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PublicInvest Research

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

 

PublicInvest Research Headlines - 30 Oct 2018

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Economy

Global: Where will global GDP growth come from in the next five years. According to forecasts released earlier this month, the global economy is expected to achieve an annual GDP growth rate, as measured in constant dollars, of 3.7% between 2018-2020 before dipping to 3.6% between 2021-2023 and, in turn, pass the USD100trn mark around 2022. Bloomberg used International Monetary Fund projections, adjusted for purchasing power parities, to dissect where the growth will come from. Even though China’s growth rate is expected to continue to slow, and in fact, is expected to grow at a slower pace than that of the US in 2040, according to long-term projections by the OECD, China will still be the top contributor to global GDP growth by a large margin in the near term. China’s share of global GDP growth is expected to rise from 27.2% to 28.4% by 2023. (Bloomberg)

US: Consumer sentiment drops more than initially estimated in Oct. Consumer sentiment in the US deteriorated by slightly more than initially estimated in the month of Oct, the University of Michigan revealed in a report released on Friday. The report said the consumer sentiment index for Oct was downwardly revised to 98.6 from the preliminary reading of 99.0. Economists had expected the consumer sentiment index to be unrevised at 99.0, which was still down from 100.1 in Sept. (RTT)

US: Economic growth slows less than expected in 3Q. Economic growth in the US slowed in the 3Q, according to a report released by the Commerce Department on Friday, although the pace of growth still exceeded economist estimates. The Commerce Department said real gross domestic product advanced by 3.5% in the 3Q after surging up by 4.2% in the 2Q. Economists had expected GDP growth to slow to 3.3%. The slowdown in the pace of growth in the 3Q came after the jump in the 2Q represented the fastest growth since a 4.9% spike in the 3Q2014. The bigger than expected increase in GDP reflected positive contributions from personal spending, private inventory investment, government spending and non-residential fixed investment. (RTT)

EU: Forecasters cut Eurozone growth projection, ECB survey. The euro area economy is projected to grow at a slightly slower pace this year and next, according to survey of professional forecasters, published by the European Central Bank. Real GDP growth expectations revised down for 2018 to 2% from 2.2% and that for next year to 1.8% from 1.9%. Meanwhile, the estimate for 2020 was retained at 1.6%. Average longer-term expectations for real GDP growth remained unchanged at 1.6%. HICP inflation is set to average 1.7% for each of 2018, 2019 and 2020. These results were unchanged from the previous survey. Average longer-term inflation expectations remained stable at 1.9%. (RTT)

EU: German consumer sentiment to remain unchanged. Germany's consumer confidence is set to remain stable in Nov, despite Brexit and trade disputes weighing on economic and income expectations. The forward-looking consumer sentiment index came in at 10.6 in Nov, the same as seen in Oct, survey data from the market research group GfK showed Friday. The score was forecast to drop to 10.5. While the economic and income expectations suffered losses, the propensity to buy rose again in Oct, the Nuremberg-based GfK institute said. After rising for two straight months, the economic expectations index dropped 8.1 points to 19.0 in Oct. (RTT)

China: Industrial profits rise at slower pace. China's industrial profits increased at a much slower pace in Sept, the National Bureau of Statistics reported Saturday. Industrial profits rose 4.1% YoY in Sept, which was much lesser than the 9.2% increase seen in August. During the first nine months of year, industrial profits advanced 14.7% after rising 16.2% during Jan to August period. Among sectors, mining industry registered the largest surge of 50%. Profits of manufacturing companies advanced 12.5%. Profits of electricity and other utility sectors also gained 8.8%. (RTT)

China: Early indicators show slowdown worsened again in Oct. China’s economic growth continued to slow in Oct, a period in which the trade conflict with the US has intensified and policy makers have stepped up support for businesses. That’s the signal from a Bloomberg Economics gauge aggregating the earliest-available indicators on business conditions and market sentiment. The government effort to stabilize the mood among executives and investors hasn’t been effective yet. What happens to China’s economy in the 4Q of this year will be closely watched, with attention on whether the government can keep the pace of growth stable without a renewed surge of debt. While performance in the third quarter ticked down, much of the effect of the trade war and slowdown is still to be felt. (Bloomberg)

China: 2025 plan remains a stumbling block as Trump meeting looms. China’s state-sponsored push to dominate technologies of the future is one of the biggest stumbling blocks to prospects for resolution to the US trade war. Officials from both sides are pessimistic about chances for a breakthrough when Donald Trump and Xi Jinping meet on the sidelines of the Group of 20 summit in Buenos Aires on Nov 30-Dec 1. While Trump is still dangling the threat of additional levies, Xi is digging in for a protracted conflict by cushioning the impact on growth and showing no signs he’s willing to compromise plans to strengthen his nation’s technological prowess. (Bloomberg)

Japan: BOJ seen standing pat amid growing focus on 10-year yield range. The Bank of Japan will maintain its policy settings at its meeting this week, according to economists surveyed by Bloomberg, amid a growing view that the BOJ will eventually use greater flexibility in yield movements as a tightening measure. All 46 analysts surveyed by Bloomberg expect no change in monetary policy at the end of a two-day meeting on Oct 31. Some 63% think inflation forecasts will be “largely unchanged” in a quarterly outlook report due out with the policy statement, while 33% predict a minor downgrade. The survey also showed that more than 90% of the analysts don’t expect the central bank to take extra action to support the economy when the sales tax is increased next year. Most of them expect the central bank to have tightened policy within a year of the tax rate going up in Oct. (Bloomberg)

Markets

Sunway, MKH: Ties up to develop RM540m project. Sunway has entered into a JV agreement with MKH to develop a transit-oriented mixed project worth RM540m in Kajang, Selangor. The company said the transit-oriented development project, to be located on a 5.28-acre site, is expected to be launched in the 4Q of next year and be completed within four years. (StarBiz)

DNeX: Unit secures RM59.4m job. Dagang NeXchange (DNeX)’s 60% owned subsidiary, Innovation Associates Consulting SB, has accepted a RM59.36m contract for the maintenance of the Accountant General’s Department’s accounting system, iGFMAS. The one-year contract will expire on Aug 9, 2019. The contract is expected to contribute positively to the future earnings and net assets per share of the group. (StarBiz)

Tropicana: Divests 55% stake in Tropicana Ivory for RM70.7m. Tropicana Corp’s wholly-owned subsidiary Tropicana Development (Penang) SB (TDP) is disposing of its 55% stake in Tropicana Ivory SB (TISB) for RM70.7m. Upon the completion of the disposal, TDP will no longer hold any equity interest in TISB. The total estimated gain from the disposal is RM10m. It said the proceeds from the disposal are expected to fund its working capital and repay its bank borrowings. (The Edge)

IOI Corp: Expects higher CPO exports and biodiesel output to boost FY19 performance. IOI Corp sees two positive catalysts to further boost the group’s outlook in the current FYE June 30, 2019 (FY19). CEO Datuk Lee Yeow Chor said he sees an opportunity for the group to ramp up its palm oil exports to China from early next year in the wake of reduced soybean imports by Beijing, due to the US-China trade war. Another positive factor Lee observes is the rally in oil price which has boosted the prospects for biodiesel, as the cheaper palm oil price compared to oil price provides the bright spot for the group to further stimulate the export of biodiesel to Europe. (The Edge)

Ipmuda: Gets properties as settlement of debt owed by Maju Holdings. Ipmuda has come to an agreement with Maju Holdings SB for the latter to settle its RM7.19m debt to the former by transferring 10 units of properties in the project known as Maju Kuala Lumpur. It said the 10 properties, worth an aggregate purchase price of RM6.65m, will settle part of the debt. The balance will be settled by the transfer of additional units of properties from the same development, or by way of cash from Maju Holdings. (The Edge)

EITA Resources: Unit bags third job from TNB this week. EITA Resources' 60%-owned subsidiary TransSystem Continental SB has secured a contract from Tenaga Nasional (TNB) for a main substation extension worth RM18.28m. It said the time for completion of the contract will be 912 days from the commencement date on Oct 23. (The Edge)

Utusan: Submits proposed debt restructuring scheme to comply with CDRC's conditions. Utusan Melayu (Malaysia) has submitted a proposed debt restructuring scheme (PDRS) to the Corporate Debt Restructuring Committee (CDRC), under the purview of Bank Negara Malaysia, in an effort to manage its debt exposure. This means that Utusan has managed to comply with the first condition set by CRDC to approve its application for assistance to mediate between the company and its subsidiaries and respective financiers. (The Edge)

Market Update

US markets saw another tumultuous day, with all 3 benchmarks ending the day in the red again despite clawing back early losses. The Dow Jones Industrial Average was down 1.2% on the day, off intraday lows of just over 2%. The S&P 500 and Nasdaq Composite sank 1.7% and 2.1% respectively meanwhile. Missed revenue expectations by the likes of Amazon and Alphabet (Google’s parent company) dampened sentiment, made worse by uncertain forward guidance. The Commerce Department’s report of the US economy growing at a 3.5% in the third quarter, above a 3.4% estimate did little to lift the gloom. European markets also ended lower, tracking declines on Wall Street. Every sector closed lower with media and telecoms stocks leading the declines. The UK's FTSE 100 ended down 1.4%, while France's CAC 40 and Germany's DAX lost 1.4% and 1.8% respectively. Asian markets were mostly lower last Friday as major indexes see-sawed between gains and losses, with investors questioning whether a potential rebound would last. Skepticism runs high after the recent sell-off so any rebound is likely to be muted barring a fresh catalyst. Data released over the weekend showed China’s profit growth in industrial enterprises falling for a fifth straight month amid the ongoing spat with the US and a weakening domestic economy. On the day, China’s Shanghai Composite and Hong Kong’s Hang Seng fell 0.2% and 1.1% while the Straits Times and FBM KLCI declined 1.4% and 0.2% respectively.

MMC Corporation and Gamuda will remain the contractors for the underground works portion of the MRT Sungai Buloh-Serdang Putrajaya line (MRT2), though at an even lower cost of RM13.1bn. Dagang Nexchange's 60%-owned subsidiary has bagged an RM59.4m maintenance contract from the Accountant General’s Department. Sunway has formed a joint venture with MKH to undertake an RM504m transit-oriented freehold mixed development on a 5.28-acre piece of land in Kajang.

Source: PublicInvest Research - 29 Oct 2018

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