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Author: PublicInvest   |   Latest post: Mon, 18 Feb 2019, 10:19 AM

 

PublicInvest Research Headlines - 15 Jan 2019

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Economy

World: Biggest economies are moving deeper into a slowdown. Momentum is easing across the world’s major economies, according to a gauge that the Organization for Economic Co-Operation and Development uses to predict turning points. The Composite Leading Indicator is the latest sign of a synchronized slowdown in global growth, adding to recession warnings sparked by industrial figures in Germany last week and slumping trade figures for China earlier on Monday. The indicator, which is designed to anticipate turning points six-to-nine months ahead, has been ticking down since the start of 2018 and fell again in Nov. (Bloomberg)

US: Clarida hints Fed may not raise rates as much as projected. Federal Reserve Vice Chairman Richard Clarida left open the possibility the US central bank will raise interest rates in 2019 fewer than the two times projected by policy makers at their last meeting. “A lot has really happened since the first week of Dec,” Clarida said. “Some of the global growth data have been softening.” In the so-called dot-plot released after the Dec 18-19 meeting, the median projection from policy makers was for two rate hikes this year. Clarida, however, downplayed the significance of those individual forecasts. “We don’t vote on those dots,” he said. Clarida said the US central bank can be “very patient” as it takes a meeting-by-meeting approach to monetary policy decisions in 2019. (Bloomberg)

US: Yellen warns anecdotal signs show businesses pausing spending. On paper, it still looks like a dynamite macroeconomic environment in the US But outside the numbers, some cracks are starting to emerge, said Former Federal Reserve Chair Janet Yellen. “All the hard data that we have on economic activity suggests that things are in good shape,’’ Yellen said. But while 2018 was a good year, in 2019 “almost all economists are forecasting a slowdown,’’ she said. “The global economy was firing on all cylinders in 2018 and now looks like we’ve got less strong and less synchronized global growth.’’ Yellen, who was replaced by Jerome Powell last February as head of the US central bank, cited downside risk in Europe, global trade tensions and an apparent slowdown in China as key factors to watch. (Bloomberg)

EU: Eurozone industrial production declines more than expected. Eurozone's industrial production decreased at a faster-than-expected pace in Nov, preliminary data from the statistical office Eurostat showed on Monday. Industrial production decreased a seasonally adjusted 1.7% from October, when it edged up 0.1%, revised from 0.2%. Economists had expected a 1.5% slump. Production of capital goods registered a 2.3% decline and output of durable consumer goods dropped 1.7%. Intermediate goods output dropped 1.2 and non-durable consumer goods by 1%. Energy production decreased 0.6%. On a YoY basis, industrial production fell a calendar adjusted 3.3% in Nov after a 1.2% increase. Economists had predicted a 2.1% slump. (RTT)

EU: Draghi faces grim euro-area tidings in first new year appearance. Mario Draghi will break his silence on Tuesday after sitting through a month of growing doubts over the durability of the region’s economic expansion. The European Central Bank president will make his first appearance of 2019 and probably his final one before the Jan 24 policy decision at the European Parliament in Strasbourg on Tuesday. He’ll speak at 4 pm local time, just hours after finding out if Germany, the region’s biggest economy and supposed powerhouse, finished last year in recession. That would be among the most troubling developments after a slew of weak data that has some questioning whether the ECB will ever be able to start raising interest rates. (Bloomberg)

EU: Germany wholesale price inflation slows in Dec Germany's wholesale prices rose at a slower pace in Dec, data from Destatis revealed on Monday. Wholesale price inflation slowed to 2.5% from 3.5% in Nov. The wholesale price growth was largely influenced by an 10.9% surge in prices for petroleum products. The prices for cereals, raw tobacco, seeds and animal feed rose by 17.6% each, the agency reported. MoM, wholesale prices fell 1.2% after gaining 0.2% in Nov. For the whole year 2018, wholesale prices increased 2.7%. (RTT)

EU: ECB faces now-or-never dilemma for 2019 rate hike, Lampe says. The European Central Bank risks missing its chance to raise interest rates in this economic cycle if it doesn’t act this year, according to a German private bank. Investors are betting that the euro zone’s economic slowdown -- in part a consequence of global risks including US-led protectionism and Brexit -- will cause the ECB to push back its gradual exit from negative rates to next year. In a note to clients, Bankhaus Lampe questions the rationale for that view. “This delay makes little sense to us, as the fundamental environment in 2020 is if anything weaker,” said Alexander Krueger, an economist at the bank in Dusseldorf. (Bloomberg)

India: Subdued inflation signals monetary policy u-turn. India’s headline inflation edging toward the lower-end of the central bank’s target band has opened the door to interest-rate cuts in coming months. While rate swaps show investors are pricing no change in the benchmark repurchase rate for the next 12 months, the Reserve Bank of India may be forced to jettison its hawkish stance adopted five months ago for an easing bias. The reasons: deceleration in economic growth, deferment of investments ahead of an election due by May and rising expectations of a global slowdown. There’s also a new governor in office: Shaktikanta Das, who is seen as more dovish on monetary policy, was appointed to replace Urjit Patel. (Bloomberg)

China: Dec exports fall most since 2016. China's exports and imports in Dec declined at the worst rates in two years, adding to evidence of a rapid slowdown in the economy amid the trade war with the US and weakening global activity. Exports dropped 4.4% YoY in Dec, figures from the General Administration of Customs showed on Monday. That was in contrast to the 3% gain economists had predicted. Imports decreased 7.6% from a year ago, defying expectations for a 5% rise. Both exports and imports outcome was the worst since 2016. In Dec, the trade surplus was USD57.1bn. (RTT) from October, when it edged up 0.1%, revised from 0.2%. Economists had expected a 1.5% slump. Production of capital goods registered a 2.3% decline and output of durable consumer goods dropped 1.7%. Intermediate goods output dropped 1.2 and non-durable consumer goods by 1%. Energy production decreased 0.6%. On a YoY basis, industrial production fell a calendar adjusted 3.3% in Nov after a 1.2% increase. Economists had predicted a 2.1% slump. (RTT)

EU: Draghi faces grim euro-area tidings in first new year appearance. Mario Draghi will break his silence on Tuesday after sitting through a month of growing doubts over the durability of the region’s economic expansion. The European Central Bank president will make his first appearance of 2019 and probably his final one before the Jan 24 policy decision at the European Parliament in Strasbourg on Tuesday. He’ll speak at 4 pm local time, just hours after finding out if Germany, the region’s biggest economy and supposed powerhouse, finished last year in recession. That would be among the most troubling developments after a slew of weak data that has some questioning whether the ECB will ever be able to start raising interest rates. (Bloomberg)

EU: Germany wholesale price inflation slows in Dec Germany's wholesale prices rose at a slower pace in Dec, data from Destatis revealed on Monday. Wholesale price inflation slowed to 2.5% from 3.5% in Nov. The wholesale price growth was largely influenced by an 10.9% surge in prices for petroleum products. The prices for cereals, raw tobacco, seeds and animal feed rose by 17.6% each, the agency reported. MoM, wholesale prices fell 1.2% after gaining 0.2% in Nov. For the whole year 2018, wholesale prices increased 2.7%. (RTT)

EU: ECB faces now-or-never dilemma for 2019 rate hike, Lampe says. The European Central Bank risks missing its chance to raise interest rates in this economic cycle if it doesn’t act this year, according to a German private bank. Investors are betting that the euro zone’s economic slowdown -- in part a consequence of global risks including US-led protectionism and Brexit -- will cause the ECB to push back its gradual exit from negative rates to next year. In a note to clients, Bankhaus Lampe questions the rationale for that view. “This delay makes little sense to us, as the fundamental environment in 2020 is if anything weaker,” said Alexander Krueger, an economist at the bank in Dusseldorf. (Bloomberg)

India: Subdued inflation signals monetary policy u-turn. India’s headline inflation edging toward the lower-end of the central bank’s target band has opened the door to interest-rate cuts in coming months. While rate swaps show investors are pricing no change in the benchmark repurchase rate for the next 12 months, the Reserve Bank of India may be forced to jettison its hawkish stance adopted five months ago for an easing bias. The reasons: deceleration in economic growth, deferment of investments ahead of an election due by May and rising expectations of a global slowdown. There’s also a new governor in office: Shaktikanta Das, who is seen as more dovish on monetary policy, was appointed to replace Urjit Patel. (Bloomberg)

China: Dec exports fall most since 2016. China's exports and imports in Dec declined at the worst rates in two years, adding to evidence of a rapid slowdown in the economy amid the trade war with the US and weakening global activity. Exports dropped 4.4% YoY in Dec, figures from the General Administration of Customs showed on Monday. That was in contrast to the 3% gain economists had predicted. Imports decreased 7.6% from a year ago, defying expectations for a 5% rise. Both exports and imports outcome was the worst since 2016. In Dec, the trade surplus was USD57.1bn. (RTT)

Markets

FGV: To sell RM350m worth of non-core businesses, assets. FGV Holdings has identified several non-core businesses and assets worth RM350m for disposal, said its chairman Datuk Wira Azhar Abdul Hamid. In a letter to shareholders, Azhar said FGV has also identified several areas for the development of strategic alliances or partnerships to capitalise on its strengths and plug capacity gaps where there are any. However, he said detailed announcements will only be made at the appropriate time. Azhar also acknowledged that FGV’s operations are not effectively and efficiently managed, as evidenced by its persistent poor performance. (The Edge)

CMSB: Takes majority stake in MPAS for RM64m. Cahya Mata Sarawak (CMSB) is taking majority control in associate company Malaysian Phosphate Additives (Sarawak) SB (MPAS), raising its stake from 49.94% to 60% for RM64.24m cash. The increase follows its RM45.54m investment for a 9.94% stake in MPAS in the 3Q ended Sept 30, 2018. The subscription is a strategic move by CMSB to enable CMSB Group to use consolidation method of accounting to bring MPAS’ earnings into the consolidated statements of CMSB to bolster the group’s future earnings. (The Edge)

TSR Capital: Bags Gemas - JB rail sub-contract worth RM307m. TSR Capital has secured an RM307m earthwork sub-contract for the Gemas-Johor Bahru electrified double-track project. Its wholly-owned subsidiary, TSR Bina SB, was awarded the sub-contract by Syarikat Pembenaan Yeoh Tiong Lay SB. TSR Bina will be undertaking site clearance and embankment earthwork for the project, with work expected to be completed by March 2020. The project involves the construction of 197km of double tracks, stations, electric trains, depots, land viaduct, bridges, and electrification and signalling systems. (The Edge)

Ranhill: Associate fails in appeal against revocation of permit to sell renewable energy. Ranhill Holdings’ 26.7%-owned associate, Tawau Green Energy SB (TGE), has failed in its appeal against Sustainable Energy Development Authority’s (Seda) decision to revoke its feed-in approval. TGE had on Oct 4 last year received Seda’s revocation, and had submitted an appeal to Energy, Science, Technology, Environment and Climate Change Minister Yeo Bee Yin. (The Edge)

PBA Holdings: Seek Putrajaya’s nod to review Penang’s water tariff. Penang’s water supply company, Perbadanan Bekalan Air Pulau Pinang SB (PBAPP), is seeking a water tariff revision to raise funding for RM501m in investments between 2019 and 2021. Penang chief minister Chow Kon Yeow said water demand in the state is projected to rise 128% to 1,884m litres per day (MLD) from 826 MLD in 2017, according to an independent ‘Masterplan Study for Potable Water in Penang towards 2050’ that was commissioned in 2009. (The Edge)

D’Nonce Technology: Gets new CEO. D’Nonce Technology, which is in the midst of an investigative review, announced that its executive director Lim Teck Seng has been redesignated as group CEO of the industrial packaging company, replacing Kuah Choon Ching who had resigned on Jan 10. Lim, 49, joined the board of directors of D’Nonce on Jan 8. Lim had previously served in Apex Group of companies for nine years. During the period, he had served as a chairman of JF Apex Securities and executive director of Apex Equity Holdings. (The Edge)

Market Update

The FBM KLCI might open lower as Wall Street stocks slipped overnight, tracking losses for equities in Europe and China after a run of weak economic data stoked fears about a global slowdown, leaving indices vulnerable after last week’s rebound. Trade figures from China showed exports posting the largest monthly fall in two years, while industrial production numbers from the eurozone missed forecasts. The US earnings season had a lacklustre start after Citigroup posted an unexpected decline in quarterly revenue. At the closing bell, Wall Street’s S&P 500 index dropped 0.53%, after a slight fall on Friday left its gain for the week at 2.5%. The Dow Jones Industrial Average slid 86.11 points, or 0.4%, to end at 23,909.84, while the Nasdaq Composite Index dropped 65.56 points, or 0.9%, to close at 6,905.92. European indices extended declines as the session developed. London’s FTSE 100 was down 0.9% and Frankfurt’s Xetra Dax 30 fell 0.3%.

Back home, the FBM KLCI index lost 7.06 points or 0.42% to 1,676.16 points on Monday. Trading volume decreased to 2.18bn worth RM1.42bn. Market breadth was negative with 286 gainers as compared to 557 losers. The regional markets finished mixed with the Nikkei 225 gained 0.97%, while the Hang Seng led the Shanghai Composite lower. They fell 1.38% and 0.71% respectively.

Source: PublicInvest Research - 15 Jan 2019

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