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Author: PublicInvest   |   Latest post: Tue, 21 May 2019, 9:49 AM

 

PublicInvest Research Headlines - 11 Jan 2019

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Economy

US: Weekly jobless claims showcase economy's strength. The number of Americans filing applications for jobless benefits fell more than expected last week, pointing to sustained labor market strength that could further assuage concerns about the economy’s health. The report from the Labor Department on Thursday followed data last week showing employers hired the most workers in 10 months in Dec and increased wages. Surveys showing steep declines in consumer and manufacturing activity in Dec had stoked fears that the economy was rapidly losing momentum against the backdrop of tightening financial market conditions and slowing global growth. (Reuters)

US: Fed's Powell again stresses patience as US economy's 'narrative' unfolds. Federal Reserve Chairman Jerome Powell stressed again the US central bank can be patient in approving any further rate increases as officials gauge whether the US economy will slow this year, as some in financial markets worry, or continue motoring ahead as the Fed itself expects. Powell's second appearance in less than a week generated a subdued response in financial markets, a sign he may have found his footing in how to describe central bank policy without surprising investors. Several of his recent appearances have generated large market swings in both directions. With no sign of excessive inflation or outsized risk in financial markets, Powell said the Fed would be "waiting and watching" in coming months to see which of those two competing "narratives" plays out. (Reuters)

EU: ECB to explore cheap loans amid 'fragile and fluid' economic outlook, says minutes. ECB policymakers are likely to explore the unconventional policy of granting cheap long-term loans to banks in the coming months as they chose to adopt a cautious stance towards terming the risks to the euro area economic outlook as "downside", minutes from Dec policy session showed. Following the Dec 12-13 Governing Council session, the ECB confirmed that it is ending its massive EUR2.3trn asset purchase programme in December and trimmed the growth and inflation projections for this year. ECB President Mario Draghi said the risks surrounding the euro area growth outlook were still "broadly balanced", but "the balance of risks is moving to the downside", owing to geopolitical uncertainties, protectionist threats, emerging market vulnerabilities and financial market volatility. (RTT)

China: Sluggish prices raise deflation fears. Consumer and producer prices decelerated sharply in China last month, compounding the challenge for Beijing in boosting sluggish demand in a deepening economic downturn. Consumer prices rose in Dec at their slowest pace in six months, 1.9% from a year earlier by China’s benchmark index, while prices charged by producers increased by the lowest rate in two years, at 0.9%, according to official data released. With those readings, more economists are sounding the alarm about the rising risk of deflation in the Chinese economy, with slumping prices potentially eating into corporate earnings and hurting companies’ ability to repay debts. The disappointing price data reinforces market concerns over deflation as domestic demand weakens and economic growth slows. Weak prices add to the trail of recent bad news, with indicators such as factory orders, retail sales and exports pointing to a slowing economy. (The Wall Street Journal)

Japan: Leading index at 2-year low in Nov. Japan's leading economic index dropped to a two-year low in Nov, preliminary data from the Cabinet Office showed on Thursday. The composite leading index fell to 99.3 in Nov from 99.6 in Oct. Economists had expected the index to remain unchanged. The latest score was the lowest since Nov 2016, when it was 98.6. The coincident index dropped to 103 from 104.9 in Oct. The reading was in line with economists' expectations. The assessment of the coincident index was "weakening", same as in the previous two months, the Cabinet Office said. (RTT)

Malaysia: Moody's sees increased fiscal challenges. Moody's Investors Service sees increased fiscal challenges in Malaysia with the abolishment of the goods and services tax (GST) and introduction of the sales and services tax (SST). Sovereign Risk Group vice-president and senior analyst Anushka Shah said the GST abolishment in favour of a narrower SST would shrink the government's tax base. “In general, the government's focus on supporting growth and incomes of poorer households is a factor behind a slower fiscal consolidation path than previously projected,” she said in a media webcast in conjunction with the release of Moody's report titled "Sovereigns Asia Pacific 2019 Outlook". Shah said should the government prioritise growth and provisions to low-income households further, Malaysia's fiscal strength would weaken. (StarBiz)

Malaysia: Government collected RM5.4bn in SST, exceeds forecast of RM4bn. The government collected RM5.4bn from the Sales and Services Tax in the past two months, exceeding its estimate of RM4bn, Bloomberg reported. Finance Minister Lim Guan Eng told a press conference in Putrajaya on Thursday the final decision to pick the bankers for its JPY200bn (USD1.9bn) Samurai bond would only be made next week. Bloomberg earlier reported Malaysia had hired banks for the country’s first Samurai bond sale in three decades, adding to a flood of yen-denominated debt offerings by global borrowers tapping cheap funds in Japan. Among the arrangers were HSBC Holdings Plc, Mizuho Financial Group Inc. and Nomura Holdings Inc. Meanwhile, the report stated Malaysia is confident that deficit levels are on track for 3.7% for 2018, 3.4% for 2019, 3% for 2020, and under 2.8% in 2021. (StarBiz)

Markets

TNB (Outperform, TP: RM16.86): Secures RM144m financing for second large-scale solar project. Tenaga Nasional (TNB) has secured RM144m financing for its second large-scale solar (LSS) project in Malaysia. Its unit, TNB Bukit Selambau Solar SB (TBSS), together with MUFG Bank (Malaysia), recently achieved financial close for financing the project located at Bukit Selambau, Kuala Muda, Kedah. The project is scheduled to be completed in the 4Q of 2020. (The Edge)

Eversendai: Bags three projects worth RM406m. Eversendai Corporation has secured three contracts worth RM406m to undertake structural projects in Singapore, India and Qatar. The company said the Project in Singapore was awarded by Sato Kogyo (S) Pte Ltd and it involved building of a new hi-tech data processing and computing facility. It said it also bagged a contract from AG Middle East, Qatar to undertake structural steel works for the Lusail Expressway Al Wahda Arch. “The projects are expected to contribute positively to the earnings of the Eversendai group for FY2019 and FY2020,” it said. (StarBiz)

MAHB: Misses 2018 passenger volume target, sets 4.9% growth target for this year. Malaysia Airports Holdings (MAHB) missed its passenger volume target last year partly due to the shift of airlines seat capacity by some of the local carriers and the anticipated higher passenger movements related to the 14th general election (GE14) that did not take place. The airport operator saw 2.5% more passengers passing through the 39 airports in the country it operates last year, to reach 99m from 96.6m in 2017. MAHB had expected passenger volume to grow 6.5% in 2018. For 2019, MAHB has set a lower passenger growth target of 4.9%, with international and domestic passenger traffic growing at 2.4% and 7.6% respectively. (The Edge)

AWC: Unit wins RM26m sub-contract in Singapore. AWC announced that its Singapore unit has secured a sub-contract in the republic worth SGD8.57m (RM25.97m). Stream Environment (S) Pte Ltd (SEPL) was awarded the sub-contract by SDK Consortium, AWC said. The job scope comprises works on pneumatic waste and linen chute system, as well as foodwaste treatment system work. SEPL’s work is expected to be completed by Jan 13, 2021. (The Edge)

Industronics: Proposes placement of 30% share capital to raise RM2.8m. Industronics wants to place out a big block of shares that is equivalent to 30% of its existing paid-up capital to raise nearly RM2.8m for working capital. It has earmarked RM2m to grow its system integration business, which is currently primarily involved in the provision of light information display systems for airports, it said. Key customers include KLIA and klia2, as well as the Penang International Airport, the group said. (The Edge)

Atlan: 3Q profit rises seven-fold, declares 10 sen dividend. Atlan Holdings’ 3Q net profit rose over seven-fold to RM13.7m from RM1.6m a year earlier, on the back of higher revenue and better margins in terms of operating expenses. EPS for the quarter ended Nov 30, 2018 jumped to 5.4 sen, from 0.63 sen in the same quarter last year, Atlan said. The group declared a dividend of 10 sen per share, bringing its cumulative dividend in the first three quarters to 20 sen, from 21 sen in the same period last year. (The Edge)

Market Update

US markets ended the day higher again, its first 5-day winning streak since September last year, though gains were capped by less-than-encouraging consumption-related numbers. Macy’s recorded poorer holiday sales while American Airlines cut its revenue guidance. Concerns over a prolonged US government shutdown also weighed on sentiment. Earnings reporting season will get underway with the likes of J.P. Morgan Chase, Bank of America, BlackRock and Morgan Stanley among the companies set to report next week. On the day, both the Dow Jones Industrial Average and S&P 500 gained 0.5% while the Nasdaq Composite rose 0.4%. Over in Europe, investors kept an eye out for more details post-conclusion of the US – China trade talks and the other on the Brexit process ahead of next week’s crucial vote. The UK Parliament agreed on Wednesday that the government must come up with a plan-B within three days if the Withdrawal Agreement is not approved this coming Tuesday. The country’s benchmark FTSE 100 showed no worse-for-wear despite the ongoing drama however, gaining 0.5% overnight. Elsewhere, Germany’s DAX inched 0.3% higher though France’s CAC 40 slipped 0.2%. Earlier in the day, Asian markets were mixed following weaker-than expected Chinese inflation data as investors also digested the conclusion of a three-day trade negotiation between the Beijing and Washington. Amongst the continent’s key benchmarks, the Nikkei 225 and Shanghai Composite fell 1.3% and 0.4% though the Hang Seng Index gained 0.2%. The Straits Times Index and FBM KLCI rose 0.8% and 0.7% respectively meanwhile.

Malaysia Airports Holdings has missed its passenger volume target last year, with the disappointment attributed to the shift of seat capacities by some of the local carriers while the anticipated higher passenger movements related to the 14th general election (GE14) also did not take place. For 2019, it has set a lower growth target of 4.9%, with international and domestic passenger traffic growing at 2.4% and 7.6% respectively. AWC’s Singaporean unit Stream Environment (S) Pte Ltd (SEPL) has secured a sub contract worth S$8.57m (RM25.9m) to undertake works on pneumatic waste and linen chute system, and food-waste treatment system there.

Source: PublicInvest Research - 11 Jan 2019

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