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PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 18 Nov 2019, 9:59 AM

 

PublicInvest Research Headlines - 11 Mar 2019

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Economy

US: Feb job growth weakest in nearly one and a half years. US employment growth almost stalled in Feb, with the economy creating only 20,000 jobs, adding to signs of a sharp slowdown in economic activity in the 1Q. The meager payroll gains reported by the Labor Department were the weakest since Sept 2017, with a big drop in the weather-sensitive construction industry. They also reflected a decline in hiring by retailers and utility companies as well as the transportation and warehousing sector, which is experiencing a shortage of drivers. The sharp step-down in payrolls was another blow to President Donald Trump who has suffered a series of setbacks in recent weeks, including failed nuclear talks with North Korea, a record goods trade deficit despite his administration’s “America First” policies and the economy missing the White House’s 3% annual growth target in 2018. (Reuters)

US: Fed's Powell says no immediate policy responses needed to economy. The Federal Reserve does not see problems in the US economy that warrant an immediate change in its policy, and it will be careful not to shock financial markets as it stabilizes its bond portfolio, Fed Chair Jerome Powell said. The US central bank is nearing a major milestone in its efforts to unwind economic stimulus measures enacted to fight the 2007-09 recessions. In a wide-ranging speech at Stanford University, the Fed was “well along” in discussions on a plan to end a runoff of its balance sheet, which ballooned during and after the recession. While there were “cross-currents” pointing to economic risks, none were flashing warning signals serious enough for the Fed to change its interest rate policy stance. (Reuters)

US: Housing starts rebound much more than expected in Jan. After reporting a steep drop in new residential construction in the US in the previous month, the Commerce Department released a report showing housing starts rebounded by much more than anticipated in the month of Jan. The report said housing starts soared by 18.6% to an annual rate of 1.230m in Jan after plunging by 14.0% to a revised rate of 1.037m in Dec. Economists had expected housing starts to jump by 11% to a rate of 1.197m from the 1.078m originally reported for the previous month. Single-family housing stars surged up by 25.1% to a rate of 926,000 in Jan. (RTT)

EU: German factory orders unexpectedly fall in Jan. German factory orders sharply dropped in Jan at the fastest pace in seven months, defying expectations for further gains, mainly due to a slump in external demand, preliminary data from the Federal Statistical Office showed. Manufacturing orders decreased a seasonally and calendar adjusted 2.6% MoM, while economists were looking for a modest 0.5% gain. The latest fall in orders was the worst since a 3.6% slump in last June. After considering major orders received subsequently, Dec's 1.6% decline in orders was revised to a 0.9% increase. (RTT)

UK: BOE tells some UK lenders to triple amount of liquid assets before Brexit. The Bank of England has told some UK lenders to triple the amount of easy-to-sell assets they hold to help them weather any no-deal Brexit crisis, the Financial Times reported, citing people familiar with the situation. The BOE has told some lenders to hold enough liquid assets to be able to cope with stress of 100 days, instead of the regular 30 days that BOE’s Prudential Regulation Authority rules demand, the FT reported. A Bank of England spokeswoman said the central bank had no immediate comment. (Financial Times)

China: Exports plunge at fastest pace in 3 years. China's exports dropped the most in three years in Feb, eclipsing economists’ expectations, mainly due to the tariffs-driven sharp fall in trade with the US and also because of a shift in the timing of the Chinese New Year. Exports tumbled 20.7% YoY, which was the biggest fall since Feb 2016, official customs data showed Friday. The fall was much bigger than the 4.8% slump economists had expected. In Jan, exports grew 9.1%. This year, the Lunar New Year was earlier in Feb than in the previous year, when it began in the middle of the month. Hence, Jan trade figures were better due to front-loading of order ahead of the New Year holidays. (RTT)

China: Central bank pledges more policy support as bank lending slides. China’s central bank on Sunday pledged to further support the slowing economy by spurring loans and lowering borrowing costs, following data that showed a sharp drop in Feb’s bank lending due to seasonal factors. The central bank is widely expected to ease monetary policy further this year to encourage lending especially to small and private firms vital for growth and job creation. The central bank’s “prudent” monetary policy will emphasize on counter-cyclical adjustments, said People’s Bank of China (PBOC) Governor Yi Gang, using a phrase that implies the need to fight an economic slowdown. (Reuters)

China: Factory prices stabilize in february amid deflation risk. China’s factory price growth remained steady in Feb at a close-to-zero reading that signals the continued risk of deflation in the world’s second largest economy. The producer price index rose 0.1% in Feb from a year earlier, while the consumer price index rose 1.5%, according to the National Bureau of Statistics. That was compared to estimates of 0.2% and 1.5% respectively. In line with the global low-inflation environment, China’s producer prices and consumer prices have slowed since late last year, adding to the pressure on company profits and debt repayments. (Bloomberg)

India: Central Bank is having trouble getting banks to cut rates. Indian lenders haven’t fully passed on the central bank’s latest interest rate cut to borrowers, pressuring the monetary authority to loosen policy even more to support economic growth. A mismatch between deposits and credit growth, and competition from the government for small savings mean banks face a high cost of capital, limiting their ability to transmit monetary policy easing. Bankers say the Reserve Bank of India’s 25 basis-point reduction in the repurchase rate to 6.25% in Feb was a start, but was probably too little to have any impact on lending rates just yet. Latest data from the central bank shows the main overnight lending rate offered by commercial banks has been sticky in a range of 8.15% to 8.55% since the beginning of the year. (Bloomberg)

Markets

Yong Tai (Neutral, TP: RM0.55): To raise up to RM17m via private placement. Yong Tai has proposed to raise up to RM17.1m via a private placement to third-party investors to be identified later, which will be used to partly finance some of its projects. The group said the proposed private placement will involve the issuance of up to 51.82m shares. The group could raise between RM16.03m and RM17.1m. (The Edge) Comments : Timing of this placement exercise comes as a sight surprise considering the Group’s weak share price near all-time lows and the relatively small amount raised as a result, though proceeds raised may be very much needed. Our confidence in the Group depends on the speed in which it manages to turn around its Encore Melaka which is being dragged by lower-than-expected ticket sales. Our Neutral call and RM0.55 target price is retained.

Daya Materials (Neutral, TP: Under Review): Given more time until Aug 27 to submit its regulatory plan. PN17 company Daya Materials has been granted an extension by Bursa Malaysia up till Aug 27 to submit a regularisation plan to the authorities. However, Daya Materials said the extension is without prejudice to Bursa’s right to proceed to suspend the trading of the listed securities and to de-list the company. (The Edge)

Sime Darby Plantation (Underperform, TP: RM4.03): Winds up Indian unit. Sime Darby Plantation (SDP) said that its local unit in India will go into voluntary liquidation, after ceasing its business operations since Jan last year. Sime Darby Edible Products India Pte Ltd (SDEPI) held its extraordinary general meeting at which it was resolved that it would be wound-up voluntarily and that Neeraj Parmar, an insolvency professional, be appointed as the liquidator. SDEPI was involved in market support services. It is currently dormant. (The Edge)

Econpile: Unit bags RM69m Putrajaya contract. Econpile (M) SB has bagged a RM68.8m contract from Niaz Enterprises (M) SB to undertake piling, pilecap and basement works for a proposed integrated development in Precinct 8, Putrajaya. Econpile Holdings said the proposed integrated development comprised residential towers, podium block, retail space, serviced apartments, common facilities, high street, facilities block for serviced apartments, facility floor, a show gallery, event hall, promenade, basement and elevated parking. (StarBiz)

Uni Wall, AZRB: Bags RM32.14m job from AZRB. Uni Wall APS has announced its contract win with a RM32.14m sub-contract from Ahmad Zaki Resources (AZRB). The contract is for the supply and installation of aluminium and glazing works for the Mass Rapid Transit 2 project, specifically for the construction and completion of elevated stations and other associated works at Serdang Raya (South), Seri Kembangan and UPM. (The Edge)

Seacera: To sell stake in construction unit in streamlining move. Seacera Group is disposing of a 60% stake in its 80%-owned construction outfit Spaz SB for RM12m cash. The disposal is in line with the group's strategic direction to streamline and restructure its operation in order to focus on businesses that are viable and profitable in the mid to long term. The expected gain on the disposal is approximately RM8m based on Seacera's original investment cost in SPAZ of RM16m. (The Edge)

Market Update

The FBM KLCI might open lower today after worries about faltering global growth intensified on Friday after US jobs data significantly missed forecasts, adding to the trend for weak global economic data and deepening concern about the impact of the trade war. Global stocks chalked up their biggest weekly drop since early December, while the dour mood sent investors scurrying for the relative safety of government debt, handing US Treasuries their biggest weekly rally in three months. On Friday, the dollar took a hit and US stocks fell after non-farm payrolls grew by only 20,000 posts in February, short of forecasts of 180,000. The index tracking the world’s reserve currency fell by 0.3 percent after the data. The S&P 500 recovered early declines to finish 0.2% lower, but its fifth straight down day represented the index’s longest losing streak since late November. Down 2.2% over the past five sessions, the benchmark had its biggest weekly drop since December 21 and has trimmed its 2019 gain to 9.4%. The Dow Jones Industrial Average bounced off intraday lows to slide 22.99 points, or 0.1%, to 25,450.24 and the Nasdaq Composite Index dropped 13.32 points, or 0.2%, to 7,408.14, marking its weakest stretch since April. Europe’s Stoxx 600 was down 0.9% after weak German industrial production data followed the ECB’s cut to its growth forecasts and its return to crisis-era stimulus policy offering cheap wholesale financing to banks to boost lending. The U.K.’s FTSE 100 slipped 0.7% to 7,104.31, while Germany’s DAX fell 0.5% to 11,457.84. France’s CAC 40 dropped by 0.7%.

Back home, the FBM KLCI index lost 7.05 points or 0.42% to 1,679.90 points on Friday. Trading volume decreased to 2.61bn worth RM2.22bn. Market breadth was negative with 328 gainers as compared to 524 losers. The regional markets finished sharply lower on Friday with shares in China leading the region. The Shanghai Composite lost 4.40% while Japan's Nikkei 225 was off 2.01% and Hong Kong's Hang Seng was lower by 1.91%.

Source: PublicInvest Research - 11 Mar 2019

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