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Author: PublicInvest   |   Latest post: Fri, 15 Nov 2019, 9:19 AM

 

PublicInvest Research Headlines - 1 Apr 2019

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Economy

US: Consumer spending soft, inflation benign as economy slows. US consumer spending barely rose in Jan and income increased modestly in Feb, suggesting the economy was fast losing momentum after growth slowed in the 4Q. The report from the Commerce Department on Friday also showed price pressures muted in Jan, with a measure of overall inflation posting its smallest annual increase in nearly 2-1/2 years. The Federal Reserve last week brought 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, in a nod to the slowing economy, low inflation and rising headwinds to growth. (RTT)

US: New home sales jump much more than expected in Feb. A report released by the Commerce Department on Friday showed a much bigger than expected increase in US new home sales in the month of Feb as well as substantial revisions to the previous data. The Commerce Department said new home sales surged up by 4.9% to an annual rate of 667,000 in Feb from the revised Jan rate of 636,000. Economists had expected new home sales to increase by about 1.3%. The report also showed the 6.9% plunge in new home sales originally reported for Jan was revised to an 8.2% spike, although the jump in new home sales in Dec was also revised to a 3.9% slump. With the increase in Feb, new home sales are at their high level since hitting a rate of 672,000 last March and up 0.6% compared to the same month a year ago. (RTT)

US: Yellen sees no recession, says Fed won't cut rates in 2019. The US economy isn’t likely to slip into recession anytime soon, and there is no reason for the Federal Reserve to cut interest rates, former Fed Chair Janet Yellen said. Yellen said that while Fed officials had marked down their economic growth forecasts to a median of 2.1% for 2019, “that’s not a recession. A slowdown is something that was long expected.” “They are comfortable with the current level of rates. They’re prepared to move in either direction depending on how things play out,” Yellen said. “But my baseline is I don’t see a recession, I don’t think it’s likely. And I expect them to stay on hold during the year.” Yellen said (Bloomberg)

US, China: China will continue to suspend extra tariffs on US vehicles, auto parts. China’s State Council said on Sunday that the country would continue to suspend additional tariffs on US vehicles and auto parts after April 1, in a goodwill gesture following a US decision to delay tariff hikes on Chinese imports. In Dec, China said it would suspend additional 25% tariffs on US-made vehicles and auto parts for three months, following a truce in a trade war between the world’s two largest economies. The State Council, or cabinet, said Sunday’s move was aimed at “continuing to create a good atmosphere for the ongoing trade negotiations between both sides”. “It is a positive reaction to the US decision to delay tariff hikes and a concrete action adopted (by the Chinese side) to promote bilateral trade negotiations,” the State Council said. “We hope the US can work together with China, accelerate negotiations and make concrete efforts towards the goal of terminating trade tensions.” (Reuters)

EU: German unemployment rate hits record low. German unemployment continued its declining trend in March and the jobless rate fell to a record low, while retail sales rose for a second month unexpectedly, signaling that household consumption will be the growth driver this year as export demand weakens amid a global economic slowdown. The seasonally adjusted unemployment decreased by 7,000 persons, data from the Federal Employment Agency showed on Friday. Economists had forecast a fall of 10,000. Jan's decline was revised to 20,000 from 21,000. Earlier on Friday, the Federal Statistical Office reported on Friday that the ILO jobless rate fell to 3.1% in Feb from 3.2% in Jan. Retail sales grew 0.9% MoM in real terms, which was in contrast to economists' prediction for a 0.9% fall. (RTT)

China: March factory activity grows for first time in four months, but exports weak. Factory activity in China unexpectedly grew for the first time in four months in March, an official survey showed on Sunday, suggesting government stimulus measures may be starting to take hold in the world’s second largest economy. If sustained, the improvement in business conditions could indicate that manufacturing is on a path to recovery, easing fears that China could slip into a sharper economic downturn. But analysts remained cautious, citing seasonal distortions due to the long lunar New Year break in Feb. They said real investment and consumer demand remained soft and pushed up inventories, potentially adding pressure to the sector. The official PMI rose to 50.5 in March from Feb’s three-year low of 49.2, marking the first expansion in four months. (Reuters)

China: Home price outlook recovers as credit conditions improve. Home prices in China are expected to rise more this year than predicted just a few months ago, as Beijing urges banks to ramp up lending and lower interest rates to boost the slowing economy, a Reuters poll showed. Strong underlying demand for housing and the relaxation of home purchase restrictions in some cities are also likely to support prices, even though sales are still expected to slow. China’s average residential property prices are forecast to rise 5% in 2019 from a year earlier, up sharply from a gain of just 0.5% expected in the previous survey in Dec, according to the poll of 17 property analysts and economists. Property investment is now expected to rise by 7% for the year, from 4% in the last poll, as some developers have shown more confidence in the market as domestic financing conditions improve. (Reuters)

Markets

GDEX, AirAsia (Outperform, TP: RM3.50): GDEX forms strategic partnership with AirAsia's RedCargo Logistics. GD Express Carrier (GDEX) has inked a strategic partnership with RedCargo Logistics, the cargo and logistics platform of AirAsia Group Bhd. GDEX said the new partnership provides GDEX customers with access to AirAsia’s extensive network, allowing goods to be transported and delivered efficiently on more than 5,000 weekly flights across Asia Pacific. In return, RedCargo Logistics will be provided with opportunities to explore last-mile capabilities as part of the new partnership, it said. (The Edge)

Sunway: To buy quarry and premix plant operator to penetrate into new markets . Sunway is acquiring Blacktop Industries SB, which will allow the group's quarry division to penetrate into new markets by wider market coverage and additional capacity. Blacktop is in the business of production and selling of quarry aggregates and asphalt premix, as well as renting of mobile equipment. Sunway Holdings SB has entered into a share sale agreement (SSA) to acquire 1 million shares or a 100% stake in Blacktop Industries SB for RM70.09 million. Sunway said the proposed acquisition will improve both market share and financial performance of its quarry division via penetration into new markets. (The Edge)

Tasco: Japanese Govt fund takes up 30% stake in Tasco's unit for RM125m. Tasco announced that the Japan Overseas Infrastructure Investment Corp for Transport & Urban Development (JOIN) is investing RM125m for a 30% stake in its unit, Tasco Yusen Gold Cold SB. Tasco said JOIN's investment is strategic in nature and will allow it to establish a partnership with the Japanese Government fund in the cold chain and convenience retail logistics segments. This could provide Tasco with greater access to other markets in which JOIN has a presence. (The Edge)

Gadang: Plans to vary JV terms of RM1.8b project as partner seeks more funding . Gadang Holdings has proposed to vary certain terms of its JV agreement (JVA) involving a RM1.8bn integrated project being developed on its land in Johor Bahru, chief of which is a reduction to its entitlement from the project from a maximum of RM324m to RM250m. Up until March 21 this year, the project's developer, Capital City Property SB (CCPSB), had paid RM149.79m to Gadang's wholly owned Achwell Property SB (APSB), which owns the land, for the settlement of the initial entitlement sum. Under the proposed variations, the revised remaining entitlement will be RM100.21m, which will now be satisfied via the contra of 408 identified, completed retail units that have not been sold. In return, APSB agrees to transfer the legal and beneficial ownership of the land to CCPSB, who intends to use it to raise additional financing to complete the remainder of the project, and to fund the operations of its retail component. (The Edge)

Vertice: Vertice and main sub-con mutually terminate RM218.5m contract. Vertice and Kumpulan Liziz SB have mutually agreed to terminate a sub-contract for the proposed upgrading works on a federal road from Gambang, Pahang, to Segamat, Johor, valued at RM218.48m. Last year, Vertice's wholly-owned unit Vertice Construction SB was awarded a sub-contract job from Kumpulan Liziz, the main sub-contractor, for the upgrading of the federal road known as Federal Road 12 (FR12). The project was awarded to Kumpulan Liziz by Mulia Interlink Construction SB, acting as the main contractor for Jabatan Kerja Raya Malaysia (Malaysian Public Works Department). (The Edge)

Market Update

US markets ended the day firmer to register their best starts to the year in a long while. Much of the current optimism stems from progress on trade talks between the US and China in which Beijing is said to have made proposals on a range of issues that go further than it has before. The Dow Jones Industrial Average gained 211.22pts (+0.8%) on the day, up 11.2% for the quarter (best since 2013). The S&P 500 rose 0.7% for the day, +13.1% for the period (best since 2009) while the Nasdaq Composite gained 0.8% last Friday for a 16.5% gain in the quarter (best since 2012). This quarter's rally is characterized by three factors: a sharp rebound off the Christmas Eve lows, increasing optimism in US – China trade talks and a sharp reversal in the Federal Reserve's monetary policy stance. European bourses clawed back earlier losses to end the day higher even as UK Prime Minister Theresa May lost another Brexit vote in Parliament. Data-wise, German retail sales rose more-than-expected in February, according to new figures. The UK economy grew by an annual average of 1.4% in 2018, according to a final reading of official data, the weakest expansion since 2012. France’s CAC 40 was the continent’s major gainer, up 1.0%. Germany’s DAX and UK’s FTSE 100 rose 0.9% and 0.6% meanwhile. Most major Asian markets closed higher on Friday as investors took heart on reported progress in trade negotiations between Washington and Beijing. The Shanghai Composite Index surged 3.2% higher while the Hang Seng Index rose 1.0%. Elsewhere, Japan’s Nikkei 225 and Singapore’s Straits Times Index rose 0.8% and 0.3% respectively while the FBM KLCI overcame recent weaknesses to notch a 0.1% gain on the day.

The Japan Overseas Infrastructure Investment Corp for Transport & Urban Development (JOIN) is investing RM125mn for a 30% stake in Tasco’s wholly-owned unit, Tasco Yusen Gold Cold Sdn Bhd. GD Express Carrier (GDEX) has inked a strategic partnership with RedCargo Logistics, the cargo and logistics platform of AirAsia Group. Vertice and Kumpulan Liziz Sdn Bhd have mutually agreed to terminate a sub-contract for upgrading works on a federal road from Gambang, Pahang, to Segamat, Johor, valued at RM218.5mn.

Source: PublicInvest Research - 1 Apr 2019

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