PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 6 Dec 2019, 9:18 AM


PublicInvest Research Headlines - 21 Mar 2019

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US: Fed now sees no rate hikes in 2019. The Federal Reserve said Wednesday it expects the benchmark rate to stay near 2.4% by the end of 2019, slashing its forecast from 2 hikes for the year to zero. The Fed said its benchmark rate will approach 2.6% in 2020 and remain at that level through 2021. In the longer run, the central bank expects rates to rise to 2.8%. Chairman Jerome Powell and the Fed have softened their approach toward interest rates after spooking markets late last year. (CNBC)

US: Fed ending its balance-sheet reduction in Sept. The Federal Reserve’s program to reduce the bonds it holds on its balance sheet will end in six months, in a move being closely watched by financial markets. In an announcement Wednesday following its two-day meeting this week, the central bank said that in May it will begin tapering the amount of proceeds it allows to roll off its balance sheet each month. Under the current program, it is allowing USD30bn in Treasury proceeds and USD20bn from mortgage-backed securities to roll off, while reinvesting the rest. The amount for Treasurys will drop to USD15bn in May. While technically still allowing the proceeds to roll off from mortgages, the Fed will simply reinvest them in Treasurys. (CNBC)

US, China: Trump says tariffs will stay until China complies with deal. President Donald Trump said he’ll keep tariffs on China until he’s sure Beijing is complying with any trade deal, refuting expectations that the two nations will agree to roll back duties as part of a lasting truce to their trade war. “We’re not talking about removing them, we’re talking about leaving them for a substantial period of time, because we have to make sure that if we do the deal with China that China lives by the deal,” Trump said. “They’ve had a lot of problems living by certain deals.” The president’s comments dim hopes that round-the-clock trade negotiations between the world’s two biggest economies could lead to them removing the roughly USD360bn in tariffs they’ve imposed on each other’s imports. Beijing has pushed the Trump administration to remove tariffs as part of any deal. (Bloomberg)

EU: German producer price inflation stable in Feb. Germany's producer price inflation was unchanged in Feb, defying expectations for an acceleration, after slowing in the previous two months, preliminary figures from the Federal Statistical Office showed on Wednesday. The producer price index rose 2.6% YoY, same as in Jan. Economists had expected a higher rate of 2.9%. Producer price inflation was last lower than the current rate in May 2018, when it was 2.5%. Among the main industrial groups, energy prices rose 7.5% after a 0.2% slump in Jan. Prices of durable consumer goods and those of capital goods climbed 1.6% each. Producer prices of intermediate goods were 1.1% higher, after a modest 0.1% fall at the start of the year. Prices of non-durable consumer goods grew 0.8%. Excluding energy, producer prices rose 1.3% YoY and edged up 0.1% from the previous month. On a MoM basis, producer prices decreased 0.1% after a 0.4% increase in Jan. Economists had forecast a 0.2% rise. (RTT)

EU, UK: EU pushes UK to brink of no-deal Brexit. Theresa May gambled on a desperate bid to get her Brexit deal approved by Parliament, as a standoff with the European Union drove Britain to the brink of an economically disastrous no-deal divorce. The deadlock over how long to delay the UK’s exit from the EU plunges the country deeper into a political crisis that now seems likely to push the Brexit endgame into the final hours before next week’s deadline. Under pressure from euroskeptic Conservatives, the prime minister formally proposed delaying Britain’s exit from the EU until June 30. But the bloc warned this limited extension will only be possible if she can persuade members of Parliament to vote for her deal in the next nine days. If she can’t, the choice will be a prolonged extension or leaving the EU without a deal. (Bloomberg)

UK: Inflation unexpectedly accelerates in Feb. UK consumer price inflation unexpectedly accelerated in Feb for the first time in six months, led by higher prices for food and alcohol, while house price inflation was the weakest in nearly six years at the start of the year. The consumer price index rose 1.9% YoY following a 1.8% increase in Jan, preliminary data from the Office for National Statistics showed on Wednesday. Economists had expected the inflation rate to remain unchanged. A modest rise in food and alcohol and tobacco prices was behind the latest acceleration in inflation, while weaker price growth in clothing and footwear offset further rise in inflation, ONS said. (RTT)

Thailand: Central bank holds key rate, cuts growth outlook as exports sag. Thailand's central bank cut its forecasts for 2019 economic growth and exports for the second time in three months on Wednesday, but kept its benchmark interest rate unchanged, saying domestic demand is picking up some of the slack. The Bank of Thailand (BOT), as expected, left the one-day repurchase rate steady at 1.75% for a second straight meeting. All 19 economists polled by Reuters had predicted no change to policy on Wednesday. "Despite a slight downward revision to economic projection, the Thai economy as a whole was expected to continue expanding around its potential on the back of domestic demand," the bank's monetary policy committee (MPC) said in a statement. "The committee viewed that the current accommodative monetary policy stance would remain appropriate," the committee said after a unanimous vote. The MPC voted 4-2 to hold the rate at its Feb review, after hiking it by 25 basis points in Dec for the first time in more than seven years. (The Star)


Serba Dinamik (Outperform, TP: RM4.69): Aims to bid for contracts worth RM20bn. Serba Dinamik Holdings plans to bid for contracts worth RM20bn across its operations this year. Of them, 60% will be in the O&G sector, followed by power generation (30%) and other sectors (10%). Group CEO Datuk Mohd Abdul Karim Abdullah said at the moment, 80-85% of its revenue was derived from the O&G segment. He said by year-end, the order book for the segment could rise to RM10bn from the current RM8.3bn. "We believe RM10 bn is a good and achievable figure and will help to put the company on a good, strong financial position," he said. (The Edge)

UEM Sunrise (Outperform, TP: RM1.10): To launch RM1.6bn worth of properties in FY19. UEM Sunrise plans to launch RM1.6bn worth of properties in FY19. The real estate developer is also targeting RM1.2bn worth of property sales during the year. MD and CEO Anwar Syahrin Abdul Ajib said it is planning property launches in the Klang Valley in the Kepong and Bangi areas. In Johor, the Group intends to launch properties in Gerbang Nusajaya. He said the group’s plan to dispose of pockets of land is ongoing and is expected to be completed by the 2HCY19. (The Edge)

BAuto (Outperform, TP: RM2.57): Says to concentrate on CKD market. Bermaz Auto, the distributor of Mazda cars in Malaysia, will concentrate on the complete-knocked-down (CKD) market to grow sales. Bermaz CEO Datuk Francis Lee said the company hopes to receive the government's support as the group focuses on the CKD market. We have the option to invest in plants or pay more dividends, but that will depend on the board’s decision,” says Lee. The Group expects flat growth in sales volume YoY for 2020 FY20 at about 16,000 units, due to absence of Malaysia's tax holiday. (The Edge)

Hibiscus Petroleum (Outperform, TP: RM1.73): Eyeing infrastructure sharing in Australia. Hibiscus Petroleum is exploring opportunities to share infrastructure with other O&G exploration and production services providers in Australia, before deciding on its development plan for its Australian assets. MD, Dr Kenneth Pereira said the group expects to complete this process within the next two or three years. On the group’s overall capacity, Pereira said while it has the potential to produce 20,000 barrels by 2021 organically, it is always open to look at new acquisitions. (The Edge)

SunCon: Bags 2 new piling jobs worth RM86m, YTD job wins reach RM867.7m. Sunway Construction Group (SunCon) announced that it has, bagged two piling works contracts worth a combined value of RM86.4m, bringing its YTD job wins to RM867.7m, from its target of RM1.5bn. SunCon said the first contract was related to the Light Rail Transit 3 (LRT3) and was secured by Sunway Geotechnics (M) SB (SunGeo) from S.N. Akmida Holdings SB for a contract sum of RM47.65m. The second contract was secured by Sunway Construction SB from Putrajaya Development SB for a piling job related to a proposed transit-oriented development at Plot 7MD7 at Precint 7, Putrajaya, for RM38.79m. (The Edge)

Econpile: Bags RM45m MRT2 job. Econpile Holdings has secured a RM44.7m contract from MMC Gamuda KVMRT (UGW) JV to design and build the reinforced concrete box tunnel works for the Hospital Kuala Lumpur Station under the Mass Rapid Transit Sungai Buloh-Serdang-Putrajaya (SSP) Line (MRT 2). “This RM44.7m contract represents Econpile’s second undertaking for an underground station for KVMRT2 project. (The Edge)

Market Update

The FBM KLCI might open lower today after a dovish take on rate rises by the Federal Reserve helped US stocks trim their losses overnight as concerns over US-China trade talks again weighed on investor sentiment. The central bank’s move to dial back expectations for rate rises also hit the greenback, with the dollar index slipping 0.5%, and pushed US Treasury yields to their lowest mark in more than a year. The S&P 500, which had been down about 0.7% at session lows, briefly turned higher on the day after Fed officials pencilled in zero rate rises for 2019, compared with a prior outlook for two. The Dow Jones Industrial Average fell 0.6%, while the tech-heavy Nasdaq Composite managed a gain of 0.1%. Mining stocks were hit in Europe, reflecting the sector’s sensitivity to the outlook for growth in China as well as the prospect of increased supply from the resumption of production at mines in Brazil. The Stoxx index tracking the sector fell 1.5% against a slip of 0.7% for the Europe-wide Stoxx 600. London’s FTSE 100 closed 0.3% lower, while Frankfurt’s Xetra Dax 30 fell 1.6%.

Back home, the FBM KLCI index lost 3.47 points or 0.21% to 1,684.21 points on Wednesday. Trading volume decreased to 2.59bn worth RM1.83bn. Market breadth was negative with 363 gainers as compared to 469 losers. The regional markets finished mixed with the Nikkei 225 gained 0.20%, while the Hang Seng led the Shanghai Composite lower. They fell 0.49% and 0.01% respectively.

Source: PublicInvest Research - 21 Mar 2019

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