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Author: PublicInvest   |   Latest post: Fri, 14 Jun 2019, 12:18 PM

 

PublicInvest Research Headlines - 12 Dec 2018

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Economy

US: Producer prices rise, oil likely to slow momentum. US producer prices unexpectedly rose in Nov as increases in the costs for services offset a sharp decline for energy products, but the overall momentum in wholesale inflation appears to be slowing. With oil prices down sharply since Oct, inflation at the factory gate is likely to slow further in the coming months. The report did not change expectations the US Federal Reserve will raise interest rates at its Dec. 18-19 policy meeting. The central bank has hiked rates three times this year. The Labor Department said its producer price index for final demand edged up 0.1% last month after jumping 0.6% in Oct. In the 12 months through Nov, the PPI rose 2.5%, slowing from Oct’s 2.9% surge. (Reuters)

US: Plan to limit high-tech exports forge on amid trade truce. The US is pressing ahead with plans to tighten restrictions on technology exports that some American companies fear could hurt research and development, even as President Donald Trump and his Chinese counterpart Xi Jinping agreed to a 90-day truce aimed at alleviating a trade war. The White House has embarked on a long-term strategy to ensure the US maintains its technological lead over China, with Trump’s trade advisers tying the US’s economic interests to protecting national security. Central to that effort are wider controls on a broad range of American exports including artificial-intelligence components, microprocessors and robotics. (Bloomberg)

EU: Rome and EU could be ready to compromise over Italy's spending plans. Italy and the European Commission could be ready to compromise over Italy's 2019 spending plans, according to local Italian media reports. La Repubblica newspaper reported that the European Commission is willing to accept an increase in Italy's deficit target to 1.95% for next year. Meanwhile, it said that Italy's Finance Minister Giovanni Tria was ready to target a budget deficit of 25% for 2019. Although not an agreement over the budget deficit targeted by Italy in 2019, the report suggests that both sides are willing to compromise after Italy's spending plans put it on a collision course with Brussels. (CNBC)

EU: Germany cuts GDP growth forecast for 2018, sees up to 1.6%. The German government cut its economic growth forecast for this year as Economy Minister Peter Altmaier predicted an economic expansion of around 1.5% - 1.6%, below his previous forecast of 1.8%. The German economy, Europe’s largest, has shifted into a lower gear as Britain’s looming departure from the European Union and trade conflicts sparked by US President Donald Trump’s ‘America First’ policies cause business uncertainty. But the government expects the economic upswing to continue and enter its 10th year of expansion in 2019. In April, the German government had predicted economic growth of 2.3% for this year. In Oct, Berlin reduced its growth forecast to 1.8%. (Reuters)

EU: German economic sentiment improves but Brexit, trade risks weigh. German economic sentiment picked up in Dec, the ZEW research institute said, but it warned that 4Q growth was set to be subdued and cautioned of the risks to exports from Brexit and the international trade dispute. The indicator showed sentiment picking up to -17.5 from -24.1 in Nov. That compared with a Reuter’s consensus forecast of -25.0. But the assessment of current conditions in Germany darkened to 45.3 from 58.2. The mixed signals come as signs cluster of an approaching end to the decade-long boom in Europe’s exporting powerhouse, which would be particularly vulnerable if tensions between Washington and Beijing grew into a full-blown trade war. (Reuters)

UK: Wage growth at decade high. UK wages rose at the fastest pace in a decade in the three months to Oct, suggesting that real pay growth is turning sustainable and contribute to economic growth if a "no-deal" Brexit is avoided. Average wages including bonuses rose 3.3% YoY, which was the biggest increase since the May to July period of 2008, the Office for National Statistics said. Economists had forecast a 3% increase. Excluding bonuses, average pay increased 3.3%, which was the fastest rise since Sept to Nov 2008. Whether the latest improvement in pay growth will sustained depends on how Brexit turns out. Employment grew by 79,000 from the three months to July to a record 32.48m, while economists were looking for an increase of just 25,000. (Reuters)

China: Nov loans top forecasts but other credit gauges at record lows. China’s banks extended more new loans than expected in Nov after a sharp drop the previous month, in a sign that recent government pressure on lenders to help struggling smaller firms may be starting to bear fruit. But several other key credit gauges remained stuck at record lows or fell to new lows, suggesting China’s policymakers will need to step up support efforts soon to stabilise the slowing economy. Chinese banks extended Y1.25trn (USD182bn) in net new yuan loans in Nov, slightly more than analysts had expected and up from the previous month, according to data published by the People’s Bank of China. (Reuters)

China: Car-tariff gesture stirs hope of a more lasting truce. China’s openness to cutting tariffs on US cars is feeding optimism about trade talks with the US. But recent history gives investors reason to be cautious about expecting a deal by the March 1 deadline. Shares of US automakers surged after Bloomberg News reported that China’s Cabinet will review a proposal to cut tariffs on US cars to 15% from 40%, bringing the US in line with what other countries pay. President Donald Trump tweeted that very productive conversations are taking place with the Chinese, predicting important announcements to come. The car-tariff gesture is the latest in a series of positive developments this week. (Bloomberg)

Markets

AirAsia (Outperform, TP: RM4.14), AAX (Neutral, TP: RM0.23): MASSB claiming RM36.1m in unpaid PSC. Malaysia Airports (Sepang) SB (MASSB) is claiming RM36.1m in arrears for uncollected passenger service charges from AirAsia X (AAX) and AirAsia Group’s subsidiary, AirAsia (AAB). MASSB had served two writ of summons for RM26.71m and RM9.4m to AAX and AAB for uncollected PSC at KLIA2, respectively. “MASSB wants AAX and AAB to collect another RM23 per passenger effective July 2018, which have not and will not collect. “We strongly believe, as does the Malaysian public, and have so represented to MASSB numerous times, that KLIA2 is a low-cost airport and the charges levied should reflect the level of services provided,” it said. (Bernama)

Vortex: Acquires delayed mixed development project in Kajang. Vortex Consolidated is taking over a mixed development project in Kajang with a GDV of more than RM340m, in line with its business diversification into the property sector. It is doing this by acquiring an 85% stake in a loss-making private property firm, Paris Dynasty Land SB, for a nominal cash consideration of RM100. Vortex said the acquisition, which is expected to be completed in the 4Q of its FYE March 31, 2019, will reduce its EPS by 0.16 sen. However, it is expected to have a positive impact on the future earnings of the group once the potential benefits from the development project is materialised over the project period, it said. (The Edge)

Alam Maritim: Secures another pan-Malaysia job. Alam Maritim Resources announced its subsidiary has been awarded a conditional contract to provide pan-Malaysia underwater services for petroleum arrangement contractors. It said the five-year contract was awarded to wholly-owned Alam Maritim (M) SB by ExxonMobil Exploration and Production Malaysia Inc. The contract is on a call-out basis, whereby work orders will be issued by clients based on a schedule of rates provided. As such, the total value of the deal will be contingent upon the actual work orders and the scope of work performed, it said. Regardless, it said the contract is expected to contribute positively to its earnings and net tangible assets for the 2018-2023 period. (The Edge)

Sanichi: Aims to secure order book of RM500m via F&B venture. Sanichi Technology aims to secure an order book of RM500m over the next five years with its latest venture into the F&B business. The company said it had entered into an equity JV with FKS Holdings Pte Ltd to supply fresh produce for the international F&B industry, in addition to providing Japanese fine dining cuisine. Under the JV, Sanichi will hold a 70% equity interest and FKS the rest. (Bernama)

Manforce: Opens at premium at LEAP listing. Manforce Group, a workforce solutions and services provider, opened at 0.5 sen premium upon its listing on the Leading Entrepreneur Accelerator Platform (LEAP) market, from its IPO of 18 sen per share. It raised RM8.6m through a private placement at an issue price of 18 sen per share, contributing to a market capitalisation of RM57.6m upon listing. (Business Times)

LB Aluminium: 2Q net profit jumps nearly 70% to RM2.8m. LB Aluminium posted a 69.4% jump in net profit to RM2.8m for the 2QFY19 from RM1.7m a year earlier. The aluminium supplier attributed the increase to higher sales volume and average selling price during the quarter. The group said its profit from operations increased significantly by 184.6% to RM4.6m due mainly to higher sales volume coupled with better margin. (The Edge)

MARKET UPDATE

The FBM KLCI might open flat today after a mixed performance on Wall Street overnight. An initial bout of optimism that the US and China were making progress in resolving their trade dispute evaporated after Donald Trump, US president, threatened to shut down the Federal government over funding for a wall along the US-Mexican border. In another extremely volatile session on Wall Street, the S&P 500 gave back an early 1.4% rise, although European stocks ended higher, with the resources, carmaking and technology sectors leading the way. At the closing bell, the S&P 500 ended fractionally weaker at 2,636, after touching 2,674 — briefly putting the index back in positive territory for the year. The Dow Jones Industrial Average slipped 0.2% while the Nasdaq Composite finished 0.2% higher, having earlier been up 1.6%. In Europe, London’s FTSE 100 rebounded 1.3%, with Frankfurt’s Xetra Dax up 1.5%. The Europe-wide Stoxx 600 ended 1.5% higher.

Back home, the FBM KLCI index lost 10.68 points or 0.64% to 1,652.63 points on Tuesday. Trading volume decreased to 1.43bn worth RM1.51bn. Market breadth was negative with 253 gainers as compared to 549 losers. Hong Kong’s Hang Seng edged up 0.1% as gains by industrials and tech stocks were limited by losses for telecoms and financials. The CSI 300 of mainland China’s stocks rose 0.5%. But Tokyo’s Topix closed at its lowest since June 2017 after shedding 0.9%, with financial and cyclical stocks tracking worries about global growth.

Source: PublicInvest Research - 12 Dec 2018

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