PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 13 Dec 2019, 10:07 AM


PublicInvest Research Headlines - 13 Mar 2019

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US: Slowing economy keeping US inflation under wraps. US consumer prices rose for the first time in four months in Feb, but the pace of the increase was modest, resulting in the smallest annual gain in nearly 2-1/2 years. The report from the Labor Department also showed benign underlying inflation last month, which together with slowing economic growth support the Federal Reserve’s “patient” approach towards further interest rate increases this year. The Consumer Price Index increased 0.2%, lifted by gains in the costs of food, gasoline and rents. The CPI had been unchanged for three straight months. In the 12 months through Feb, the CPI rose 1.5%, the smallest gain since Sept 2016. The CPI increased 1.6% YoY basis in Jan. Excluding the volatile food and energy components, the CPI edged up 0.1%, the smallest increase since Aug 2018. (Reuters)

US: Keeps China tariff threat open as talks near final stage. President Donald Trump’s top trade negotiator said the US must keep the option of raising tariffs on Chinese imports as a way to ensure Beijing lives up to a trade agreement that could be finalized in a matter of weeks. “We have to maintain the right to be able to whatever happens to the current tariffs to raise tariffs in situations where there are violations of the agreement,” U.S. Trade Representative Robert Lighthizer said Tuesday in testimony before the Senate Finance Committee. “I can’t predict success at this point, but we’re working hard and we have made real progress.” Under questioning from Democratic Senator Ron Wyden, Lighthizer declined to say the administration will roll back US tariffs if it reaches a deal with the Chinese. “That’s still a subject matter of negotiation,” Lighthizer said. (Bloomberg)

UK: Jan economic growth beats forecast. The UK economy expanded at a faster-than-expected pace in Jan, supported by growth in all main sectors such as manufacturing, services and constructions, preliminary figures from the Office for National Statistics showed. GDP grew 0.5% MoM in Jan after a 0.40% decline in Dec. Economists had expected a 0.20% increase. In Nov, GDP grew 0.2% monthly. On a 3Mo3M basis, GDP rose 0.20% in Jan, which was in line with economists' expectations. Across the latest three months, growth remained weak with falls in manufacture of metal products, cars and construction repair work all dampening economic growth. These were offset by strong performances in wholesale, IT and health services. Industrial production rose 0.6% from Dec, when it fell 0.5%. Economists were looking for a 0.20% growth. (RTT)

EU: Greece inflation rises in Feb. Greece's consumer price inflation rose in Feb after easing in the previous month, data from the Hellenic Statistical Authority showed. The consumer price index rose 0.6% YoY in Feb after a 0.4% climbs Jan. In Dec, inflation was 0.6%. The biggest increase was in communication, where costs rose 6.2% annually, followed by a 2.1% rise in prices of food and non-alcoholic beverages. Meanwhile, clothing and footwear decreased the most, down 2.7% in Feb. On a monthly basis, consumer prices edged up 0.1% in Feb, after a 1.8% decline in the previous month. The harmonized index of consumer prices, or HICP, rose 0.8% YoY in Feb after a 0.5% increase in Jan. The latest inflation rate was the fastest in three months. Compared to the previous month, the HICP edged up 0.3% after a 1.3% decrease in Jan. (RTT)

India: Inflation quickens as focus shifts to april rate cut. India’s inflation rebounded in Feb, but was still benign enough to support calls for the central bank to lower interest rates at next month’s monetary policy meeting. Consumer prices rose 2.57% last month from a year earlier, the Statistics Ministry said in a statement. That compares with the 2.4% median estimate in a Bloomberg survey of 34 economists. Inflation has slowed sharply since last year because of a fall in food prices, and remains well below the Reserve Bank of India’s 4% medium-term target. The central bank is forecasting inflation of 2.8% in the Jan-March quarter. This is the last inflation print before the April 4 interest-rate decision and ahead of general elections that kick off next month. Calls are growing for the RBI to lower interest rates again after it surprised with a 25 basis-point reduction in Feb. (Bloomberg)

Japan: Machinery orders decline more than expected in Jan. Japan’s machinery orders dropped more than expected, adding to data that show trade tensions and cooling external demand are taking a toll on the nation’s export-dependent economy. Core machine orders fell 5.4% in Janfrom the previous month, a third straight decline. That compares with economists’ median estimate of a decline of 1.5%. Orders dropped 2.9% on year. Machine orders are volatile, yet the results follow grim numbers on industrial production, exports and manufacturing sentiment in suggesting a first-quarter slowdown for capital expenditure. Separate figures for machine tool orders in Feb fell by the most since 2009. The risks are skewed to the downside, particularly for the auto sector, given uncertainty over how US-Japan trade talks will play out this spring. (Bloomberg)

Singapore: Retail sales rebound tops expectations. Singapore's retail sales increased at a faster-than-expected pace in Jan, after falling sharply in the previous month, figures from the Department of Statistics showed. Retail sales rose 7.6% YoY in Jan, reversing a 5.8% fall in Dec. Economists had expected a 2.6% rise. Sales of motor vehicles alone grew 20.0% from last year, reversing the 20.7% slump in Dec. The massive growth in Jan was attributable to the Motor Show event. Higher demand due to the pre-Chinese New Year festive season led to sales growth of between 8% and 10.5% in clothes and footwear, medical goods and toiletries, department stores, supermarket and hypermarkets, and food retailers. In contrast, sales of computer and telecommunications equipment decreased 11.5%, partly due to weaker demand for mobile phones. (RTT)


Sime Darby Plantation (Underperform, TP: RM4.03): Looks downstream for growth. Sime Darby Plantation plans to boost its refining capacity and produce more higher-margin products in a bid to cut its exposure to volatile palm oil prices. Plantation company profits were hammered last year by a 15% fall in benchmark palm oil prices to a three-year low. Prices are expected to recover this year, but only by 3%. "You see high levels of volatility impacting your bottom line because of market prices. Downstream, on the other hand, is a bit more consistent," said CEO downstream of Sime Darby Plantation. (The Edge)

T7 Global: Bags contracts from Petronas Carigali, Vestigo. T7 Global has received a letter of award from Petronas Carigali SB to provide splash zone structural repair and maintenance. Its unit Tanjung Offshore Services SB (TOS) had received the letter of award dated Dec 24, 2018. It added the contract was for two years, starting from Jan 2 with an option to extend for one additional year exercisable by TOS. T7 Global also said its subsidiary of Fircroft Tanjung SB had received a letter of award for umbrella contract to provide manpower services from Vestigo Petroleum SB. (Star Biz)

Matrix Concepts: Plans private placement to raise up to RM147m for Indonesian venture. Matrix Concepts Holdings has proposed to raise up to RM147m via a private placement to third party investors, to fund its Indonesian financial district development joint venture (JV). The proposed private placement will involve the issuance of up to 75m shares, to a major shareholder or Chief Executive of Matrix Concepts, and nominee corporations. However, the identity of the placee(s), the number of placement shares, as well as the issue price for the placement shares are yet to be determined and finalised by the board, it said. (The Edge)

Ekovest, PLS Plantations: Ekovest buys stake in PLS Plantations from Executive Chairman Lim Kang Hoo. Ekovest is buying a 23.42% stake in PLS Plantations for RM76.5mil from a company controlled by its executive chairman Tan Sri Lim Kang Hoo. The purchase price works out to RM1 per PLS share. PLS is involved in management and operation of forest plantation and oil palm plantation in Johor. The proposed acquisition is being carried out to transform Ekovest into a larger listed conglomerate with a larger portfolio of diversified businesses,” Ekovest said. (Star Biz)

JCY: Gets RM81m compensation for property relocation in China. JCY International (JCY) has agreed to receive RMB133.30m (RM81.05m) as compensation for the relocation of its properties in China’s Suzhou Wuzhong Economic Technology Development Area. The proposed acceptance of relocation compensation is in line with the needs of Jiangsu Province for properties upgrade in Wuzhong Chemical Industrial Park. JCY expects pre-tax gain from the acceptance of compensation to be around RMB20.64m (RM12.55m), after taking into account the expected direct and consequential costs. JCY said the proceeds will be kept as a capital reserve for future investment purposes. (The Edge)

Market Update

The FBM KLCI might open with positive bias today after US stocks rose for a second consecutive day, while US Treasuries also rallied, as investors digested a weak inflation reading and news that UK’s parliament defeated Prime Minister Theresa May’s revised Brexit plan. The S&P 500 gained 0.3% a day after snapping a five-session losing streak, which was its longest since November. The tech-heavy Nasdaq Composite advanced 0.4%. The Dow Jones Industrial Average, down 0.4%, again came under pressure from a sell-off in shares of Boeing. The jet maker fell 6.2%, notching its worst two-day run since June 2009, as more airlines and countries grounded 737 Max 8 flights following an Ethiopian Airlines plane crash on Sunday. Data this morning showing US consumer prices rose in February at their slowest pace in two and a half years buoyed US government bonds, with expectations the Federal Reserve may have to keep interest rates lower for longer helping drag yields lower.

Across the Atlantic, Britain’s benchmark stock index rose while the pound weakened as the Brexit process twisted and turned ahead of Tuesday’s parliamentary vote, which ultimately went against an updated deal for the UK’s exit from the EU. The FTSE 100 index closed 0.3% higher.

Meanwhile, Germany’s DAX added 0.4% and France’s CAC 40 tacked on 0.08%.

Back home, the FBM KLCI climbed 6.65 points or 0.4% today to close at 1,671.2. Trading volume stood at 3.02bn shares with a value of RM2.1bn. Oil and gas counters Sapura Energy Bhd, Bumi Armada Bhd and Velesto Energy Bhd were the most-actively traded stocks. Top gainers included KLCI stocks Public Bank Bhd and Press Metal Aluminium Holdings Bhd.

In the region, Japan’s Topix was the best performer in the Asia-Pacific region on Tuesday, up 1.5%, its best day in a month. The Hang Seng index and China’s CSI 300 rose 1.5% and 0.7% respectively after China’s state news agency reported that Vice Premier Liu He had held a telephone call with Robert Lighthizer, US trade representative and Steven Mnuchin, Treasury secretary on trade.

Source: PublicInvest Research - 13 Mar 2019

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