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PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 20 Jun 2019, 10:04 AM

 

PublicInvest Research Headlines - 13 Dec 2018

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Economy

US: Consumer prices flat, underlying inflation firm. US consumer prices were unchanged in Nov, held back by a sharp decline in the price of gasoline, but underlying inflation pressures remained firm amid rising rents and healthcare costs. The strength in underlying inflation reported by the Labor Department supports views that the Federal Reserve will raise interest rates at its Dec. 18-19 policy meeting. The US central bank has hiked rates three times this year. But with oil prices tumbling, financial market conditions tightening and economic growth slowing, some economists believe the Fed could settle for fewer rate increases in 2019. Nov’s flat reading in the Consumer Price Index, which was the weakest in eight months, followed a 0.3% increase in Oct. In the 12 months through Nov, the CPI rose 2.2%, the smallest gain since Feb, after advancing 2.5% in Oct. (Reuters)

US: Mortgage activity hits 2-month high as interest rates fall. US borrowers filed the most loan requests to buy a home and to refinance one in two months as most lending costs declined to their lowest levels since September, the Mortgage Bankers Association said. The Washington-based group’s seasonally adjusted index on mortgage applications increased 1.6% to 346.0 in the week ended Dec. 7. This was the strongest reading since the week of Oct 5 when it was 346.7. Interest rates on 30-year, fixed-rate “conforming” mortgages with balances of USD453,100 or less averaged 4.96% last week, the lowest level since the week of Sept 28. They averaged 5.08% the prior week. The weekly drop in the 30-year conforming mortgage rate was the steepest since March 2017. (Reuters)

EU: Eurozone production rises in Oct thanks to capital goods. Eurozone industrial output rose in Oct thanks to a sharp increase in the production of capital goods and despite a decline in energy output, the European Union’s statistics office Eurostat said. Eurostat said seasonally adjusted industrial production rose 0.2% MoM in Oct for a 1.2% YoY increase. Economists polled by Reuters had expected a 0.2% monthly gain and a 0.7% annual rise. Eurostat revised downwards its figures for Sept to -0.6% MoM from -0.3% and to 0.8% YoY from the previously reported 0.9%. The Oct increase in production was mainly thanks to a 3.7% annual rise in the output of capital goods, used for investment, which, together with a 1.2% gain in the production of non durable consumer goods helped offset a 3.1% drop in energy and a 0.4% fall for intermediate goods. (Reuters)

China: Will likely speed up its Belt and Road projects amid US tensions. China will likely speed up infrastructure projects in its ambitious Belt and Road Initiative amid trade tensions with the US. Several Chinese companies and various sectors, including mining and transportation, are poised to benefit from that development. The Asian giant announced the BRI in 2013, aimed at recreating and modernizing ancient Silk Road trade routes. It has become the signature foreign policy program of Chinese President Xi Jinping's government. The program is an ambitious infrastructure project aimed at connecting more than 60 countries in Asia, Europe, Africa and the Middle East through overland and maritime routes. (CNBC)

China: Recent soybean purchase just a drop in the US export bucket. China is back in the market for US soybeans, but the recent purchases represent just a fraction of sales American farmers have lost since the Trump administration embarked on a trade war with Beijing in July. Chinese state-owned companies bought at least 500,000 tons of US soybeans, in the first major purchases since US President Donald Trump and his Chinese counterpart Xi Jinping met in early Dec. The deals - valued at USD180m - helped propel US soybean prices to a 4- 1/2-month high on the futures market. US stock prices were also buoyed by signs that the soybean purchase could represent a thaw in the trade tensions between Washington and Beijing. (CNBC)

Japan: Business investment should rebound in 4Q. Japan's machinery order growth was weaker-than-expected in Oct, yet they point to rising business investment in the 4Q, Capital Economics said. That suggests that the slump in 4Q GDP will be reversed in the 4Q. Japanese machinery orders rebounded with a 7.6% MoM increase in Oct. However, the growth was weaker than economists' expectations for a 9.7% increase. In Sept, orders plunged 18.3%. Manufacturing orders grew 12.3% in Oct, while non-manufacturing orders rose just 4.5%. Capital Economics expect a 1.5% QoQ rebound in non-residential investment in the 4Q, which suggest that the slump in output in the 3Q will prove temporary. (RTT)

India: New India Central Bank Chief fends off concerns about autonomy. India’s new central bank governor billed himself as a consensus-builder and a defender of the institution’s autonomy, saying all the right things to win investors worried the government is trying to usurp its powers. Just hours after becoming the third central bank chief in as many years, Shaktikanta Das said he “will uphold the autonomy, the integrity and credibility of the Reserve Bank of India as an institution.” He has an uphill battle to convince investors of his commitment. The career bureaucrat was appointed a day after his predecessor, Urjit Patel, abruptly quit amid worrying signs of government interference in the RBI’s functioning. As one of the key officials helping to carry out Prime Minister Narendra Modi’s controversial cash ban in 2016, Das is seen as more open to doing the government’s bidding. (Bloomberg)

Singapore: Retail sales growth slows sharply in Oct. Singapore's retail sales grew for a second straight month in Oct, but the pace of increased slowed sharply, amid weaker sales in department stores and supermarkets. Retail sales at current prices edged up 0.1% YoY after a 1.9% gain in Sept. In August, sales fell 0.4%. On a seasonally adjusted basis, retail sales dropped 0.4% MoM in Oct, same as in Sept. Excluding automobiles, retail sales grew 0.5% yearly after a 1.7% gain in Sept. Compared to the previous month, sales fell 2.1% in Oct following a 0.1% drop in the previous month. YoY, department store sales fell 3.6%, while sales at supermarkets and hypermarkets dropped 2.9%. Motor vehicles sales decreased 2%. (RTT)

Malaysia: Well on track to become high income nation. Malaysia is well on its way to cross the threshold into high-income and developed country status in the coming years, said the World Bank. Vice President for East Asia and Pacific Victoria Kwakwa said Malaysia's economy was well-diversified and stood on solid foundations, which are primed to take the country to the next level. “We welcome the government's efforts, as part of this process, to strengthen institutions, develop human capital and protect the vulnerable in the society. The World Bank Group stands ready to support Malaysia during this important transition process,” she said. Kwakwa has just concluded an official four-day visit to Malaysia. (Bernama)

Markets

Cypark (Neutral, TP: RM2.45): Bags RM450m to build two solar power plants. Cypark Resources has bagged two contracts worth a combined RM450m to build a solar photovoltaic energy generating facility in Sik, Kedah and another one at Empangan Terip, Negeri Sembilan. It said its wholly-owned subsidiary Cypark Ref SB has accepted the letters of award from Viva Solar SB for the Sik project, and Cypark Estuary Solar SB for the Empangan Terip project on a turnkey basis. Work on the two plants will commence on the date of notice issued by Viva Solar and Cypark Estuary Solar respectively and the time of completion is Aug 4, 2020. (The Edge)

Maxis (Underperform, TP: RM5.18): Signs six-month network sharing deal with U Mobile. Maxis has entered into an agreement with U Mobile SB to provide it 3G network access services for a six month period starting later this month. It said the agreement is for a limited scope of the provision of 3G network access services by Maxis Broadband SB to U Mobile, and will run from Dec 28 this year to June 30, 2019. The agreement appears to be an extension of a current one between the two telcos which will end on 27 December 2018. Maxis said the 3G agreement is not expected to have material impact to the consolidated financials of the group for the FYE 2018. (The Edge)

BIMB: Makes early partial redemption on RM1.66bn sukuk to Tabung Haji. BIMB Holdings has made an early partial redemption of RM609.9m of a 10-year RM1.66bn sukuk, which was issued at a discount and fully subscribed by Lembaga Tabung Haji. The maturity date of the sukuk is Dec 12, 2023. It said the early partial redemption exercise will reduce the group’s future payment obligations under the sukuk and is expected to have a positive impact on its future earnings. Based on its current cash flow position, BIMB said it has sufficient funds to make an early partial redemption under the sukuk. (The Edge)

Alam Maritim: Bags third PAC job in less than two weeks. Alam Maritim Resources’ subsidiary has secured another contract to provide pan-Malaysia underwater services for petroleum arrangement contractors (PAC). This is its third PAC contract win since Nov 30. It said the contract was awarded to its wholly-owned subsidiary Alam Maritim (M) SB by Hess Exploration and Production Malaysia BV. The job is on a regular or a call-out basis, whereby work orders will be issued by client based on the schedule of rates as set forth in the contract. (The Edge)

Prestariang: Seeks compensation over SKIN termination. Prestariang says it is entitled to compensation following the government’s decision to terminate a RM3.5bn project with the Immigration Department. Prestariang has a 70% stake in the project. “The actual financial impact can only be ascertained once Prestariang SKIN SB’s (PSkin) negotiation and discussion with the government has been concluded,” it said. (StarBiz)

Sinotop: Plans disposal of China fabric production business. Sinotop Holdings has proposed to dispose of its Chinese assets involved in fabric production via an open tender to fund its other existing business. The group said these assets comprise its investments in its wholly-owned subsidiary Be Top Group Ltd and Be Top’s unit, Top Textile (Suzhou) Co Ltd. Sinotop said its original cost of investment totalled CNY142.22m, or RM67.2m. The proposed disposal, which is subject to shareholders’ approvals, is expected to be completed by the 2Q of next year. (The Edge)

MARKET UPDATE

The FBM KLCI might open higher today after global equities took their cue from positive developments on the US-China trade front after Donald Trump delivered some upbeat comments about the prospects for a deal — although once again, Wall Street pared an early advance in late trading. On Wall Street, the S&P 500 ended 0.5% higher at 2,651, after earlier hitting 2,685 — above the level at which it ended 2017. The Dow Jones Industrial Average rose 0.6% while the tech-heavy Nasdaq Composite finished 1% higher. In Europe, the region-wide Stoxx 600 rose 1.7%, with the Xetra Dax in Frankfurt rising 1.4% and the FTSE 100 in London adding 1.1% — in spite of sterling’s rally.

Back home, the FBM KLCI index gained 10.64 points or 0.64% to 1,663.27 points on Wednesday. Trading volume increased to 2.07bn worth RM1.94bn. Market breadth was positive with 394 gainers as compared to 371 losers. The regional markets also finished broadly higher with shares in Japan leading the region. The Nikkei 225 rose 2.15% while Hong Kong's Hang Seng added 1.61% and China's Shanghai Composite tacked on 0.31%.

 

Source: PublicInvest Research - 13 Dec 2018

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