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Author: PublicInvest   |   Latest post: Thu, 25 Apr 2019, 10:18 AM

 

PublicInvest Research Headlines - 21 Nov 2018

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Economy

US: Housing starts rise, but underlying trend weak. US homebuilding rose in Oct amid a rebound in multi-family housing projects, but construction of single-family homes fell for a second straight month, suggesting the housing market remained mired in weakness as mortgage rates march higher. Other details of the report published by the Commerce Department on Tuesday were also soft. Building permits declined last month and homebuilding completions were the fewest in a year. Housing starts increased 1.5% to a seasonally adjusted annual rate of 1.228m units last month. Building permits fell 0.6% to a rate of 1.263m units in Oct. (Reuters)

US: Trump calls Fed a ‘problem,’ says he wants lower interest rates. President Donald Trump renewed his criticism of the Federal Reserve on Tuesday, describing the US central bank as a “problem” as he called for lower interest rates. The fresh presidential assault on the nation’s monetary authority comes as stocks tumble on concerns ranging from slower global growth to a widening trade war between the US and China. A homebuilder survey this week indicated the housing market is slowing further amid the highest mortgage rates in eight years, a possible warning sign for the broader economy. (Bloomberg)

US: USTR says China has failed to alter 'unfair, unreasonable' trade practices. The Trump administration on Tuesday said that China has failed to alter its "unfair" practices at the heart of the US-China trade conflict, adding to tensions ahead of a high-stakes meeting later this month between US President Donald Trump and Chinese President Xi Jinping. The findings were issued in an update of the US Trade Representative's "Section 301" investigation into China's intellectual property and technology transfer policies, which sparked US tariffs on USD50bn worth of Chinese goods that later ballooned to USD250bn. (Reuters)

US: Tax reform's next phase won't happen in 2018, says White House's Kudlow. White House Economic Adviser Larry Kudlow said on Tuesday the next phase of US tax reform will not happen during the final months of 2018, the “lame duck” period when Republicans will still control Congress. A follow-up to Republicans’ 2017 tax overhaul could be passed in the new session of Congress starting in Jan, Kudlow said, even though Democrats will hold the majority in the House of Representatives, the chamber that writes revenue and spending legislation. (Reuters)

UK: With BOE warning of 1970s-style shock, UK firms ready for no-deal Brexit. Companies began triggering plans to keep operating if Britain leaves the EU without an agreement, a "no deal" scenario the BOE said could plunge the economy into a crisis not seen since the 1970s. With less than five months before Britain leaves the bloc, Prime Minister Theresa May is struggling to persuade parliament to back a draft divorce deal agreed with Brussels last week. She won the backing of BOE Governor Mark Carney, who warned that a no-deal Brexit could hit the economy in a way not seen since the oil crisis that pushed many western nations into recession just after Britain had joined what is now the EU in 1973. (Reuters)

Japan: MOF urged to implement sales tax hike, prevent downturn. A panel advising Japanese Finance Minister Taro Aso urged the government on Tuesday to go ahead with a planned sales tax hike next Oct, taking all steps needed to prevent a downturn while also avoiding fiscal expansion. The proposal, made in recommendations from the Fiscal System Council, is the basis for debate on the fiscal 2019 budget to be drafted by the Ministry of Finance (MOF) in Dec. Prime Minister Shinzo Abe, who has resorted to a mix of easy money policy and flexible fiscal spending to boost growth, faces pressure from within his ruling bloc to spend more on areas such as public works as elections next year draw closer. (Reuters)

India: Central bank signals truce with government on reserves. India’s central bank signaled a compromise with the government by agreeing to study a demand for sharing a part of its capital -- an issue that had triggered a public spat between the monetary policy makers and their political bosses. The Reserve Bank of India will form a panel to consider the funds transfer to the government, the central bank said in a statement after Monday’s board meeting that lasted a little over nine hours. (Bloomberg)

Markets

Malakoff (Neutral, TP: RM1.09): Algerian associate receive termination notice for water purchase deal. Malakoff Corp said its associate Almiyah Attilemcania SPA (AAS) and subsidiary Tlemcen Desalination Investment Co SAS (TDIC) have received a notice from Sonatrach SPA and L'Algerienne Des Eaux (ADE) to terminate a water purchase agreement inked on Dec 9, 2007. (The Edge)

Comments: We understand that the termination of water purchase agreement of its 35.7%-joint venture in Almiyah Atiilemcania SPA (AAS), Algeria will have minimal impact on Malakoff’s earnings as its carrying amount of investment has been fully provided for in FY16. Hence, we keep our earnings estimates for now.

MMAG: To buy Klang land for courier and logistics business expansion. MMAG Holdings is buying Active Trio Deluxe SB which owns a 18,381 sq m parcel of industrial land in Seri Alam Industrial Park, Klang, Selangor for RM12.67m cash. The proposed acquisition will facilitate its wholly-owned subsidiary Line Clear & Logistics SB's future courier and logistics storage and warehousing needs in the area of Kapar. Line Clear may also use part of this land to carry out its sea freight business in future. (The Edge)

Ni Hsin: Sells 10% stake in Caely to substantial shareholder Goh Choon Kim. Ni Hsin Resources sold off its 10% stake in undergarments manufacturer Caely Holdings to Penang-based businessman Datuk Seri Goh Choon Kim for RM9.6m. The expected gain from the disposal of the stake comprising 8m shares is RM1.5m. The proceeds arising from the disposal shall be utilised for working capital of the group and the expected timeframe for full utilisation of the said proceeds is within 12 months from the date of the disposal. (The Edge)

MRCB: To introduce shopping mall at Penang Sentral by 2020. Malaysian Resources Corp (MRCB) expects to introduce a retail shopping mall at Penang Sentral, an integrated northern region transportation hub project, by 2020. The total gross development value (GDV) of the whole Penang Sentral project is RM2.9bn and phase two of the shopping mall project has begun. Work on the mall is currently on-going and the first part of the pilling work on phase two has just completed. (The Edge)

DNex: Reports 55% fall in 3Q net profit. Dagang Nexchange has posted a 55.4% fall in net profit for the 3QFY18 to RM6.65m from RM14.91m a year ago. This comes from lower profit before tax margin of 18% (38% in 2017), mainly due to increasing manpower cost and expenses incurred for business development activities and one- off goodwill impairment of RM3.6m. The group attributed the increase mainly to progress billing for the work done on a submarine cable installation and repair project in Indonesia. (The Edge)

SunCon: 3Q profit up 8% as revenue strengthens. Sunway Construction Group (SunCon)'s net profit grew 8% YoY to RM36.41m in the 3QFY18 from RM33.72m on higher revenue. Revenue rose 13% YoY to RM557.3m from RM491.3m, contributed by the better performance in both its construction and precast segments. The construction segment's revenue grew 11% to RM524.1m on higher civil works contribution, while profit before tax rose 23% to RM48.8m on the finalisation of an account for a completed project. (The Edge)

Market Update

The FBM KLCI might open lower after another day of extreme turbulence across financial markets saw global equities sell off sharply, oil prices tumble and the dollar swing from losses to gains as concerns intensified about the global economy. While weakness for technology stocks grabbed the headlines, energy was actually by far the worst performing sector in the S&P 500 as Brent oil fell as much as 7.6 percent to its lowest point since December 2017. On Wall Street, the S&P 500 fell 1.8% to a three-week closing low of 2,641, off the day’s low of 2,631, but back below where it ended 2017. The Dow Jones Industrial Average shed 2.2%, while the Nasdaq Composite ended 1.7% weaker. The mood was similarly downbeat in Europe, where the region-wide Stoxx 600 index fell 1.1% and the Xetra Dax in Frankfurt shed 1.6%. The FTSE in London ended 0.8% lower.

Back home, the FBM KLCI index gained 4.33 points or 0.25% to 1,710.71 points on Monday. Trading volume decreased to 1.58bn worth RM1.56bn. Market breadth was negative with 365 gainers as compared to 428 losers. The regional markets finished sharply lower yesterday with shares in China leading the region. The Shanghai Composite lost 2.13% while Hong Kong's Hang Seng gave away 2.02% and Japan's Nikkei 225 was lower by 1.09%.

Source: PublicInvest Research - 21 Nov 2018

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