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PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 25 Jun 2019, 11:52 AM

 

PublicInvest Research Headlines - 22 Feb 2019

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Economy

US: Existing home sales fall sharply to three-year low. US home sales fell in Jan to their lowest level in more than three years and house prices rose only modestly, suggesting a further loss of momentum in the housing market. The National Association of Realtors said on Thursday existing home sales dropped 1.2% to a seasonally adjusted annual rate of 4.94m units last month. That was the lowest level since Nov 2015 and well below analysts’ expectations of a rate of 5.0m units. Dec’s sales pace was revised slightly higher. The drop in Jan came after months of weakness in the US housing market. Existing home sales were down 8.5% from a year ago. The US housing market has been stymied by a sharp rise in mortgage rates since 2016 as well as land and labor shortages. That has led to tight inventory and more expensive homes. At the same time, the 30-year fixed mortgage rate has dipped in recent months and house price inflation is slowing. The median existing house price increased 2.8% from a year ago to USD247,500 in Jan. That was the smallest increase since Feb 2012. (Reuters)

US: Weekly jobless claims fall, but trend weakening. The number of Americans filing applications for unemployment benefits fell last week, but the four-week moving average rose to a more than one-year high, suggesting the labor market was slowing down. Initial claims for state unemployment benefits dropped 23,000 to a seasonally adjusted 216,000 for the week ended Feb 16, the Labor Department said on Thursday. But the Labor Department said claims for California, Virginia, Hawaii and Puerto Rico were estimated last week because of Monday’s Presidents’ Day Holiday. That could have exaggerated the drop in claims. Economists polled by Reuters had forecast claims falling to 229,000 in the latest week. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 4,000 to 235,750 last week, the highest level since Jan 2018. (Reuters)

EU: Germany inflation confirmed at 11-month low. Germany's consumer price inflation slowed in Jan to its lowest level in nearly a year, latest data from Destatis confirmed on Thursday. The consumer price index advanced 1.4% YoY in Jan, slower than the revised 1.6% increase in Dec. On a MoM basis, the consumer prices fell 0.8%. Prices edged up 0.1% in Nov. The flash estimates for both annual and monthly changes were thus confirmed. The main reason for the inflation rate being lower than in the previous month was the development of energy product prices, the statistical office said. Energy price inflation slowed to 2.3% from 4.9% in Dec. Excluding energy prices, the inflation rate rose 1.3% in Jan. Food prices rose 0.8% YoY. Clothing and footwear prices grew 1.4%. (RTT)

China: PBOC sees benchmark rate cut as last resort, may use other tools. China’s central bank is not yet ready to cut benchmark interest rates to spur the slowing economy, despite cooling inflation and a stronger yuan, which have fanned market expectations of such a move, policy sources told Reuters. But the PBOC is likely to cut market based rates and further lower banks’ reserve ratios (BRR) to boost credit growth and reduce firms’ borrowing costs, according to the sources. “We cannot rule out a (benchmark) rate cut, but we still need to watch economic data for a few months,” one said. “There is no sufficient reason for cutting benchmark rates if we look at the huge amount of new loans in Jan.” China’s trading partners and major central banks are increasingly concerned over how quickly the world’s second largest economy is decelerating and how much it will drag on global growth. (Reuters)

Japan: Manufacturing sector falls into contraction in Feb. The manufacturing sector in Japan slipped into contraction in Feb, the latest survey from Nikkei revealed on Thursday with a 32-month low manufacturing PMI score of 48.5. That's down from 50.3 in Jan, and it sinks beneath the boom-or-bust line of 50 that separates expansion from contraction. Individually, deterioration in the manufacturing sector reflected stronger falls in production and new orders. Backlogs, new export orders, stocks of purchases and stocks of finished goods also contracted. Future output expectations turned negative for the first time since Nov 2012. (RTT)

Markets

Axiata (Neutral, TP: RM3.85), TM (Neutral, TP: RM3.40): Celcom wins contract to provide 4G MOCN to TM's subsidiary webe. Celcom Axiata has bagged a related party award from Telekom Malaysia (TM) to provide the 4G Multi-Operator Core Network to TM's subsidiary webe digital SB. (The Edge)

Comment : Earlier in January 2016, Celcom, a subsidiary of Axiata Group, has entered into a collaboration with TM where Celcom would provide 2G and 3G domestic roaming services to webe. In return, TM would provide wholesale high speed broadband access to Celcom. We believe this 4G network sharing is just an extension from the previous collaboration for Celcom to provide a complete wireless network access to TM. Although this is expected to generate new earnings stream to Axiata, we also reckon that it could introduce new and greater competition into the mobile business as webe would be able to rollout long-term evolution services more aggressively, leveraging on Celcom’s nationwide network and coverage. We maintain our Neutral rating on Axiata and Trading Buy call on TM.

Ranhill: To export power to southern Thailand from Kedah. Ranhill Holdings (Ranhill) and Thailand-based Treasure Specialty Company Ltd (TS Co) will jointly develop a 1,150 megawatt combined cycle gas turbine power plant in Kedah for power export to Southern Thailand. Upon completion, the power plant is expected to dispatch 100% of its generation capacity through a dedicated transmission line to a substation in southern Thailand. (The Edge)

Inari: 2Q net profit down 19.7%, declares 1.5sen dividend. Inari Amertron 2Q net profit fell 19.71% to RM55.09m from RM68.61m a year ago, mainly due to lower revenue volume and changes in product mix. EPS for the 2QFY19 dropped to 1.73sen from 2.23sen previously. Revenue fell 20.17% to RM300.15m, from RM375.96m in the previous corresponding quarter. (The Edge)

Pharmaniaga: 4Q net profit plunges 80%, declares lower dividend. Pharmaniaga 4Q net profit plunged 80% to RM4.44m, from RM21.7m a year ago, mainly due to lower demand coupled with higher finance costs. EPS for the quarter ended Dec 31, 2018 fell to 1.71sen from 8.36sen previously. Revenue was also lower by 3% at RM596.64m compared with RM613.2m a year ago. (The Edge)

MPI: 2Q net profit down 4.8% to RM39.23m. Malaysian Pacific Industries (MPI) net profit for the 2Q ended Dec 31, 2018 slid 4.8% to RM39.23m, from RM41.2m a year earlier. EPS fell to 20.64sen from 21.69sen. Revenue, however, rose marginally by 0.7% to RM398.16m from RM395.25m in the previous year. MPI attributed the higher revenue to an 8% increase in revenue for the Asia segment. (The Edge)

Construction (Neutral): China's ECRL negotiation team to visit Malaysia this month — Daim. A negotiation team of the China government is expected to visit Malaysia shortly for further discussion on Malaysia’s derailed East Coast Rail Link (ECRL) project, said Council of Eminent Persons (CEP) chairman Tun Daim Zainuddin. “Let's put it this way, we are still negotiating. Actually, they will come to Malaysia this month. They invited me to China last time, but I could not make it, that's why I’m inviting them to come to Malaysia,” he said. (The Edge)

Market Update

The FBM KLCI might open lower today after the broad rally in global stocks paused on Thursday, as investors waited for a breakthrough in US-China trade talks. Investors’ focus on the talks has sharpened as the deadline of March 1 nears, when US tariffs on $200bn of Chinese imports will jump from 10 percent to 25 percent unless the world’s two largest economies reach an agreement. The S&P 500 closed 0.4% lower in New York, with weaker US economic data doing little to help sentiment. The latest reading from the Philadelphia Federal Reserve’s business index swung into negative territory in February. The Dow Jones Industrial Average and Nasdaq Composite both closed 0.4% lower. The FTSE 100, London’s blue-chip index, underperformed global equities as it was weighed down by a number of disappointing results for some of the market’s biggest companies. The index finished 0.9% lower. Other European equities ended the day mixed, with the Stoxx 600, a benchmark for the region, finishing 0.3% lower. France’s CAC 40 was flat while Spain’s IBEX 35 gained 0.1% and the German DAX dropped by 0.6%.

Back home, the FBM KLCI index gained 4.50 points or 0.26% to 1,730.68 points on Thursday. Trading volume decreased to 3.71bn worth RM3.00bn. Market breadth was positive with 509 gainers as compared to 398 losers. The regional markets finished mixed with the Hang Seng gained 0.41% and the Nikkei 225 rose 0.15%. The Shanghai Composite lost 0.34%.

Source: PublicInvest Research - 22 Feb 2019

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