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Author: PublicInvest   |   Latest post: Tue, 10 Dec 2019, 9:35 AM

 

PublicInvest Research Headlines - 29 Mar 2019

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Economy

US: Economy shifts into low gear as fiscal boost wanes. The US economy slowed more than initially thought in the 4Q, keeping growth in 2018 below the Trump administration’s 3% target, and corporate profits fell by the most in a year after a one-off boost from lower taxes. The economy is losing momentum as stimulus from the White House’s USD1.5trn in tax cuts and a government spending blitz diminishes. It is also facing headwinds from slowing global growth, Washington’s trade war with China and uncertainty over Britain’s departure from the European Union. The darkening clouds over the economy contributed to the Federal Reserve’s decision last week to bring its three-year campaign to tighten monetary policy to an abrupt end. The US central bank abandoned projections for any interest rate hikes this year after increasing borrowing costs four times in 2018. GDP increased at a 2.2% annualized rate, the Commerce Department said in its third reading of 4Q GDP growth on Thursday. (Reuters)

US: Weekly jobless claims unexpectedly fall. The number of Americans filing applications for unemployment benefits unexpectedly fell last week, suggesting labor market conditions remained solid, despite slowing job growth. Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 211,000 for the week ended March 23, the Labor Department said on Thursday. Data for the prior week was revised to show 5,000 fewer applications received than previously reported. Economists polled by Reuters had forecast claims rising to 225,000 in the latest week. The government revised the claims data and the so-called seasonal factors from 2014 through 2018. Job growth has slowed after last year’s robust gain. The pace, however, remains more than enough to keep up with growth in the working age population. The unemployment rate is currently at 3.8%. (Reuters)

US: Pending home sales unexpectedly slump 1.0% in Feb. Pending home sales in the US unexpectedly decreased in the month of Feb, according to a report released by the National Association of Realtors on Thursday. NAR said its pending home sales index slumped by 1.0% to 101.9 in Feb after soaring by 4.3% to a downwardly revised 102.9 in Jan. Economists had expected pending home sales to climb by 0.7% compared to the 4.6% spike originally reported for the previous month. Compared to the same month a year ago, pending home sales were down by 4.9% in Feb, reflecting the fourteenth straight month of annual decreases. A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. In January, pending contracts were up close to 5%, so this month's 1% drop is not a significant concern. (RTT)

EU: German inflation slows in March, dropping further below ECB goal. German inflation remained below the European Central Bank’s target level for a fourth consecutive month in March, data showed on Thursday, suggesting that price pressures in Europe’s biggest economy are still moderate despite zero interest rates. German consumer prices, harmonised to make them comparable with inflation data from other European Union countries, rose by 1.4% YoY after an increase of 1.7% in the previous month, the Federal Statistics Office said. This undershot a forecast of 1.6%. The ECB targets inflation of close to but below 2% for the euro zone as a whole. On the month, EU-harmonised prices rose by 0.5%, the preliminary numbers showed. (Reuters)

EU: Eurozone economic mood eases more than expected in March, bodes ill for 1Q. Economic sentiment in the eurozone weakened more than expected in March, mainly due to a bleaker outlook among manufacturers and services, suggesting 1Q growth could be lower than previously thought, European Commission data showed on Thursday. The Commission said in its monthly survey that its index of economic sentiment in the 19 countries sharing the euro eased to 105.5 points in March from 106.2 in Feb, weaker than the 105.9 reading expected by economists polled by Reuters. The decline shows that business confidence continues to suffer and that the start of a growth recovery hasn’t really happened so far. 1Q GDP is therefore set to disappoint again. The European Commission forecast in Feb that euro zone growth would accelerate to 0.3% QoQ in Jan-March from 0.2% in the last three months of 2018, and then speed up to 0.4% in subsequent quarters. (Reuters)

EU: Eurozone M3 growth improves in Feb; lending to businesses rise. Eurozone's M3 money supply annual growth improved in Febafter slowing in the previous month, figures from the European Central Bank showed on Thursday. M3, a measure of broad money supply, grew 4.3% YoY in Feb following a 3.8% increase in January. In Dec, M3 rose 4.1%. Economists had forecast M3 growth of 3.90%. The annual growth of the narrower monetary aggregate M1, which comprises of currency in circulation and overnight deposits, accelerated to 6.6% from 6.2%. Loans to households increased 3.3% annually, which was slightly faster than the 3.2% growth in Jan. Growth in lending to non-financial businesses improved strongly to 3.7% from 3.4%. In Dec, loans to businesses increased 3.9%. (RTT)

UK: Consumer sentiment falls to five-year low . Consumer sentiment in Britain fell to its lowest point in more than five years in March, the month the country was due to leave the European Union, a European Commission survey of EU business and consumer confidence showed on Thursday. The index for consumer sentiment in Britain dropped to - 11.7 points in March from -10.8 in February and -11.3 in January. The reading was the lowest since November 2013. (Reuters)

Markets

Zelan: Claims RM3.3m for late payment from BBCC Development. Zelan’s wholly-owned unit Zelan Construction SB is claiming for a principal amount of RM3.34m from BBCC Development SB due to outstanding payment on construction works. Zelan said its unit will be also be claiming the principal sum together with late payment interest and costs, with the amount to be determined at a later stage. Zelan Construction explained that the claims are on the work done and outstanding payment due in relation to the main construction work for a project on Jalan Hang Tuah/Jalan Pudu. (The Edge)

Boustead: Bags RM150m contract from defence ministry. Boustead Heavy Industries Corp (BHIC) indirect unit has bagged an RM150m contract from the Defence Ministry for the provision of inservice support for prime minister-class submarines for the Royal Malaysian Navy. The contract awarded to Boustead DCNS Naval Corp SB (BDNC) is for a 13-month period from Dec 1, 2018. BDNC is 40%-owned by French shipbuilder Naval Group and 60% by BHIC Defence Technologies SB, which in turn is a wholly-owned subsidiary of BHIC. (The Edge)

Mah Sing: Acquires land in Mukim Petaling for RM90.3m. Mah Sing Properties SB, a wholly-owned subsidiary of Mah Sing Group (Mah Sing), has acquired a plot of freehold land in Mukim Petaling for RM90.3m, inclusive of development charges. Mah Sing said the land will be used for a quick-turnaround niche development as the 1.87- hectare land comes with a development order but in view of the prime location the group intends to revisit the development plans in order to fit current market demand. It said the acquisition was in line with the group’s focus to increase its presence in the Klang Valley, especially in the affordable property range and its prime land bank has increased to 853.48 hectares, with total remaining gross development value (GDV) and unbilled sales of RM26.2bn. (The Star)

Kenanga: To acquire Libra Invest for RM50m. Kenanga Investment Bank (KIBB) has proposed to take over unit trust management company Libra Invest for about RM50.1m cash. KIBB said its wholly owned subsidiary Kenanga Investors (KIB) had entered into a conditional share purchase agreement with ECM Libra Financial Group to acquire the entire issued share capital or 6.5m shares of Libra Invest. KIBB said the proposed acquisition was expected to complement KIB’s fixed-income management business and enhance its presence in the retail market of the asset management business in Malaysia. In addition, the deal would result in an immediate increase in its asset-under-management size to more than RM10bn. It said the purchase consideration would be satisfied entirely from a RM30m loan from KIBB to KIB, while the remainder would be satisfied by internally generated funds of KIB. (The Star)

BAssets: Sells 2.45% stake in 7-Eleven for RM41.55m. Berjaya Assets Bhd (BAssets) has disposed of 27.7m shares or a 2.45% stake in 7-Eleven Malaysia Holdings via a direct business transaction, for RM41.55m or RM1.50 per share. BAssets is left with 39.9m shares or a 3.53% stake in 7-Eleven. BAssets did not provide details of the buyers of the shares. The disposal price was at a 4.17% premium above 7-Eleven’s five-day volume weighted average market price (up to March 22) of RM1.44 per share. The cash proceeds from the share sale will be utilised for repayment of borrowings and working capital. (The Edge)

Market Update

US markets edged higher as trade talks with China resumed, with reports suggesting Chinese officials having made unprecedented offers regarding forced technology transfers as well as on other major sticking points. On its part, the US is saying it is ready to extend talks for weeks, or even months, and that not all tariffs may stay in place as and when a deal is struck. Growth concerns continued to linger in the background however, capping gains on the day. Both the Dow Jones Industrial Average and S&P 500 gained 0.4% with the Nasdaq Composite a step back with a 0.3% gain. Over in Europe, major markets were mixed as investors kept one eye on trade talks and another on the on-going Brexit saga. British Prime Minister Theresa May’s offer to resign if her twice defeated withdrawal deal was finally passed by Parliament failed to impress some hardline Brexiteers and Northern Ireland's DUP party, with conditions no different today than it was last week. UK lawmakers voted on a number of Brexit alternatives overnight, none of which gained majority support. The country’s benchmark FTSE100 showed no worse for wear however, gaining 0.6%. Germany’s DAX inched 0.1% higher though France’s CAC 40 slipped 0.1%. Asian markets were mostly lower earlier in the day on growth-related jitters as weakness in the long-dated US Treasury yields continued to stoke fears of recession. The Nikkei 225 and Shanghai Composite tumbled 1.6% and 0.9% respectively though the Hang Seng Index managed a 0.2% gain.

Gamuda has secured its first overseas project of the year, a ~RM521.8m construction job in Taiwan (please refer to the accompanying report today for more details). Boustead Heavy Industries’ indirect unit has bagged an RM150m contract from the Defence Ministry for the provision of in-service support for the Royal Malaysian Navy’s submarines. Kenanga Investment Bank’s asset management subsidiary, Kenanga Investors Bhd (KIB), has proposed to acquire ECM Libra Financial Group Bhd’s wholly owned fund management arm, Libra Invest Bhd, for a provisional purchase consideration of RM50.1m.

Source: PublicInvest Research - 29 Mar 2019

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