PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 7 Aug 2020, 12:20 PM


PublicInvest Research Headlines - 19 Dec 2018

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US: Housing starts rise; single-family segment still weak. US homebuilding rebounded in Nov, driven by a surge in multi-family housing projects, but construction of single-family homes fell to a 1-1/2- year low, pointing to deepening housing market weakness that could spill over to the broader economy. The report from the Commerce Department on Tuesday also showed housing starts fell in Oct instead of rising as previously reported. Underscoring the housing market weakness, single-family home completions dropped for a third straight month in Nov to their lowest level in more than a year. Housing starts increased 3.2% to a seasonally adjusted annual rate of 1.256m units last month. Data for Oct was revised down to show starts dropping to a rate of 1.217m units instead of the previously reported pace of 1.228m units. (Reuters)

US: Treasury's Mnuchin says expects Jan trade talks with China. The US and China are planning to hold meetings in Jan to “document an agreement” on trade, US Treasury Secretary Steven Mnuchin told Bloomberg in an interview on Tuesday. Mnuchin was quoted as saying the two sides had held several phone conversations in recent weeks, and were planning further formal talks. Trump administration officials had not disclosed plans for face-to-face meetings since a Dec 1 trade truce reached between US President Donald Trump and Chinese President Xi Jinping led to a delay in planned US tariff increase until March 2. (Bloomberg)

EU: German business confidence worsens, putting rebound in doubt. German business sentiment deteriorated further to its lowest level in more than two years as trade tensions and the rising risk of a no-deal Brexit threaten to hamper a meaningful economic rebound from a summer lull. The Ifo Institute’s gauge of corporate confidence in Europe’s largest economy fell to 101.0 in Dec from 102.0 in Nov. The fourth straight decline will add to concerns about economic prospects in Germany and the 19-nation euro area after the ECB decided to rein in stimulus. The report suggests Germany may have to overcome bigger hurdles than new emissions-testing rules, which hit the auto industry in the third quarter and led to a contraction in economic output. Gauges for current conditions and expectations both decreased. Worsening confidence will spark speculation whether the ECB was right to cap quantitative easing at EUR2.6trn (USD3trn). (Bloomberg)

UK: Government to activate full 'no-deal' Brexit preparations. The British government said it would implement plans for a no-deal Brexit in full and begin telling businesses and citizens to prepare for the risk of leaving the EU without an agreement. Those plans include setting aside space on ferries to ensure a regular flow of medical supplies and keeping 3,500 armed forces personnel ready to support the government with its contingency plans. With just over 100 days until Britain is due to leave the EU, Prime Minister Theresa May is yet to win the support of a deeply divided parliament for the deal she struck last month with Brussels to maintain close ties with the bloc. (Reuters)

China: Takes WTO step in dispute over Trump's trade tariffs. China moved a step closer to launching a formal World Trade Organization inquiry into whether President Donald Trump’s USD250bn in tariffs against Chinese goods violate international trade rules, a process that could move forward next month. The US rejected China’s first request for a WTO inquiry in the matter, according to a participant at Tuesday’s dispute-settlement meeting. The trade body’s rules prevent the US from blocking a dispute inquiry if China returns with a second request at the next WTO dispute-settlement meeting. The next such meeting is set for Jan. 28; the WTO could hold a special session before then to hear China’s second request. (Bloomberg)

Japan: 3Q output gap turns negative in blow to BOJ's inflation goal. Japan’s output gap in 3Q turned negative for the first time in almost two years, in a sign the BOJ’s 2% inflation target will become even more distant due to waning price pressure. A negative output gap occurs when actual output is less than the economy’s full capacity and is considered a sign of weakening demand. Japan’s economy contracted in 3Q by the most in four years due to a strong earthquake, severe floods and worries about global trade friction. Japanese companies quickly rebounded from the natural disasters, but there are worries that China’s economic slowdown from its trade war with the US will have a more lasting negative impact on Japan’s economy. (Reuters)

Malaysia: World Bank lowers Malaysia's GDP forecast to 4.7% for 2018. The World Bank has once again lowered its GDP growth expectation for Malaysia this year to 4.7% from a 4.9% prediction set in early Oct 2018. This is due to two factors, namely lower government spending and a decline in private and public investment. In addition to moderating growth, risks are increasingly skewed towards the downside. A key concern domestically is the narrow fiscal space the government has, to cope with shocks, especially due to steeply declining revenue and high level of public debt. It is important that efforts to sustain growth in the near term are carefully balanced with the need to restore fiscal buffers. That being said, even in the face of a potential recession in developed nations next year, Malaysia's economy is expected to remain resilient with the World Bank maintaining its 4.7% GDP growth forecast for 2019. (The Edge)


CIMB (Outperform, TP: RM6.50): Expected to recognize RM200m gain from transfer of Malaysian stockbroking business to Jupiter. CIMB Group Holdings is estimated to record a gain on disposal of RM200m from the proposed transfer of its stockbroking business to Jupiter Securities SB. The consideration in connection with the business transfer will be satisfied in cash. It was determined based on the future prospects and net asset value of the in-scope business as at Dec 31 2015, which amounted to RM565.6m. (The Edge)

Comments: With this final Malaysian leg of the pan-Asian deal which commenced late-2016 finally nearing completion, we remain excited over the prospects and long-term value enhancement this partnership brings. While the RM200m disposal gain expected is much welcomed, the Group's exposure to the China market (which had already commenced early this year) is a bigger boost. Our Outperform call and RM6.50 target price remain unchanged.

TM (Trading Buy, TP: RM3.60): Clarifies Streamyx upgrades. Telekom Malaysia (TM) have to date upgraded close to 60% out of over 340,000 Streamyx customers' high-speed Internet packages in unifi-coverage areas to unifi at the same price of their current plans, to widen the nation's broadband coverage. Thus far, close to 70% of upgradable packages owned by Streamyx customers in non-unifi coverage areas have been moved up to double their current Streamyx speed, where technology permits, at the same price of current plan. (The Edge)

Maybank (Neutral, TP: RM9.90): Sees 20% rise in ASNB transactions with new online services. Malayan Banking is expecting a 20% jump in Amanah Saham Nasional (ASNB) transactions through the bank's platforms in the next one year, with the introduction of 2 new online services. Permodalan Nasional (PNB) and Maybank launched two 2 services to provide enhanced convenience and accessibility for ASNB customers to make investments via digital channels. (The Edge)

MAHB: Expects higher passenger movement in Dec. Malaysia Airports Holdings (MAHB) expects the passenger movement at the KLIA main terminal and klia2 to surge by 12% and 21%, respectively, this month, which is considered a super-peak travel period. The airport operator projected a total of 6.9m passengers travelling via KLIA during this school holidays and Christmas festive season. The super-peak period at the KLIA’s main terminal is likely to last until Dec 23, 2018. (The Edge)

Crescendo: Buys land in Johor for RM13m. Property developer Crescendo Corp is buying a piece of land in Johor Bahru for RM13m to develop apartments for rent by Crescendo International College students. Crescendo’s wholly-owned unit Crescendo Education SB owns a 55% stake in Crescendo International College. The group is buying the land from Panoramic Housing Development SB, a related party. (The Edge)

Apex Equity: Inks merger deal with Mercury Securities. Apex Equity Holdings and its JF Apex Securities have inked a business merger agreement (BMA) with Mercury Securities, following a preliminary agreement they entered into on Sept 21. Under the BMA, Apex Equity will be taking over Mercury Securities’ stockbroking, corporate advisory and other related businesses for RM140m, and transfer to JF Apex. (The Edge)


The FBM KLCI might open flat today as an extremely choppy session on Wall Street saw the S&P 500 swing from gains to losses and back before closing barely changed, with oil prices under severe pressure as participants continued to focus on concerns over global growth, the US-China trade spat and tighter central bank policy. So-called “haven” currencies such as the Japanese yen continued to attract demand, while US Treasuries and gold edged higher. As a two-day meeting of the Federal Reserve’s Open Market Committee got under way, expectations for a rate rise remained high — although speculation has mounted that the central bank might adopt a more dovish stance in its policy forecasts for next year. On Wall Street, the S&P 500 finished just a fraction higher at 2,546 — snapping a three-day run of losses — after climbing as high as 2,574 earlier in the day. The energy sector fell 1.9%. The S&P recorded its lowest close since early October 2017 in the previous session. The Dow Jones Industrial Average finished 0.4% higher, while the Nasdaq Composite index gained 0.5%. Across the Atlantic, the pan-European Stoxx 600 fell 0.8% — led by the utilities and energy sectors — as the FTSE 100 in London shed 1.1% and the Xetra Dax in Frankfurt slipped 0.3%.

Back home, the FBM KLCI index lost 6.31 points or 0.38% to 1,635.31 points on Tuesday. Trading volume increased to 2.27bn worth RM1.91bn. Market breadth was negative with 222 gainers as compared to 699 losers. In the region, Hong Kong’s Hang Seng index lost 1.1% as heavily weighted technology stocks lost ground, while mainland China’s CSI 300 fell 1%. Tokyo’s Topix fell 2% to its lowest level in 18 months.


Source: PublicInvest Research - 19 Dec 2018

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