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Author: PublicInvest   |   Latest post: Fri, 19 Apr 2019, 10:04 AM

 

PublicInvest Research Headlines - 5 Dec 2018

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Economy

US: Fed’s Williams says strong economy warrants further rate hikes. Federal Reserve Bank of New York President John Williams gave an optimistic review of the US economy, reiterated his support for further gradual interest-rate increases and expressed no concern that market participants have dialed back expectations for policy tightening in 2019. Interest-rate futures pricing adjusted so that they’re now anticipating just one rate increase in 2019 following a hike at their meeting later this month. That’s at odds with the Fed’s Summary of Economic Projections from Sept, which suggests that officials see a rate increase this month and three more hikes next year. That forecast will be updated when officials gather Dec 18-19 in Washington. “My own view is, I think completely consistent with what Chairman Powell said, is that the US economy is strong, but there are definitely” some “risks on the horizon,” Williams said. The Fed is in a good position to react to whatever the economy does going forward, he said. (Bloomberg)

US, China: ‘Tariff Man’ Trump says he may extend truce in China trade war. Donald Trump suggested Tuesday that he could extend a 90-day truce in his trade war with China, while his top White House economic adviser backtracked from the president’s announcement that Beijing had agreed to reduce tariffs on US-made cars. The developments again called into question the extent of a trade agreement the White House said Trump had struck with Chinese President Xi Jinping over dinner at the Group of 20 summit on Saturday. Trump said in a series of tweets on Tuesday that “unless extended,” negotiations with China over economic policies the US has long considered objectionable would end in 90 days. If the talks fail, Trump said he’d be happy to maintain tariffs on Chinese imports. (Bloomberg)

EU: Eurozone producer price inflation unexpectedly rises in Oct. Eurozone producer price inflation accelerated further in Oct, defying expectations, figures from Eurostat showed Tuesday. Producer prices rose 4.9% YoY after a revised 4.6% in Sept. Economists had expected the rate to remain unchanged at Sept's original figure of 4.5%. Energy sector prices jumped 14.6%. Prices for intermediate goods climbed 2.6% and those for capital goods and durable consumer goods rose 1.2% each. Prices for non-durable consumer goods were unchanged. On a MoM basis, producer prices increased 0.8% after a 0.6% rise in Sept. Economists had forecast a 0.5% climb. (RTT)

UK: London to lose USD900bn to Frankfurt due to Brexit, German finance group claims. London is predicted to lose up to EUR800bn (USD909bn) of assets by March next year, as banks move their business operations to other hubs before Brexit takes place. Lobby group Frankfurt Main Finance (FMF) released the figure last week, which it calculated based on a confirmation that 30 financial institutions had applied to the ECB to move their headquarters to Frankfurt. It claimed this number would be higher by March and continue to increase beyond Brexit. The EUR800bn being moved out of London relates to balance sheet assets such as cash, inventory and prepaid expenses. FMF MD Hubertus Vath said uncertainty was forcing banks to relocate selected business divisions or their entire businesses out of the UK. "As long as uncertainty persists, most institutions are likely to prefer the minimum solution. In any case, it is clear that considerable second round effects will follow," he said. (CNBC)

UK: Can unilaterally end Brexit, EU top court indicates. The UK should be allowed to reverse Brexit, according to an advisory opinion from the European Union’s top court that will fuel the campaign to thwart the divorce. The opinion, which isn’t binding, comes at a crucial moment for Prime Minister Theresa May who’s trying to convince Parliament to back the deal she brought back from Brussels but faces opposition on all sides. The advice will embolden those who are fighting to reverse Brexit, a campaign that’s gathering momentum. But May could also use it to her advantage as the country heads into uncharted Brexit territory. The possibility that the UK can go back on its decision will be alarming to Brexit hardliners and could encourage them to grudgingly support May’s much-maligned roadmap for how the country should quit the bloc. (Bloomberg)

UK: Carney defends BOE's Brexit analysis. BOE Governor Mark Carney on Tuesday defended the central bank's analysis that a no-deal Brexit would cause a severe recession in the UK, the kind not even seen during the global financial crisis a decade ago. Responding to questions on the same from lawmakers at a hearing on Tuesday, Carney said some criticism was "entirely unfair". Carney said the probability of the worst-case Brexit scenario, which is the country leaving the EU without any agreement on future relationship, especially on trade, and a transition period, actually happening was low. "Tail risk is tail risk," he said. The BOE predicted that the economy could shrink as much as 8% next year in the event of a disorderly Brexit. (RTT)

UK: Construction sector expands most in 4 month. British construction sector expanded at the fastest pace in four months in Nov, thanks to an increase in new work and consequent gains in job creation, though Brexit concerns damped expectations for the months ahead. The CIPS construction PMI climbed to 53.4 from 53.2 in Oct, survey data from IHS Markit showed on Tuesday. Economists had forecast a score of 52.5. A reading above 50 suggests growth in the sector. The UK construction sector expanded for an eighth month in a row and the latest reading was the highest since July. (RTT)

Markets

Hibiscus Petroleum (Outperform, TP: RM1.73): Aims to produce up to 12,000 bbl of oil per day by 2020. Hibiscus Petroleum said it is working towards achieving net production of between 10,000 and 12,000 barrels (bbl) of oil per day for both its Anasuria cluster and North Sabah Production Sharing Contract by the end of FY20. The group is currently producing up to 9,000 bbls per day for both, its MD Dr Kenneth Pereira said. For FY19, the company intends to deliver total oil production attributable to the group of about 2.7m to 3m barrels of oil (mmbbls). On capital expenditure, Pereira said the group will be spending close to RM200m on the two fields for FY19. (The Edge)

Malakoff (Trading Buy, TP: RM1.02): Told to give up stake in Algerian water plant to state-owned firm. Malakoff Corp’s business partner in an Algerian sea water desalination plant — state-owned Algerian Energy Co (AEC) — wants the group to give up its stake in the plant operator following the termination of a water purchase agreement. Malakoff's 70%-owned Tlemcen Desalination Investment Co SAS (TDIC) currently holds a 51% stake in the joint stock company Almiyah Attilemcania SPA, under which the plant is parked. The remainder 49% is held by AEC, the government company that handled the power and water privatisation exercise in Algeria. (The Edge)

TRC Synergy: Gets nearly RM500m job from Putrajaya Holdings. Construction company TRC Synergy has bagged a RM498.7m contract from Putrajaya Holdings SB, the master developer of Putrajaya, for an integrated development project. TRC Synergy said on Tuesday the contract was the largest clinched by its unit Trans Resources Corporation SB this year. (StarBiz)

Utusan: Sells PJ shop office for RM7m. Utusan Malaysia (M) has agreed to sell a five-storey corner shop office in Seksyen 14, Petaling Jaya to Eden Resources SB for RM7m. Net proceeds from the disposal will be utilised to fund working capital requirements and finance its day-to-day operations, the newspaper publisher said. The original cost of the investment made in Dec 1995 was RM4.8m and the net book value of the property based on the latest audited financial statements as at Dec 31, 2017 was RM2.7m. (StarBiz)

Sasbadi: Bags MoE job to print Form 3 Science text books. Sasbadi Holdings has bagged a ministry of education (MoE) contract to print Form 3 Science text books for three years. Sasbadi said its wholly-owned subsidiary Sasbadi SB has accepted a letter of acceptance from the ministry to translate, publish and print the dual language programme text book at an estimated contract value of RM892,680. The period of the contract is from Dec 3, 2018 to Dec 2, 2021. (The Edge)

Suria Capital: Proposes one-for-five bonus issue. Suria Capital Holdings has proposed a bonus issue of up to 58.3m new shares on the basis of one bonus share for every five existing shares held on the entitlement date to be determined later. As at Nov 15, Suria's share capital stood at RM288.2m comprising 288.2m shares and 3.2m outstanding options granted under the employees’ share scheme (ESOS). Assuming all the outstanding ESOS options are exercised prior to the implementation of the proposed bonus issue, 58.3m bonus shares will be issued. (The Edge)

Market Update

The FBM KLCI might open lower today after US stocks suffered one of the biggest sell-offs in recent years on Tuesday as concerns over the durability of President Donald Trump’s trade truce with China stirred fears about global economic growth. Equity market selling accelerated into the close of New York trading as investors digested comments by Mr Trump casting doubt on his weekend trade ceasefire with China, which saw the US President agree to delay plans to raise tariffs on Chinese imports. The S&P 500 index fell 3.2%, one of only eight declines of more than 3% in the past five years. The Nasdaq Composite dropped 3.8 %, returning to correction territory. The Dow Jones Industrial Average closed 3.1%, or 800 points, lower. In Europe, the pan-regional Stoxx 600 ended 0.8% lower as Frankfurt’s Xetra Dax 30 fell 1.1% and London’s FTSE 100 shed 0.6%.

Back home, the FBM KLCI index lost 4.73 points or 0.28% to 1,694.99 points on Tuesday. Trading volume decreased to 2.44bn worth RM2.08bn. Market breadth was negative with 282 gainers as compared to 525 losers. The regional markets finished mixed with the Shanghai Composite gained 0.42% and the Hang Seng rose 0.29%. Meanwhile, the Nikkei 225 lost 2.39%.

Source: PublicInvest Research - 5 Dec 2018

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