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PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 9 Dec 2019, 9:31 AM

 

PublicInvest Research Headlines - 23 Jan 2019

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Economy

US: Home sales hit three-year low, prices rise slowly. US home sales tumbled to their lowest level in three years in Dec and house price increases slowed sharply, suggesting a further loss of momentum in the housing market. The weak report from the National Association of Realtors (NAR) on Tuesday was the latest indication of slowing economic growth. A survey last Friday showed consumer sentiment dropped in Jan to its lowest level since President Donald Trump was elected more than two years ago. Existing home sales were now the weakest since Trump was elected, said MUFG Chief Economist Chris Rupkey, “signaling the initial confidence boost from the new ideas and new legislation is falling flat.” The NAR said existing home sales declined 6.4% to a seasonally adjusted annual rate of 4.99m units last month. That was the lowest level since Nov 2015. (Reuters)

UK: Dec budget deficit larger than expected. UK budget deficit for Dec exceeded economists' expectations and was the second lowest figure for the month in 18 years, figures from the Office for National Statistics showed Tuesday. The public sector net borrowing, or PSNB, was GBP3bn in Dec, which was GBP0.3bn more than a year ago. Economists had forecast borrowing of GBP1.9bn. That was the lowest Dec borrowing for 18 years, save for a GBP2.7bn borrowing in Dec 2017. The PSNB was GBP35.9bn in the YTD period, which was GBP13.1bn less than the same period in 2017. That was also the lowest YTD figure for 16 years. (RTT)

UK: Employment hits record high, pay growth biggest in decade. The UK employment hit a record high in Dec and the workers' pay grew at the fastest pace in a decade amid steady unemployment, despite the Brexit chaos. The employment level grew by 141,000 sequentially to a record high 32.54m in the three months to Nov, figures from the Office for National Statistics showed on Tuesday. Economists were looking for an increase of 87,000. The rate of employment rose to 75.8%, which was the highest since comparable records began in 1971. The number of unemployed was 1.37m in the three months to Nov, broadly unchanged from the previous three months ended Aug. The figure dropped by 68,000 from a year earlier. The ILO jobless rate was 4% in the three months to Nov, which was the lowest since Dec 1974 to Feb 1975 period, and unchanged from the three months ended Aug. (RTT)

UK: Parliament moves closer to stopping a no-deal Brexit. The UK Parliament is edging closer to a plan to delay Brexit in order to stop the country dropping out of the European Union with no deal. The main opposition Labour Party is now increasingly likely to support a move to extend the March 29 exit day deadline, if Prime Minister Theresa May fails to negotiate a divorce agreement, said John McDonnell, the party’s chief finance spokesman. McDonnell described the proposal as a “sensible” way to avoid an economically disastrous no-deal Brexit. If Labour does support the proposal, put forward by lawmakers including Yvette Cooper, a former minister, it is far more likely to win enough backing to be passed. That would force May’s hand and ensure she cannot take Britain out of the EU without a deal in nine weeks’ time. (Bloomberg)

China: Growth slowed by service, farm sectors, despite construction rebound. Weakness in the service and farm sectors slowed China’s economic growth in the fourth quarter, despite a strong pickup in construction activity, official data showed on Tuesday. Services grew 7.4% from a year earlier, slowing from 7.9% in the 3Q, while growth in agriculture slowed to 3.5% from 3.6%, the National Bureau of Statistics (NBS) said. The services sector accounted for almost half of GDP in the quarter by value as China continued to transition towards a service-oriented economy, while agriculture contributed about 10%, according to Reuters’ calculations based on the latest data. Construction enjoyed a strong recovery thanks to support for infrastructure projects, as the government frontloaded local government bond issuance to support their financing. (Reuters)

Malaysia: Bank Negara forex reserves rise to USD101.7b at Jan 15. Bank Negara Malaysia's international reserves rose by USD300m to USD101.7bn as at Jan 15 from two weeks earlier. The central bank said the reserve position was sufficient to finance 7.3 months of retained imports and was one time the short-term external debt. As at Dec 31, the reserves were at USD101.4bn after taking into account the quarterly adjustment for foreign exchange revaluation changes. The reserves position then was sufficient to finance 7.4 months of retained imports and is 1.0 time the short-term external debt. The ringgit firmed up against the USD to 4.0975 at Jan 15 from 4.1385 on Dec 31. (StarBiz)

Markets

Sapura Energy (Outperform, TP: RM0.46): Rights issue of ordinary shares under-subscribed but group says exercise a success. Sapura Energy announced that it has successfully raised about RM4bn from its rights issue exercise that closed on Jan 16, though the rights issue of ordinary shares under the exercise was undersubscribed. The rights issue comprises the rights issue of ordinary shares sweetened with free warrants and Islamic redeemable convertible preference shares (RCPS-i). While the first portion that is to raise about RM3bn was under-subscribed, with a subscription rate of 81.5%, the preference shares to raise some RM1bn was over-subscribed by 1.18%. (The Edge)

Destini: Bags tubular running services contract in Thailand. Destini has bagged a contract from Carigali-PTTEPI Operating Co SB (CPOC) to provide tubular running services for exploration and appraisal and infill drilling campaign for Block B-17 & C-19 and Block B-17-01 located at the lower part of Gulf of Thailand. The value of the contract was not disclosed. Destini said its wholly-owned subsidiary Destini Oil Services SB has on Jan 14 received a letter of award from CPOC the operator of the petroleum blocks for the proposed project. (The Edge)

HeiTech Padu: Bags MoH contract worth RM33m. HeiTech Padu has secured a Ministry of Health (MoH) contract worth RM33.18m. The contract is for the supply, installation and commissioning of the Critical Care Information System (CCIS) in intensive care units of 11 hospitals for a period of three years. The contract, which will commence on Feb 1, 2019, is expected to have positive impacts on its future earnings. The contract will have no material effect to its net asset, dividend policy, share capital and substantial shareholdings for the FYR Dec 31, 2019. (The Edge)

Bina Puri: Bags RM252m sub-contract works for Gemas-JB double track project. Bina Puri Holdings joint venture (JV) with Tim Sekata SB has bagged a RM251.53m contract to undertake sub contract works for the electrified double track project from Gemas to Johor Baru. The group's unbuilt book order stands at RM1.145bn with the latest award. Bina Puri Builder SB has accepted the letter of award from Syarikat Pembenaan Yeoh Tiong Lay SB on Jan 15, 2019 for the proposed job. (The Edge)

K-One: Secures manufacturing agreement with US-based dental flosser. K-One Technology has secured a manufacturing agreement with a new US customer to manufacture dental water flosser that it forecasts will generate sales of about RM10m each year, for the first three years. The deal was secured via its wholly-owned subsidiary K One Resources SB. The customer is part of a US-based multinational. Tooling is expected to commence in the 1Q2019, which will be followed by manufacturing of the products at the end of the subsequent quarter. (The Edge)

Country View: 4Q net profit surges to RM52m on property disposal. Country View net profit surged over five times in 4QFY18 to RM52.03m from RM9.54m in the same quarter last year, mainly due to the completion of disposal of lands in Kedah in the quarter under review. The strong net profit growth, however, was partly offset by higher administrative expenses arising from the allowance on fair value losses on investment properties in 4QFY18 in order to reflect the fair value of the investment properties as at Nov 30, 2018. (The Edge)

Market Update

The FBM KLCI might open lower today after pessimism on the outlook for global growth, along with lingering uncertainty over the prospects for US-China trade talks, helped drag down equities and oil prices while offering support to Treasuries, the yen and gold. The IMF lowered its forecasts for GDP growth this year and next in both advanced and emerging economies, citing risks including trade tensions, Brexit and the budgetary position of Italy. The downgrades came hard on the heels of data showing that China’s economy had expanded in 2018 at the slowest pace for almost three decades. And there was little comfort for growth bulls from data released on Tuesday showing that US existing home sales dropped 6.4 percent last month to the lowest level since November 2015. As US markets reopened after Monday’s holiday, the S&P 500 equity index gave back all of Friday’s advance, while Brent oil retreated after hitting a six-week high above $63 a barrel in the previous session. At the closing bell, the S&P 500 fell 1.4% to 2,633 — following a 1.3% advance on Friday — having been down as much as 2% at one stage. The Dow Jones Industrial Average fell 1.2% and the Nasdaq Composite ended 1.9% lower. In Europe, the pan-regional Stoxx 600 index ended 0.4% lower, as London’s FTSE 100 fell 1% and the Xetra Dax in Frankfurt shed 0.4%.

Back home, the FBM KLCI index gained 9.90 points or 0.59% to 1,702.12 points on Tuesday. Trading volume increased to 3.32bn worth RM2.12bn. Market breadth was negative with 332 gainers as compared to 556 losers. In the region, the CSI 300 index of mainland China’s stocks fell 1.3%, while Hong Kong’s Hang Seng index finished 0.7% softer. Japan’s Topix shed 0.6%.

Source: PublicInvest Research - 23 Jan 2019

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