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PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 23 Sep 2019, 9:36 AM

 

PublicInvest Research Headlines - 10 Jan 2019

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Economy

US: Fed minutes indicate patient approach to further rate hikes. Minutes from the Federal Open Market Committee's latest meeting confirmed Federal Reserve Chairman Jerome Powell's recent remarks suggesting the central bank will take a patient approach to further interest rate increases. The minutes of the FOMC's Dec meeting showed participants saw the appropriate extent and timing of future rate hikes as less clear than earlier. The Fed decided to raise rates by a quarter points at the meeting, but the minutes suggest volatility in financial markets and increased concerns about global economic growth have clouded the outlook for rates. A number of participants noted it was important for the FOMC to assess the impact of increasingly pronounced risks and the effects of past rate hikes before making further changes to the stance of monetary policy. (RTT)

US: Trump is probably going to get his way with the Federal Reserve this year. As President Donald Trump jawbones the Federal Reserve, the likelihood that he's going get what he wants this year from the central bank continues to grow. Markets expect the Fed to hold off on rate hikes and are even anticipating the possibility of a cut during the next year or two, playing into the low-rate environment the president has espoused. That in turn would decrease the chances that Trump might try to fire Fed Chairman Jerome Powell, a move universally regarded as difficult to achieve and likely disruptive if not disastrous for the market. That chance may have declined even more in recent days as market conditions improved. (CNBC)

US, China: China willing to buy more American as trade talks end, says US. The Trump administration wrapped up the latest round of trade talks in Beijing, noting a commitment by China to buy more US agricultural goods, energy and manufactured items. China and the US concluded three days of talks on Wednesday, with a cautious sense of optimism that the world’s two biggest economies might be able to reach a deal that ends their bruising trade war. In a statement, the office of US Trade Representative Robert Lighthizer said the two sides considered ways to “achieve fairness, reciprocity, and balance in trade relations.” Officials discussed the need for any deal to include “ongoing verification and effective enforcement. The US will decide on the next steps after officials report back to Washington. (Bloomberg)

US, China: Trade talks conclude as hopes of a deal build. Chinese and US teams ended trade talks here that lasted longer than expected and officials said details will be released soon, raising hopes an all-out trade war that could badly disrupt the global economy can be avoided. The talks were extended into an unscheduled third day, showing both sides were serious, China’s Foreign Ministry said. Ted McKinney, US undersecretary of agriculture for trade and foreign agricultural affairs, said the US trade delegation would return to the United States after a good few days. Speaking at a daily news briefing, Chinese Foreign Ministry spokesman Lu Kang confirmed both sides had agreed to extend the talks beyond Monday and Tuesday as originally scheduled. (Reuters)

EU: Eurozone unemployment unexpectedly falls to 10-year low. Unemployment in the eurozone unexpectedly fell in Nov to its lowest rate in more than ten years, official estimates released showed. The EU statistics office Eurostat said unemployment in the 19-country currency bloc dropped to 7.9% in Nov, the lowest level since Oct 2008, and below economists’ forecasts of an 8.1% rate. Eurostat also revised down its Oct reading to 8.0% from a previous estimate of 8.1%. The fall was partly caused by a drop of the number of jobless in Italy and Spain which still have the highest unemployment rates in the eurozone after Greece. Unemployment fell to 14.7% in Spain from 14.8% in Oct. It went down to 10.5% in Italy from 10.6%. The latest figures available for Greece show an 18.6% rate in Sept. (Reuters)

EU: German trade surplus grows in Nov as imports fall unexpectedly. Germany's merchandise trade surplus grew in Nov to its biggest level in five months as imports fell unexpectedly, and exports decreased, giving further evidence of a slowdown in the biggest euro area economy. The non-adjusted trade surplus grew to EUR20.5bn from EUR18.9bn in Oct, preliminary data from the Federal Statistical Office showed. Economists had expected a surplus of EUR18.6bn. The latest surplus was the biggest since June, when the figure was EUR22bn. On a seasonally and calendar adjusted basis, the trade surplus increased to EUR19bn from EUR17.9bn in Oct. That was also the biggest since June. In Nov, the decline in imports outstripped the fall in exports. Imports decreased a seasonally adjusted 1.6% from the previous month after a 0.8% increase in Oct. (RTT)

China: To propose wider 2019 fiscal deficit amid slowdown. China’s Finance Ministry is set to propose a small increase in the targeted budget deficit for this year as officials seek to balance support for the economy with the need to keep control of debt levels. The ministry agreed the proposed deficit target of 2.8% of GDP at its annual work conference in Dec, two people familiar with the matter said. The figure, which compares with 2018’s target of 2.6%, will be presented for approval at the National People’s Congress, China’s legislature, in March. The final number could still change. While officials have pledged a pro-active fiscal policy this year amid a slowdown in the economy that’s being worsened by the trade war with the US, the proposed deficit expansion is smaller than many economists had forecast. (Bloomberg)

Japan: Wage data credibility in doubt over erroneous sampling. Japan’s labor ministry has issued wage data without meeting sampling standards, officials said, undermining the credibility of a key indicator used to gauge the success of Prime Minister Shinzo Abe’s economic policies. In compiling the monthly data, which covers some 33,000 firms nationwide with five or more full-time employees each, the labor ministry is supposed to collect samples from all the firms that employ 500 or more workers. But it turned out that the data sampling failed to cover two thirds of some 1,400 businesses in Tokyo for an unspecified period of time. Domestic media reported the sampling error extends back for 15 years, but officials stopped short of confirming the period, saying that the matter was still under investigation. (Reuters)

Markets

AirAsia (Outperform, TP: RM4.14): Leasing plans of 5 planes aborted. AirAsia Group, which is divesting its aircraft leasing business to entities managed by BBAM Ltd Partnership, said plans to lease five of the aircraft to third party airlines with an enterprise value (EV) of USD173.67m have been aborted. It said the leasing of the aircraft will not take place as the agreements have now lapsed. (The Edge)

Sapura Energy (Outperform, TP: RM0.46): JV seeks up to RM2.3bn loans. SEB Upstream SB (SUP), a joint venture between Sapura Energy Bhd and OMV Aktiengesellschaft (OMV AG), plans to obtain financing facilities from local and foreign financial institutions and/or its Austrian partner for between USD350m (RM1.46bn) and USD550m (RM2.29bn) to repay part of its debt and for working capital. It said SUP will use USD350m to partially repay the amount owing by it to Sapura Energy of USD890m (RM3.7bn) and the rest for working capital. (The Edge)

WCT (Neutral, TP: RM0.90): To jointly develop first residential project in TRX worth RM1.1bn with Chinese partner. WCT Holdings, which is substantially owned by Tan Sri Desmond Lim of the Pavilion group with a 19.67% stake, and China-based China Communications and Construction Group (CCCG), will jointly develop the first residential project at the Tun Razak Exchange (TRX) here, with an estimated GDV of RM1.1bn. The development is scheduled to be completed around the end of 2022. (The Edge)

ConnectCounty: Pares down stake in Chinese unit. ConnectCounty Holdings said its wholly-owned China-based unit Rapid Conn (Shenzhen) Co Ltd (RCC) has divested a 31% stake in its subsidiary, Shenzhen Rapid Power Co Ltd, for a total of CNY2.33m, or approximately RM1.4m. The transfer of shares was done as part of RCC’s equity restructuring of subsidiaries due to changing business circumstances in China, it said. Sale proceeds will be utilised for working capital purposes. The expected gain arising from the partial disposal is approximately RM891,900, and Rapid Power will cease to be an indirect subsidiary of ConnectCounty. (The Edge)

Gunung Capital: Signs MoU to manage oil estate in Sarawak. Gunung Capital has inked a MoU with Jendala Padu SB to jointly work on improving the yield of the Pandan Land Bintulu Palm Oil Estate. Additionally, the solutions derived from the MoU will provide a basis for a project management contract to manage the oil palm estate on a long-term basis, it said. Jendala Padu had entered into a lease agreement in 2016 with AML Enterprises SB and JP Nominees Holdings SB to lease both a palm oil estate and the biological assets attached until March 31, 2040. The estate is located in Bintulu, Sarawak. (The Edge)

Nylex, Ancom: Operations unaffected after group MD held in probe. Nylex (Malaysia) confirmed its group MD Datuk Siew Ka Wei was held by the Malaysian Anti-Corruption Commission (MACC) but its operations remained unaffected. MACC had granted a four-day remand order involving Siew to help in its probe during his tenure as chairman of the Tourism Board of Malaysia. In a separate statement, Ancom also said its operations were unaffected following the arrest and remand of Siew, who is its executive chairman. (StarBiz)

Market Update

The FBM KLCI might open higher today after stocks on Wall Street ended mostly in the positive territory overnight. The dollar hit its lowest level against a basket of currencies for nearly three months as expectations mounted that the Federal Reserve would adopt a more cautious policy stance over the coming year. The minutes of the Fed’s meeting last month showed that recent volatility in financial markets and muted US inflation had encouraged “many participants” to take the view that the central bank could afford to be patient about further rate rises. Earlier in the day, several Fed officials made cautious comments about the path of US monetary policy. At the closing bell, the S&P 500 ended 0.4% higher at 2,584, having been up more than 0.8% at one stage. The day’s rise left the index with a four-day gain of 5.6%. The Dow Jones Industrial Average also rose 0.4%, while the technology-heavy Nasdaq Composite finished 0.9% stronger. Across the Atlantic, London’s FTSE 100 rose 0.7%, with Frankfurt’s Xetra Dax ending 0.8% higher. The Europe-wide Stoxx 600 gained 0.5%.

Back home, the FBM KLCI index lost 4.93 points or 0.29% to 1,667.83 points on Wednesday. Trading volume increased to 3.02bn worth RM2.52bn. Market breadth was positive with 678 gainers as compared to 258 losers. The regional markets finished broadly higher with shares in Hong Kong leading the region. The Hang Seng added 2.27% while Japan's Nikkei 225 rose 1.10% and China's Shanghai Composite was up 0.71%.

Source: PublicInvest Research - 10 Jan 2019

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