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Author: PublicInvest   |   Latest post: Mon, 22 Jul 2019, 10:32 AM

 

PublicInvest Research Headlines - 24 Oct 2018

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Economy

US: Foreign buying of US treasuries softens, unsettling financial markets. Overseas investors, traders and central bankers are buying fewer Treasuries, a potential turning point for a USD15trn market at the center of global finance and economics. Foreigners increased their holdings of Treasuries by USD78bn in the first eight months of 2018. That is just over half of what they bought during the same period last year and accounts for a much smaller share of Treasury issuance, as the government steps up the size of regular bond auctions to fill a growing US budget gap. Foreign buyers now hold 41% of outstanding Treasury debt, their lowest share in 15 years, down from 50% as recently as 2013, according to US Treasury data. So far, US yields remain low historically, debt funding remains broadly available and many foreign purchasers retain large stakes. (Reuters)

UK: Factory orders slide as Brexit uncertainty bites – CBI. British factory orders fell at the fastest pace in three years, and the lack of clarity about how the country will leave the EU has made manufacturers their least upbeat since the Brexit referendum in 2016, a survey showed on Tuesday. With barely five months to go until Brexit, factories scaled back investment plans in the Aug-Oct period and expected growth to stall in the coming three months, the Confederation of British Industry (CBI) said. Britain’s economy slowed after the Brexit vote but has held up better than most economists expected at the time of the vote. (Reuters)

EU: Eurozone consumer confidence unexpectedly improves in Oct. Euro area consumer confidence improved modestly in Oct, defying economists' expectations for further decline, preliminary data from the European Commission showed on Tuesday. The flash consumer confidence index climbed to -2.7 from -2.9 in Sept, which was the lowest since May 2017. Economists had forecast a score of -3.2. The flash reading for the EU edged up 0.1 points to -2.7. The confidence scores for both Eurozone and the EU are above their respective long term averages of -12.1 and -11.1, the European Commission said. Final figures for Oct consumer confidence will be released along with the overall economic sentiment data on Oct 30. (RTT)

UK: Employers' confidence in UK economy nosedives as Brexit nears. UK employers’ economic confidence is weakening as the nation prepares to leave the EU. The net balance of employers with a positive outlook for the economy fell to the lowest level since Feb, the Recruitment and Employment Confederation said Wednesday. However, the confidence of employers to make hiring and investment decisions remained positive during the three months ended Sept 30. Prime Minister Theresa May is inching closer to a Brexit deal before the planned divorce on March 29, though it’s not clear lawmakers at home will agree to whatever she brings back from Brussels. (Bloomberg)

Singapore: Core inflation dips to 1.8% in Sept. Singapore's core inflation for Sept 2018 - which strips out the cost of accommodation and private road transport - eased to 1.8% on a YoY basis, compared to 1.9% in Aug, as a moderation in retail inflation offset a pickup in services inflation. The figure was lower compared to economists' expectations of 1.9%. Figures from the Department of Statistics showed that headline inflation came in at 0.7% YoY in Sept, the same pace of increase as in Aug, as lower retail inflation was offset by higher services inflation and a smaller decline in accommodation costs. (The Business Times)

Indonesia: Interest rates unchanged after two hikes. Indonesia's central bank left its key interest rate unchanged in Oct after hiking it in the previous two policy sessions. The Board of Governors left the 7-day reverse repo rate unchanged at 5.75%, Bank Indonesia said. The move was in line with economists' expectations. The bank had hiked the rate by a quarter-point each, both in Aug and Sept. "The decision is consistent with ongoing efforts to reduce the current account deficit within a manageable threshold, while maintaining the attractiveness of domestic financial markets, thereby bolstering external resilience in Indonesia against a backdrop of persistently high global uncertainty," the bank said in a statement. The central bank aims to reduce the current account deficit to 2.5% of GDP projected in 2019. (RTT)

Markets

Chin Hin (Outperform, TP: RM1.00): Acquires metal doors and window frames maker. Chin Hin Group has proposed to acquire Kempurna SB (Kempurna), a metal doors and window frames manufacturer, for RM4.14m cash. The acquisition will enable the group to enhance its involvement in the door manufacturing business. (The Edge) Comments: This complementary acquisition also allows the Group to widen its customer base. We gather Kempurna has generated average profits of about RM2.5m annually over the last 5 years, hence this deal being very inexpensive but more importantly, earnings accretive. Despite industry-related headwinds, we continue to like Chin Hin's long-term growth prospects underpinned by its capacity expansions. Our Outperform call and RM1.00 target price are maintained.

Lotte Chemical: Awarded two contracts for its Pasir Gudang complex for a sum of RM67.7m. Lotte Chemical Titan Holding had awarded two contracts to parties related to the group. One of the contracts was awarded to Lotte Engineering and Construction Co Ltd for offshore engineering and procurement of a new boiler and ancillary equipment to facilitate the high pressure steam production in its Pasir Gudang complex for a total value of RM47.3m. The second contract was given to Lotte E&C Malaysia SB for onshore engineering, onshore procurement and construction of a new boiler and ancillary equipment for a total value of RM20.4m. (The Edge)

DNeX: Gets USD5m contract to provide solid expandable tubulars. Dagang Nexchange (DNeX) has signed a contract to provide solid expandable tubulars to the North Malay Basin gas development for USD5m. DNeX’s 80% owned unit DNeX Oilfield Services SB entered into the service contract with Hess Exploration and Production Malaysia BV. The scope of work includes the supply of solid expandable tubulars, tubular and system maintenance as well personnel and management to support Hess’s Phase 1 and II operations for the Bergading Deep development wells. There are expected to be 11 development wells, to last for 1 year. (The Edge)

Eita Resources: Bags RM56.36m contract from TNB. Elevator and bus duct systems maker Eita Resources has bagged a contract from Tenaga Nasional (TNB) for a 132kV double circuit underground cable project in Ampang. The contract, worth RM56.36m, was awarded to its 60%-owned unit, Transsystem Continental SB. The contract, to be completed within 730 days, is expected to contribute positively to Eita's earnings over the duration of the job, it added. (The Edge)

ManagePay: Aims to raise RM100m to lend financing support to SMEs. ManagePay Systems’ unit QuicKash Malaysia SB (QuicKash) is aiming to raise up to RM100m in investment notes to lend financing support to Malaysia’s Small and Medium Enterprises (SMEs). The “SME Programme Financing” campaign expects to benefit some 1,000 SMEs who have been operating their business for at least 1 year. (The Edge)

Country Heights: Signs MoU with China firm to set up auto city. Country Heights Holdings announced it is partnering with motor sport and Lifestyle Company Goldenport Motor Culture Development (Beijing) Co Ltd to set up an auto city and motor-sport track facilities for future automobile racing events in Malaysia. Both companies have entered into a MoU to set forth their mutual intentions regarding the possible transactions, which is in line with Country Heights' business expansion plan into the automotive industry. (The Edge)

Market Update

The FBM KLCI might open with a cautious note today as a volatile session on Wall Street saw the main US equity indices claw back the worst of their steep early losses as participants “bought the dips” in spite of a variety of concerns ranging from worries about global growth and Italy’s budget to the fallout from the death of dissident Saudi journalist Jamal Khashoggi. Oil prices came under heavy pressure, with Brent heading for its biggest one-day drop since July, after Saudi Arabia eased supply concerns by saying it could provide more crude quickly if needed. On Wall Street, the S&P 500 finished 0.6% lower at 2,740 — having dropped as much as 2.3% earlier in the day to its lowest point since May. At its worst, the index was down about 8.5% from the record high set in September. The Dow Jones Industrial Average slipped 0.5%, while the Nasdaq Composite closed with a loss of 0.4%. In Europe, the pan-regional Stoxx 600 index fell 1.6% to its lowest close for 22 months, while the Xetra Dax in Frankfurt shed 2.2% and London’s FTSE 100 lost 1.2%.

Back home, the FBM KLCI index lost 24.87 points or 1.44% to 1,697.6 points on Tuesday. Trading volume increased to 2.01bn worth RM2.01bn. Market breadth was negative with 170 gainers as compared to 727 losers. The regional markets finished sharply lower with shares in Hong Kong leading the region. The Hang Seng was down 3.08% while Japan's Nikkei 225 lost 2.67% and China's Shanghai Composite gave away 2.26%.

Source: PublicInvest Research - 24 Oct 2018

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