PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 15 Nov 2019, 9:19 AM


PublicInvest Research Headlines - 24 Jan 2019

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EU: ECB to maintain status quo amid growth risks. The ECB is set to leave its interest rates and forward guidance unchanged on Thursday, after ending its massive asset purchase programme in Dec, as a myriad of risks including the persistent slowing of the economy, global trade tensions and the Brexit chaos mar the outlook for Eurozone growth. The Governing Council, led by ECB President Mario Draghi, is set to announce its latest policy decision at 7.45 am ET in Frankfurt. The main refi rate is currently at a record-low zero percent and the deposit rate at -0.4%. The marginal lending facility rate is at 0.25%. Eurozone interest rates were raised last in July 2011 by 25 basis points. The current forward guidance of the ECB suggests that an interest rate hike is likely only in late 2019. Given the weaker growth and inflation outlook, and the persistent uncertainties linked to global trade and politics, some economists now expect the bank to raise interest rates only in 2020. (RTT)

UK: Postponing Brexit is worse for economy than May’s deal. The prospect of a delayed Brexit may be pushing up the pound, but it’s not the best news for the UK economy. Sterling has rallied above USD1.30 this week amid increasing signs of support from lawmakers across Parliament for extending the negotiating period set to expire on March 29. While that would remove the imminent possibility of a chaotic no deal scenario, it would leave the UK worse off than if Parliament accepted Prime Minister Theresa May’s current plan, according to economists. Pushing back the departure prolongs the uncertainty that has already hit business investment and pushed consumer confidence to the lowest since 2013, according to JPMorgan Asset Management. Worse still, it would be unlikely to help the government reach any better outcome. “Kicking the can down the road has a cost,” said JPMorgan AM global market strategist Mike Bell. “Time has a cost, dragging on growth.” (Bloomberg)

US, China: Trump says US doing well in trade negotiations with China. US President Donald Trump said on Wednesday that the US was doing well in trade talks with China. “I like where we are right now,” Trump said. Trump has vowed to increase tariffs to 25% from 10% on USD200bn worth of Chinese imports on March 2 unless China takes steps to protect US intellectual property, end policies that force American companies to turn over technology to a Chinese partner, allow more market access for US businesses and reduce other non tariff barriers to American products. China “very much wants to make a deal,” Trump said. “We’ll see what happens. But we’re doing very well in our negotiations with China,” he said. (Reuters)

China: Will step up fiscal spending this year to support economy. China will step up fiscal spending this year to support its economy, focusing on further cuts in taxes and fees for small firms, finance ministry officials said on Wednesday. Mounting pressure on the world’s second-biggest economy pushed growth last year to its lowest since 1990 even as Beijing stepped up stimulus measures and spurred banks to lend more. The government may unveil more fiscal stimulus during the annual parliamentary meeting in March, including bigger tax cuts and more spending on infrastructure projects, economists say. China’s fiscal spending rose 8.7% to CNY22.1trn (USD3.3trn) in 2018, while revenue increased 6.2% to CNY18.3trn, said Li Dawei, an official at the finance ministry. (Reuters)

Japan: BOJ leaves stimulus unchanged, cuts inflation outlook again. The BOJ left monetary policy unchanged as it cut its inflation outlook once again, underscoring how far away its price target is and how few options the central bank has for drawing closer. The BOJ maintained its yield curve-control program and asset purchases, it said, a result predicted by all but one of 50 economists surveyed by Bloomberg. The bank lowered its inflation forecast for a fourth consecutive time in its quarterly outlook report. With the ECB meeting on Thursday and the Federal Reserve next week, the gap between the BOJ and its global peers keeps widening. The BOJ cut its inflation forecast for the fiscal year starting in April to 0.9% from 1.4%, citing lower oil prices as the primary reason. (Bloomberg)

Malaysia: On track to restore financial health in three years. Finance Minister Lim Guan Eng said Malaysia is on track to restore its financial health within three years after it had been damaged by the 1MDB scandal. Lim highlighted that the major international credit rating agencies, Moody’s, Fitch Ratings and S&P Global Ratings, had all affirmed the country’s credit ratings in their recent reports. Lim also noted that these rating agencies had admittedly expressed concerns about the government’s narrowing revenue base, following the removal of the GST that was replaced with the SST. “The concerns are being addressed, as can be seen by the encouraging increase in direct tax collection last year which rose by RM13.7bn or 11.1% YoY to a record high of RM137bn. (StarBiz)


GENM (Underperform, TP: RM2.70): Fox files counter claim against Genting Malaysia. Fox Entertainment Group LLC, Twentieth Century Fox Film Corp and FoxNext LLC (FOX) have filed a USD46.4m counter claim against Genting Malaysia’s (GENM) suit against them for breach of contract at the US District Court, Central District of California. (Bursa Malaysia) Comments: This was in relation to the Memorandum of Agreement (MOA) entered into between GENM and FOX in 2013 whereby GENM was granted a license to utilize intellectual property rights associated with Fox theatrical motion pictures for its outdoor theme park. Earlier it was reported that subsequent to FOX issuing a notice of termination of the MOA, it is also claiming approximately USD46m in accelerated payments for annual fees and royalties. Meanwhile, GENM is claiming for the cost of investments and punitive damages exceeding USD1bn against FOX for terminating the agreement. We believe these lawsuits would delay the opening of the outdoor theme park, which was scheduled to take place by 1H2019. We maintain our Underperform rating on GENM.

LBS (Outperform, TP: RM1.16): To undertake RM200m GDV projects in Perak with Perak SSI. LBS Bina Group (LBS) will kick start 2019 with mixed-use projects, comprising affordable houses in Perak, in collaboration with the Perak State Secretary Incorporated (SSI), with a GDV of RM200m. LBS, through its subsidiary company, Bimbingan Simfoni SB, and Perak SSI have signed a Memorandum of Understanding to develop two parcels of land situated in Temoh and Chepor, Perak. (The Edge)

AirAsia (Outperform, TP: RM4.14): Sues Malaysia Airports for RM400m. Years of bad blood between AirAsia Group and Malaysia Airports Holdings (MAHB) continue to boil over, with the airline now counter-suing the airport operator for over RM400m in a case involving operational disruptions at KLIA2. The counter-claim is in response to MAHB’s action filed in Dec against AirAsia and its sister airline, AirAsia X (AAX), for RM36m of uncollected passenger service charges (PSC). (StarBiz)

Alam Maritim: Gets RM25m supply vessel jobs from Petronas. Alam Maritim Resources announced its unit has secured work orders worth some RM24.62m from Petronas Carigali SB for the provision of three platform supply vessels (PSVs). Alam Maritim said the value of the jobs, which were awarded to its wholly-owned subsidiary, Alam Maritim (M) SB recently, included extensions for up to 30 days. Of the three jobs, one started on Sept 21, 2018 and will be for a firm charter duration of up to 124 days, whereas the other two — for a longer period of 181 days — began two months later. (The Edge)

Sunway: Sunway, Singapore firm secures Singapore land at RM1.32bn for condominium project. Sunway, in a joint venture with Singapore's Hoi Hup Realty Pte Ltd, has secured a 2.5-hectare piece of land in Tampines, Singapore for SGD434.45m (RM1.32bn) for the development of executive condominiums. Sunway said the Housing and Development Board of Singapore had awarded the land parcel at Tampines Avenue 10 for a 99-year lease term to Sunway's indirect wholly-owned subsidiary Sunway Developments Pte Ltd (SDPL) in Singapore and Hoi Hup, following a successful tender for the land jointly submitted by the two parties. (The Edge)

Market Update

The FBM KLCI might struggle to open higher today after a strong early rise for the S&P 500 largely evaporated as well-received earnings from a number of big-name companies only partially offset persistent uncertainty on global growth and the outlook for trade talks between Beijing and Washington. Sterling remained in focus as expectations mounted that the UK’s exit from the EU might be delayed, with the pound breaking above the $1.30 level for the first time since mid-November and the euro briefly slipping below GBP0.87. On Wall Street, the S&P 500 ended 0.2% higher at 2,638 — off an earlier high of 2,653 — while the Nasdaq Composite finished little changed but the Dow Jones Industrial Average gained 0.7%. Across the Atlantic, the Stoxx Europe 600 slipped 0.1%, with the Xetra Dax in Frankfurt ending 0.2% lower and the FTSE 100 shedding 0.9%.

Back home, the FBM KLCI index lost 13.98 points or 0.82% to 1,688.14 points on Wednesday. Trading volume decreased to 2.07bn worth RM1.92bn. Market breadth was negative with 325 gainers as compared to 468 losers. The regional markets finished mixed with the Shanghai Composite gained 0.05% and the Hang Seng rose 0.01%. The Nikkei 225 lost 0.14%.

Source: PublicInvest Research - 24 Jan 2019

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