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Author: PublicInvest   |   Latest post: Thu, 21 Mar 2019, 10:17 AM

 

PublicInvest Research Headlines - 19 Nov 2018

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Economy

Global: Oil gains as OPEC mulls cuts; set for weekly drop on oversupply fears. Oil rose nearly 1% on Friday on expectations that the Organization of the Petroleum Exporting Countries and its allies would agree to cut output next month, though prices were set to for a weekly drop on underlying concerns that the global market was oversupplied. OPEC kingpin Saudi Arabia is keen for the major producers to cut output by about 1.4m barrels per day, around 1.5% of global supply, to support the market, sources told Reuters this week. But other producers, including Russia, have been reluctant to agree to a cut. Brent was up 60 cents a barrel at USD67.22 by 11:30 am EDT [1630 GMT]. (Reuters)

US: Manufacturing production rises steadily in Oct. US manufacturing output increased for a fifth straight month in Oct, shrugging off a sharp decline in motor vehicle production and suggesting underlying strength in factory activity despite signs of a slowdown in the sector. The Federal Reserve said manufacturing production rose 0.3% last month. Data for Sept was revised up to show output at factories increasing 0.3% instead of advancing 0.2% as previously reported. Economists polled by Reuters had forecast manufacturing output rising 0.2% in Oct. Motor vehicle production slumped 2.8% after increasing 1.3% in Sept. Excluding motor vehicles and parts, manufacturing gained a solid 0.5% last month, boosted by a strong increase in the output of business equipment. That followed a 0.2% rise in Sept. (Reuters)

US: Household debt continues to climb in 3Q. Household indebtedness continued to climb in 3Q, with balances continuing to rise for almost all types of borrowing, the Federal Reserve Bank of New York reported Friday. In 3Q of this year, total household debt increased for the 17 th consecutive quarter to USD13.51trn, more than 20% above the trough it hit in 2Q of 2013. Total mortgage debt was USD9.14trn in 3Q. That represented an increase from the second quarter, but it remained below the peak of USD9.29trn in 3Q of 2008. Over the same decade, auto-loan debt jumped to USD1.27trn from USD809bn and student-loan debt more than doubled to USD1.44trn from USD611bn. Both mortgage originations and non-housing debt increased in 3Q from the prior quarter. (The Wall Street Journal)

US: Trump says may not impose more tariffs on China. US President Donald Trump said that he may not impose more tariffs on Chinese goods after Beijing sent the US a list of measures it was willing to take to resolve trade tensions, although he added it was unacceptable that some major items were omitted from the list. Trump has imposed tariffs on USD250bn (GBP194.8bn) of Chinese imports to force concessions from Beijing on the list of demands that would change the terms of trade between the two countries. China has responded with import tariffs on US goods. Washington is demanding Beijing improve market access and intellectual property protections for US companies, cut industrial subsidies and slash a USD375bn trade gap. (Reuters)

UK: PM May defends Brexit deal as opponents plot no-confidence vote. British Prime Minister Theresa May won the backing of the most prominent Brexiteer in her government on Friday as she fought to save a draft EU divorce deal that has stirred up a plot to force her out of her job. More than two years after the UK voted to leave the EU, it is still unclear how, on what terms or even if it will leave as planned on March 29, 2019. Just hours after announcing that her senior ministers had collectively backed her divorce deal, May was thrust into her premiership's most perilous crisis when her Brexit Secretary Dominic Raab resigned on Thursday to oppose the agreement. Other mutinous lawmakers in her party have openly spoken of ousting her and said the Brexit deal would not pass parliament. (Reuters)

EU: Eurozone inflation confirmed at six-year high in Oct. Eurozone inflation rose in Oct at its fastest pace in nearly six years, driven by energy prices, the EU statistics agency said, confirming its earlier estimate. The core inflation measure which excludes energy and food was revised down. Eurostat said that consumer prices in the 19 countries sharing the euro rose 2.2% YoY in Oct after a 2.1% increase in Sept and a 2.0% gain in Aug. It was the biggest increase since Dec 2012. The headline figure supports the ECB’s decision to end its price boosting bond-buying program at year-end, as inflation is now overshooting the ECB target of price growth below, but close to, 2% over the medium term. (Reuters)

China: Weak credit growth raises odds of first China rate cut in years. China’s stubbornly weak credit growth has spurred talk of its first cut in benchmark lending rates in three years, but economists and policy insiders say concerns about a potential knock to its currency will likely give the central bank pause. While the PBOC has already slashed banks’ reserve requirements four times this year and pushed money market rates lower, analysts are now wondering if policymakers are considering wheeling out bigger guns. China’s economic growth has cooled to its weakest pace since the global financial crisis and is expected to soften further in coming months if domestic demand is slow to recover and the United States piles more tariffs on Chinese goods. (Reuters)

Japan: Exports to rebound in Oct, core CPI steady, according to Reuters poll. Japan’s exports likely rebounded in Oct after falls led by a series of natural disasters, a Reuters poll found on Friday, but worries over global demand and the US-China trade war linger. Exports were forecast to rise 9.0% in Oct from a year earlier, the fastest pace of gain since Jan, the poll of 16 economists showed. In Sept, they declined a revised 1.3%. Imports likely jumped 14.5% in Oct from a year earlier, giving a trade deficit of JPY70bn (USD617.5m). (Reuters)

Malaysia: External debts fell to 66.2% of GDP at end 3Q 2018. Malaysia’s total external debt declined to 66.2% of GDP as at end-3Q, 2018 from a peak of 74.3% of GDP as at end-2016. Bank Negara said that the bulk of the external debt was by corporations and banks. “Foreign currency denominated external debt stood at 46.0% of GDP as at end-3Q 2018, compared to the highest level of 60.0% of GDP during the 1997 Asian Financial Crisis,” it said in a report on the country's external debt. The report said the government’s foreign-currency denominated external debt was very low (1.2% of GDP). While risks surrounding external financing conditions have increased, risks to Malaysia’s external debt, including short-term external debt, remain manageable. This was anchored by a favourable external debt profile and borrowers’ resilient repayment capacity. (StarBiz)

Markets

Naim Holdings: Wants to build 20,000 affordable homes in Sarawak. Naim Holdings wants to build 20,000 units of affordable homes priced at about RM300,000 each in the state over the next decade. Managing director Datuk Hasmi Hasan said that demand for terraced houses priced in that range is very good. Naim Holdings has already has launched 416 units of mainly terraced and semi detached homes in Southlake zone of Permyjaya township in Miri. Naim plans to launch another 150 units of affordable and medium priced houses with GDV of RM70m in Southlake. (The Edge)

Mulpha, Mudajaya: Mulpha plans to pay dividend with Mudajaya shares. Mulpha International plans to distribute to its shareholders up to 90.33m shares in Mudajaya Group, via a dividend-in-specie. This represents approximately 15.31% equity interest in Mudajaya, currently held by Mulpha International’s wholly-owned subsidiary, Mulpha Infrastructure Holdings SB. The proposed dividend-in-specie is undertaken as an extension of its streamlining strategy where it gradually disposes of its non-core investments. The original cost of investment in the dividend shares is RM33.2m. (The Edge)

Excel Force MSC: To buy commercial space in MYEG Tower. Excel Force MSC is acquiring a commercial space in MYEG Tower within the Empire City mixed use development in Petaling Jaya from Empire City's developer Mammoth Empire Holding SB for RM9.86m cash. The price and space size attractive, taking into consideration our future business expansion needs and that it will be ready for occupation in 18 months. As we are located in an up and coming commercial centre, it is an opportune time to take advantage of the current soft property market to make this acquisition. (The Edge)

Petronas Chemicals: 3Q net profit jumps 38% on higher revenue. Petronas Chemicals (PetChem) saw its net profit jump 37.7% to RM1.26bn in the 3QFY18 from RM913m a year ago, on higher revenue and supported by lower tax expenses and higher interest income. This resulted in higher earnings per share of 16sen for 3QFY18 compared with 11sen for 3QFY17. PetChem's quarterly revenue increased 20.4% to RM4.83bn on the back of higher product prices, partially offset by lower sales volumes and the strengthening of the ringgit against the USD. (The Edge)

Lafarge: Soft market demand, competition drive loss wider. Lafarge Malaysia saw its net loss widen 2.6 times to RM109.29m in the 3QFY18 from RM42.01m a year ago, on higher operating loss from the cement segment due to weaker demand which led to lower sales volume and a more competitive environment with a decline in selling prices. This was compensated partially by higher export contribution. This resulted in higher loss per share of 12.9sen for 3QFY18 compared with 4.9sen for 3QFY17. Quarterly revenue fell 14.5% to RM495.12m from RM578.85m in 3QFY17 on lower sales from the cement segment. (The Edge)

Automotive (Neutral): Oct vehicle sales rise 0.5% to 47,273 units, production up 28%, says MAA. The Malaysian Automotive Association (MAA) said 47,273 vehicles were sold in the country in Oct, up 0.5% from 47,041 units in the same month in 2017. The increase in total industry volume is backed by a 1.02% rise in sales of passenger vehicles to 42,364 units from 41,668 previously, mitigating a 0.91% drop in commercial vehicle sales to 4,909 units from 5,373. Total production rose 27.94% to 51,769 units in Oct from 40,464 last year, attributed to the replacement of stocks. (The Edge)

MARKET UPDATE

The FBM KLCI might open flat today after Sterling recovered some ground against the dollar and European stock indices stabilised at the end of a week dominated by the twists and turns of the Brexit drama. The pound’s rally came as the dollar suffered broad weakness, and Treasury yields fell, after the Federal Reserve’s new vice-chairman said US interest rates were nearing “neutral”, and warned that there was evidence the world economy was slowing. US chipmaking stocks came under pressure from disappointing guidance from Nvidia, although the S&P 500 recouped an early fall as the energy sector got a lift from a renewed rally for oil prices. But it was UK assets that garnered much of the attention this week, as Theresa May, prime minister, reached a technical agreement with the EU on Brexit and secured “collective” cabinet agreement for the deal. However, a series of ensuing ministerial resignations and fierce criticism of the deal helped fuel speculation that the prime minister could be forced out— heightening concerns about an eventual “no-deal” Brexit. On Wall Street, the S&P 500 ended 0.2% higher at 2,736 — after earlier falling to 2,712— but still shed 1.6% over the week. The energy sector rallied 1.3% on Friday. The Dow Jones Industrial Average rose 0.5% but the tech-heavy Nasdaq Composite slipped 0.2%. Across the Atlantic, the Europe-wide Stoxx 600 index ended 0.2% lower after sliding 1.1% on Thursday. The Xetra Dax fell 0.1% on Friday and London’s FTSE 100 shed 0.3%.

Back home, the FBM KLCI index gained 12.17 points or 0.72% to 1,706.38 points on Friday. Trading volume decreased to 1.85bn worth RM1.89bn. Market breadth was positive with 450 gainers as compared to 345 losers. In the region, Hong Kong’s Hang Seng ticked up 0.3%. Mainland China’s CSI 300 turned round from earlier losses to end 0.5% higher. Japan’s Topix fell 0.6%.

 

Source: PublicInvest Research - 19 Nov 2018

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