PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 12 Dec 2019, 9:19 AM


PublicInvest Research Headlines - 7 Mar 2019

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Global: OECD cuts global outlook again and warns worse may be ahead. The global economy is suffering more than expected from trade tensions and political uncertainty which are clouding prospects particularly in Europe, according to a gloomy report from the OECD. As these are the organization’s first forecasts in almost four months, it’s partly playing catch-up with developments since then. In that period, little has gone right for the world’s biggest economies: Weakness in the euro area and China are proving more persistent, trade growth has slowed sharply and uncertainty over Brexit has continued. “The global expansion continues to lose momentum,’’ the Paris-based OECD said as it downgraded almost every Group of 20 nation’s economy. “Growth outcomes could be weaker still if downside risks materialize or interact.” The OECD’s numbers are more downbeat than the IMF’s for many economies, particularly the euro region and the UK, as the organization warns that things could get worse. (Bloomberg)

US: Fed's Williams says slower growth is a 'new normal'. Slower US economic growth is not necessarily “cause for alarm” but a “new normal” people should expect, a top Federal Reserve official said on Wednesday, adding that he is not leaning one way or another on where rates should go. New York Fed President John Williams has slightly marked down forecasts for economic growth to around 2% as violent markets late last year constrain consumer and business spending now. But Williams said that the “as-good-as-it-gets” result would be right on target with the potential growth in the US, lower than prior years because of slower gains in worker productivity and a declining workforce. That justifies current interest rates, he said, which are at a “neutral” level that neither encourages nor discourages economic activity. “I want to see wage growth higher; it’s a sign of a strong economy,” rather than a harbinger of troubling inflation, Williams said. (Reuters)

US: Trade gap surged to USD621bn in 2018, 10-year high. The US trade deficit widened in 2018 to a 10-year high of USD621bn, bucking President Donald Trump’s pledges to reduce it, as tax cuts boosted domestic demand for imports while the strong dollar and retaliatory tariffs weighed on exports. The annual deficit in goods and services increased by USD68.8bn, or 12.5%, Commerce Department data showed Wednesday. The Dec gap jumped from the prior month to USD59.8bn, also a 10-year high and wider than the median estimate of economists. The merchandise-trade deficit with China, the principal target of Trump’s trade war, hit a record USD419.2bn in 2018. As a share of the economy, the gap widened to 3% of GDP from 2.8% in 2017. It’s still significantly smaller than in the decade before the Great Recession, when it approached 6%. (Bloomberg)

EU: Scale of ECB outlook cut is said to justify new long-term loans. ECB officials are poised to cut their economic forecasts by enough to justify another round of loans for banks, according to people with knowledge of the matter. The latest projections show extensive downgrades for inflation and economic expansion in 2019, with an assumption of a pickup toward the end of the year, said the people, who declined to be identified because such matters are confidential. The inflation outlook will be cut through 2021, they said. Despite the revisions, a full announcement on new loans may not come on Thursday. (Bloomberg)

EU: Eurozone construction activity improves in Feb. Eurozone's construction activity improved in Feb, led by upturns in commercial and infrastructure activity and stronger expansion in housing activity, survey data from IHS Markit showed on Wednesday. The Construction PMI rose to 52.6 in Feb from 50.6 in Jan. Any reading above 50 indicates an expansion in the sector. Commercial and civil engineering activity rebounded in Feb after three consecutive months of contractions for the latter. House building expanded after falling to a three-month low in Jan. New business increased at a quicker rate in Feb. Employment level rose with greater workloads. (RTT)


N2N: Inks MoU with substantial shareholder to set up digital asset exchange business. The group signed a MoU with 20.36%- owned SBI Holdings Inc. The parties will jointly operate a company that will become a holding company of operators of digital asset exchange for clients in the Asia Pacific region. Both parties will hold equal shareholding in each digital exchange. SBI has incorporated DigitAEx (Global Max) as the legal entity to be the operator of digital asset exchange for clients in the Asia Pacific region (other than Japan). (The Edge)

Vertice: Bags RM100m subcontract for LRT3 precast viaduct. Vertice has secured a RM100m subcontract to supply labour and equipment for the precast viaduct (u-trough girder) of the Light Rail Transit Line 3 (LRT3). The group's wholly-owned unit Vertice Construction SB (VCSB) accepted the subcontract offer from Reaptile Industry SB. Reaptile is the main contractor for the precast viaduct for the construction of the LRT3 line from Bandar Utama in Petaling Jaya to Johan Setia in Klang via Shah Alam. The two-year construction period ends on March 5, 2021. (The Edge)

Rex: Buys land in Batu Pahat to expand beverage production line. Canned food and drinks manufacturer Rex Industry has acquired a piece of freehold industrial land in Batu Pahat, Johor, for RM13m to extend its production line. The plot comes with three existing industrial buildings with an annexed two storey office and ancillary buildings, it said. It plans to use internal funds to pay for 30% of the land's, with the remainder to be funded by bank borrowings. Rex Canning intends to use the remaining space to expand its beverage production line, given its existing production line at its Penang factory is nearing full capacity. (The Edge)

GPA: Ceases personal care products trading business. GPA Holdings has ceased trading and distribution of personal care products under its subsidiary Kenola SB in order to mitigate the negative impact and losses the sector has had on the group. The business had sustained losses and was anticipated to continue incurring losses, if operations were allowed to continue. “The exceptional items relating to the cessation for FY19 (FYE March 31) financial statements are expected to be about RM1.35m. (The Edge)

Plantation (Neutral): Drier climate experienced in parts of Indonesian estates, planter says. A mild El Nino weather pattern has started forming in Indonesia, where planters have observed drier conditions in oil palm estates starting last month, especially in the Kalimantan district. Such a phenomenon could potentially boost crude palm oil (CPO) prices this year, as the drier weather typically restricts production, according to co-founder and executive chairman of Indonesian palm oil producer Triputra Agro Persada (TAP) Group Arif P Rachmat. He forecasts CPO prices to average at USD550 to USD600 a tonne in 2019. (The Edge)

Auto (Neutral): Proton sold 5,283 cars in Feb 2019. Proton Holdings has recorded 5,283 new car sales in Feb 2019. The auto manufacturer said the number represented an estimated market share of 12.7%, an increase of over 3% compared to the same month in 2018. “With February being a short month and traditional low period for car sales in Malaysia, due to CNY holidays, the majority of automotive brands projected a slower month. As at the end of February, over 20,000 bookings have been placed for Proton’s first SUV, exceeding initial expectations. (StarBiz)

Market Update

The FBM KLCI might open lower today after the S&P 500 and Dow Jones Industrial Average notched up their sixth drop in seven sessions overnight as renewed concerns about global growth weighed on investor sentiment. Data on Wednesday morning did little to help the mood, with the US private sector adding fewer jobs than expected in February and the country’s trade deficit blowing out in December to its widest in a decade. The Dow Jones Industrial Average fell 133.17 points, or 0.5%, to 25,673.46, while the S&P 500 index dropped 18.20 points, or 0.7%, to 2,771.45. The Nasdaq Composite Index declined 70.44 points, or 0.9%, to 7,505.92. European stocks were on the back foot, with investors nervous of taking the region’s indices higher without clearer signs on a breakthrough in international trade relations. The Stoxx Europe 600 was flat on at 375.69, after finishing up 0.15% on Tuesday. The German DAX and France’s CAC 40 both fell by 0.1%, dropping to 11,606.12 and 5,294.02, respectively. The FTSE 100 bucked the trend after adding 0.1% to 7,190.46.

Back home, the FBM KLCI index gained 1.20 points or 0.07% to 1,686.82 points on Wednesday. Trading volume increased to 3.16bn worth RM2.53bn. Market breadth was positive with 532 gainers as compared to 328 losers. The regional markets finished mixed with the Shanghai Composite gained 1.57% and the Hang Seng rose 0.26%. The Nikkei 225 lost 0.60%.

Source: PublicInvest Research - 7 Mar 2019

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