PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 15 Oct 2019, 9:05 AM


PublicInvest Research Headlines - 7 Feb 2019

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US: Trade deficit narrows in Nov as imports decline. The US trade deficit fell for the first time in six months in Nov as cheaper oil and higher domestic petroleum production helped to curb the country’s import bill, leading economists to boost their economic growth estimates for the 4Q. The Commerce Department’s report on Wednesday also showed a drop in imports of consumer goods such as cellphones and other household goods. The decrease in imports followed five straight monthly increases, likely as businesses stocked up amid an escalating trade war between the US and China. “It is possible that some of the consumer goods imports were brought into the country in greater numbers to build a stockpile before the import tariffs took effect or grew even worse,” said Chris Rupkey, chief economist at MUFG in New York. “The good news is this will temporarily boost real GDP in the 4Q.” The trade deficit dropped 11.5% to USD49.3bn in Nov. It had increased for five straight months. (Reuters)

US: Possible next Fed move is a cut if global growth continues to slow, Janet Yellen said. The Federal Reserve's next move may well be an interest rate cut if weakening growth around the world starts infecting the US economy, former central bank Chair Janet Yellen said Wednesday. Weakening economies in China and Europe are posing danger to an otherwise strong US economy, Yellen said. "Of course it's possible. If global growth really weakens and that spills over to the US where financial conditions tighten more and we do see a weakening in the US economy, it's certainly possible that the next move is a cut," she said. "But both outcomes are possible." The former central bank head cited "slowing global growth" as the biggest threat to the economy she once watched over. (CNBC)

US, China: Steven Mnuchin says trade talks 'very productive' so far, confirms he's headed to Beijing next week. Treasury Secretary Steven Mnuchin expressed confidence on Wednesday in the progress of trade talks with China and said he and a US delegation are heading to China next week with the intent to make a deal before a March deadline. "We are committed to continue these talks," Mnuchin said." "We're putting in an enormous amount of effort to hit this deadline and get a deal. That's our objective." Mnuchin said the administration had "very productive meetings" with Chinese Vice Premier Liu He. The White House has set a March 2 deadline to iron out myriad issues with Chinese over trade. (CNBC)

US, China: Trump says trade deal with China must include structural change. President Donald Trump in his State of the Union address said a trade deal with China will have to address not only what he called the chronic US trade deficit but also changes in Chinese policies to protect American workers and businesses. “I have great respect for President Xi, and we are now working on a new trade deal with China,” he said Tuesday at the Capitol in Washington, referring to his Chinese counterpart Xi Jinping. “But it must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.” (Bloomberg)

EU: German factory orders decline again signaling sluggish start to 2019. Germany's factory orders unexpectedly decreased for a second straight month in Dec and at a faster pace, on the back of weak demand from abroad, suggesting that the slowdown in the manufacturing continued and the sector likely had a sluggish start to this year. Manufacturing orders decreased a calendar and seasonally adjusted 1.6% from the previous month, preliminary data from the Federal Statistical Office showed on Wednesday, while they were forecast to rise 0.3%. The latest fall was the most since June, when orders shrunk 3.6%. "The decline in orders in Dec indicates that the drought in the industry is continuing for the time being," the economy ministry said. "The latest sentiment indicators also point to a subdued industrial economy at the beginning of the year." (RTT)

EU: Italy construction sector growth at 8-month low. Italy's construction sector grew at the weakest pace in eight months in Jan, survey results from IHS Markit showed on Wednesday. The IHS Markit Construction PMI fell to 51.8 in Jan from 52.8 in Dec, the weakest expansion since May 2018. Any reading above 50 indicates an expansion in the sector, which expanded for a tenth successive month. Activity increased in all three broad sectors for the fourth successive month. Civil engineering activity contracted for the second month running, at a softer pace than in Dec. Weaker growth was recorded in the commercial and residential sectors. (RTT)

India: New central bank chief looks likely to signal rate cuts. The Reserve Bank of India headed by a new chief, Shaktikanta Das, will probably drop its hawkish bias on Thursday, the first step toward a possible interest-rate cut this year as inflation drifts lower and the economy slows. The repurchase rate will probably be kept steady at 6.5%, according to 32 of the 43 economists surveyed by Bloomberg as of Wednesday, with the rest expecting a 25 basis-point reduction. Real interest rates in India are among the highest in Asia, and calls for the first cut in the policy rate since Aug 2017 have been growing. (Bloomberg)

Thailand: Central bank holds rate steady after Dec hike. Thailand's central bank left its key interest rate unchanged in Jan, after raising it in Dec for the first time in over seven years, citing future risks to financial stability. The Monetary Policy Committee voted 4 -2 to maintain the policy rate at 1.75%, the Bank of Thailand said. The decision was in line with economists' expectations. Two members sought a quarter-point hike in the interest rate to 2% to curb financial stability risks and to build policy space, while a policymaker did not attend the meeting. In Dec, the MPC voted 5-2 to raise the policy rate by a quarter-point to 1.75%, which was the first hike since Aug 2011, when the bank had lifted the rate by 25 basis points to 3.5%. (RTT)


AirAsia (Outperform, TP: 4.14), MAHB: AirAsia Malaysia's CEO slams MAHB’s PSC clarification, calling it 'duplicitous and disingenuous'. AirAsia Malaysia CEO Riad Asmat has slammed Malaysia Airport Holdings (MAHB) statement on the passenger service charge (PSC), calling the airports operator’s arguments “duplicitous and disingenuous”. The statement by MAHB did not clarify on the PSC, but rather further muddied the waters in relation to the increased airport tax at the KLIA2, which AirAsia Group has refused to collect in the interest of its passengers. (The Edge)

CMSB: Revises dividend policy to 30% of PATNCI, from 40% previously. Cahya Mata Sarawak (CMSB) has revised its dividend policy to a minimum of 30% of its annual consolidated profit after tax and non-controlling interests (PATNCI) to shareholders, or subject to a minimum of 2sen per share. Its present dividend policy as stipulated in its annual report is a net payout ratio of 40% of its annual consolidated PATNCI to shareholders, subject to a minimum of 2sen per share. (The Edge)

CCM: Secures RM50m financing for its Pasir Gudang project. Chemical Company of Malaysia has accepted an Islamic financing facility of RM50m from OCBC Al-Amin Bank to part finance its Pasir Gudang Works Plant 1 (PGW1) reactivation project. The PGW1 reactivation project was expected to increase the production capacity for chlor alkali products by about 50% and would potentially fill in the gap in the market, which is currently met by imports, thereby increasing CCMC’s market share. The PGW1 reactivation project is currently in progress and is expected to be completed and commence production in the 2Q of this year. (The Edge)

Gunung Capital: Gets letter of award to improve estate in Sarawak. Gunung Capital has received a letter of award from Jendala Padu SB for a profit-sharing pilot-project (LOA) to improve the yield of the Pandan Land Bintulu Palm Oil Estate. The six-month LOA tenure is from Feb 1, 2019 to July 31, 2019. Gunung Capital has the option to automatically extend the tenure for an additional tenure of up to 15 years by written confirmation to Jendala Padu. Gunung Capital shall perform the project management with the degree of professional skill, care and diligence expected of a consultant experienced in providing the same or similar services. (The Edge)

SEC: Enters JV deal for property project. SC Estate Builder has entered into a joint venture (JV) agreement with BS Civil Engineering SB to develop 7.9h of freehold land into a mixed development in Bandar Alor Setar. SEC would develop the land owned by BS Civil, which would be paid RM9m by the developer. The mixed development would consist of apartments, low cost apartments and shoplots with an estimated GDV of about RM93m. The developer shall commence the development works within 3 months. (Bernama)

Auto (Neutral): Perodua sells 20,100 vehicles in Jan. Perodua has sold some 20,100 vehicles in the first month of 2019, including registrations of 1,025 units for its recently launched Aruz sport utility vehicle on the last day of Jan. Despite the delay in the registration of Aruz, the second national car maker managed to maximise the delivery of the model up to the wee hours, in anticipation of the long Chinese New Year break. Pending official figures from the Malaysian Automotive Association, Perodua estimates its market share for Jan 2019 to be around 41.7%, and a 9.2% growth from 18,400 in Dec 2018. (The Edge)

Market Update

The FBM KLCI might struggle to edge higher today after sign of fatigue began to show on Wall Street following a five-day run of gains for the S&P 500 as participants digested a mixed batch of earnings and found little to get excited about in Donald Trump’s State of the Union speech on Tuesday.

Meanwhile, fresh concerns over the outlook for the German economy helped knock the euro back below the $1.14 level.

On Wall Street, the S&P 500 ended 0.2% lower at 2,731, after rising 3.7% over the previous five sessions. The Nasdaq Composite fell 0.4% and the Dow Jones Industrial Average eased 0.1%. In Europe, the pan-regional Stoxx 600 index ended 0.2% higher, even as the Xetra Dax in Frankfurt fell 0.4% and London’s FTSE 100 slipped 0.1%. Italian stocks continued to gain ground, with the FTSE MIB rising another 0.8%. Back home Monday, the FBM KLCI index ended flat at 1,683.61 points. Trading volume decreased to 1.04bn worth RM880.7m. Market breadth was positive with 385 gainers as compared to 280 losers. Market sentiment was subdued in the half day trading session of Chinese New Year eve.

The regional markets mostly advanced on Wednesday following a rally on Wall Street led by technology companies. There was little if any immediate reaction to President Donald Trump’s State of the Union address. Japan’s Nikkei 225 index gained 0.3% early Wednesday. Australia’s S&P ASX 200 also climbed 0.5%. Markets in Hong Kong, mainland China and most of Southeast Asia were closed for lunar New Year holiday

Source: PublicInvest Research - 7 Feb 2019

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