy, with forecasts centering on growth at 6.6% in the June-Sept quarter from a year earlier - the weakest pace since the 1Q of 2009. (Reuters)

China: New loans rebound on government support. China’s new bank loans rebounded in Sept after dipping in the two previous months, as policymakers rolled out measures to ensure sufficient liquidity in the financial system amid worries a trade war with the US could hurt the economy. Chinese banks extended CNY1.38trn (USD199.25bn) in net new yuan loans in Sept, more than analysts had expected and up from the previous month. (Reuters)

Japan: Exports unexpectedly fall after natural disasters. Japan’s exports unexpectedly fell in Sept -- the first drop in almost two years – as natural disasters disrupted economic activity, while higher energy prices continued to feed gains in imports. While one-off events make it difficult to assess the impact of the US-China trade dispute, Japanese export growth has been slowing this year following double-digit expansion in 2017. The decline in shipments adds to the likelihood of Japan’s economic expansion weakening this quarter after a surge in the three months through June. (Bloomberg)

Markets

JAKS (Neutral, TP: RM1.10): Looks to renewable energy as new revenue source. JAKS Resources is looking to renewable energy as a new source of revenue for the group, which currently has businesses in power generation, construction and property development. The group CFO Steven Ang said the group would be looking at projects focused on solar and hydro power, particularly in Vietnam, Indonesia and Malaysia. At the EGM, its shareholders passed the resolution for its proposed rights issue of up to 278.16m warrants, on the basis of one warrant for every two existing ordinary shares. (The Edge)

Affin Bank: Affin Islamic issues RM300m AT1 sukuk wakalah. Affin Islamic Bank, a wholly-owned subsidiary of Affin Bank, has issued an RM300m additional tier one (AT1) sukuk wakalah. It said the sukuk would have a perpetual tenure on a non-callable five years basis. It has also been assigned a long-term rating of A3 by RAM Rating Services. The issuance is part of the bank’s sukuk programme which gives Affin Islamic the flexibility to raise funds via the issuance of Senior Sukuk Murabahah, Tier 2 Sukuk Murabahah and AT1 Sukuk Wakalah from time to time. (The Edge)

Bioalpha: Seeks to boost exports of traditional medicine to China. Bioalpha Holdings aims to increase its export sales to China by partnering with Jinrui Fortune Holding Group. Its subsidiary Bioalpha International SB inked a MoU with Jinrui to explore areas of collaboration. "The plan is for Jinrui to import health supplement products from Bioalpha to be sold at their medical halls,” said Bioalpha chairman Tan Sri Abdul Rahman Mamat.” Bioalpha will also be able to market its products on Jinrui's online portal." The group expects revenue contribution from collaboration with Jinrui to start in the 2Q of 2019. (StarBiz)

Country Heights: Unit eyes entry into auto-related businesses. Mines International Exhibition Centre SB (MIEC), a wholly-owned sub-subsidiary of Country Heights Holdings, is partnering a company that conducts automotive-related programmes, to develop an auto lifestyle centre, as well as conduct other auto industry-related businesses. It said MIEC has entered into a MoU with AsiaAuto Venture SB (AAV) to form a new company (NewCo) in which MIEC and AAV will each have an equity stake. The MoU is valid for a period of one year. (The Edge)

PUC: Cancels JV with GreenTech to bid for RE projects. PUC has scrapped a JV with GreenTech Malaysia Alliances SB (GTMA) to jointly bid for renewable energy (RE) projects in government or government-linked corporations. Consequently, PUC will buy over the remaining 20% equity interest in GTMF from GTMA for RM10. Barring any unforeseen circumstance, the acquisition is expected to be completed by the 4Q of 2018. (The Edge)

Gabungan AQRS: Makes RM17m profit in 3Q. Gabungan AQRS expects earnings to improve further next year, boosted by positive income from property development and construction division. It posted a net profit of RM17m on revenue of RM159.3m in the 3QFY18. However, slower progress works of Light Rail Transit Line 3 (LRT3) project due to the review by the Government had an impact on its revenue and profit. “Nevertheless, it is anticipated that the project review will be completed very soon and work progress for LRT3 project will be back on track by mid of 4Q18,” it said. (StarBiz)

Market Update

The FBM KLCI might open lower today after an early sell-off on Wall Street gathered pace as sentiment was hit by renewed concerns about US-China trade tension, the prospect of further interest rate rises by the Federal Reserve and mounting worries about Italy’s budget proposals. Uncertainty over relations between the US and Saudi Arabia provided a further reason for risk aversion after US Treasury secretary Steven Mnuchin said he would not attend a high-profile investment conference in Riyadh. The S&P 500 index registered its biggest one-day decline since last week’s bout of extreme turbulence while emerging market stocks and currencies also suffered hefty falls. Brent oil settled below the $80 a barrel mark for the first time in almost a month. So-called “haven” currencies such as the dollar and Japanese yen gained ground, while US Treasury prices recouped early losses and gold edged higher. On Wall Street, the S&P 500 fell 1.4% to 2,768, leaving it little changed since the end of last week, while the tech-heavy Nasdaq Composite finished 2.1% lower. The Dow Jones Industrial Average dropped 327.23 points, or 1.3%, to end at 25,379.45. European markets eased back in line with Wall Street’s early weakness. Frankfurt’s Xetra Dax ended 1.1% lower and the FTSE 100 in London fell 0.4%. The region-wide Stoxx 600 Europe index fell 0.5%.

Back home, the FBM KLCI fell 0.15% today in tandem with the day's general negative performance across the region. The benchmark index closed at 1,738.01, down 2.58 points from yesterday. In the region, Japan's Nikkei 225 closed 0.8% lower, after a surprise decline in exports data, a first in 22 months. China's Shanghai Stock Exchange Composite fell 2.94% and Hong Kong’s Hang Seng ended 0.03% lower.

Source: PublicInvest Research - 19 Oct 2018

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