PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 28 Feb 2020, 12:49 PM


PublicInvest Research Headlines - 25 Feb 2019

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US: Fed officials talk up new approach to meeting inflation goal. Two Federal Reserve officials highlighted the benefits of an approach to monetary policy called average inflation targeting, which would entail accepting overshoots of the central bank’s 2% price goal to make up for times when inflation was too low. San Francisco Fed President Mary Daly and John Williams, who preceded her in that role before shifting to run the New York Fed, last year, both mentioned the tactic during presentations at a conference in New York sponsored by the University of Chicago’s Booth School of Business. The event is previewing themes that will dominate a year-long review of the Fed’s policy framework that kicks off in Dallas on Monday. (Bloomberg)

US: Fed eyes end to balance sheet reductions later this year. Federal Reserve policymakers are coalescing around a plan to stop trimming their USD4trn balance sheet later this year, remarks from three US central bankers showed on Friday. And despite apparently competing views on why they need a balance sheet permanently bigger than what they had envisioned only a few months ago, they also agree on a secondary aim: to make the Fed’s balance sheet boring again. Investors have in recent months complained that financial conditions are tightening because of the Fed’s gradual reductions to its balance sheet, swollen from trillions of dollars of bond-buying in the post-crisis years. The reductions are capped at USD50bn a month. (Reuters)

US: Trump's economy 'a little under' 3% growth goal - Fed. The Trump administration will fall “a little under” its target of 3% annual growth of GDP for 2018, the Federal Reserve said in a report that offers an economic scorecard of sorts for the first full year of President Donald Trump’s term. By year’s end, the impact of tax cuts and other policies was waning, trade was detracting from growth and the federal deficit was wider. On the upside, employment growth remained strong. Earlier this month White House economic adviser Larry Kudlow said growth would prove to be 3% in 2018 and at least that much for 2019 - a forecast the Fed also does not share. The Fed said 2018 would prove “a noticeable pickup” from recent years, but outlined an array of headwinds, including a drop in business and consumer spending at year’s end that could carry over into 2019. (Reuters)

US, China: Barrel toward trade-war deadline. The March 1 deadline for the US and China to reach a trade deal arrives this week, likely serving as just an early milestone in a long process rather than the end of tensions between the world’s two largest economies. President Donald Trump has threatened to more than double tariffs on USD200bn in Chinese goods if the two sides don’t reach a deal by Friday. Trump suggested Feb. 22 that he might extend the deadline if progress is made, and may meet Chinese leader Xi Jinping in the “not-too-distant future.” Negotiations last week in Washington moved matters forward, with US Trade Representative Robert Lighthizer saying the two sides made progress on structural issues, but adding that major hurdles remain. The two countries haven’t yet agreed on the critical issue of enforcement in a proposed currency deal. (Bloomberg)

US, China: Haggling over how to enforce currency pact. The US and China haven’t yet agreed on the critical issue of enforcement in a proposed currency deal that would ensure Beijing lives up to its promise to not depreciate the yuan, four people familiar with the matter said. Treasury Secretary Steven Mnuchin on Friday touted the currency pact as the strongest ever, though he offered no details, following two days of high-level talks in Washington between US and Chinese officials. The discussions were extended into the weekend in search of a broad trade deal to prevent the US from increasing tariffs on Chinese goods next week. In tweets early Sunday President Donald Trump declared Saturday’s talks “very productive” and offered praise for Chinese President Xi Jinping leading into this week’s meeting with North Korea Kim Jong Un. (Bloomberg)

EU: German business morale sinks for a sixth month in Feb. German business morale fell for the sixth straight month in Feb, a survey showed, reflecting concern among corporate executives that trade hostilities will worsen a slowdown in Europe’s largest economy. The Munich-based Ifo economic institute said its business climate index fell to 98.5, the lowest since Dec 2014 and lower than a consensus forecast of 99.0. The institute said the index as well as other indicators pointed to a growth rate of 0.2% in the 1Q. The outlook for the export dependent German economy has been clouded by trade frictions and the risk of Britain leaving the European Union next month without a deal. Economists said the slide of the Ifo index suggested companies remained worried that the German economy would suffer more damage. (Reuters)

India: Cuts tax on housing to boost real estate before polls. India lowered tax on unfinished residential buildings and affordable houses to boost the real estate sector, as well as to ease the financial burden on home buyers. A panel of federal and state finance ministers on Sunday decided to lower rates on under-construction housing to 5% and affordable units to 1%, without input tax credit. The new rates will take effect on April 1. “We wanted to give a boost to the real estate sector as well as give relief to the middle class, neo-middle class and the aspirational middle class,” Finance Minister Arun Jaitley told reporters after a meeting among the ministers. The reduction in rates will maintain “revenue neutrality,” he added. The tax rate cuts are likely to cover 90- 95 percent houses in Tier two and three cities and about a third of the projects in the top-tier ones. (Bloomberg)

Singapore: Singapore Dollar bulls look to CPI to keep MAS on Hawkish path. The Singapore dollar’s three-month winning streak is facing its stiffest test yet as global growth headwinds dim the outlook for further central bank tightening. An above-consensus inflation report Monday would go a long way toward ensuring the currency’s advance remains on track. A gauge of the country’s nominal effective exchange rate, which the Monetary Authority of Singapore guides to conduct policy, is showing signs of weakness amid continued global trade tensions and a slowdown in China. On the flip side, strong domestic demand and resilient inflation are keeping alive wagers that the MAS will accelerate the pace of appreciation for a third straight time in April. The clashing signals raise the stakes for economic data due in the run up to the decision. Here’s what traders will be keeping an eye on. (Bloomberg)


AWC: Accepts contract for RM29.9m job from Lendlease. AWC has been awarded a RM29.87m contract by Lendlease Projects (M) SB for a proposed commercial mixed development at Jalan Tun Razak / Jalan Davis in Kuala Lumpur. The contract will commence immediately and is slated to be completed by June 21, 2021. AWC group CEO and president Datuk Ahmad Kabeer said the group intends to participate in more upcoming parcels in the TRX Lifestyle Quarter by Lendlease, as the securing of project financing lends more confidence to the mega project. (StarBiz)

Sumatec: Gets stay order against bondholders' winding up petition. Sumatec Resources said that it has obtained a stay of execution from the Court of Appeal on a winding up petition filed against the company by its bondholders, pending a disposal of a civil lawsuit it has filed against them. The petition was filed last Aug after the bondholders demanded a repayment of RM83.3m from three collaterialised loans they had extended to Sumatec, following the Court of Appeal's decision in April last year to Sumatec said it has "successfully obtained from the Court of Appeal, an order for stay of execution against the company dated April 16, 2018.” (The Edge)

MGB: Gets RM150.7m job from sister company, posts 41% drop in 4Q profit. MGB, a 56.1%-owned unit of LBS Bina Group, has been awarded a RM150.7m to design and build two blocks of serviced apartments and its relevant facilities in Sepang, Selangor, from its sister company. The contract was awarded by Seloka Sinaran SB, which is also a unit of LBS Bina, MGB said. The job is expected to take 18 months and is scheduled to start next month, to be completed in Aug 2020. "The contract will increase and enhance the existing order book of the Company and its group of companies. With the contract in hand, the group’s current outstanding order book is approximately RM2.02bn," said MGB. Separately, MGB announced that its net profit for the 4QFY18 fell 41.4% YoY to RM3.5m from, as revenue shrank 5.1% to RM177.45m. Contribution from construction and property segments declined. (The Edge)

Apex Equity: Gets SC nod for JF Apex-Mercury merger. The Securities Commission Malaysia has green lighted the proposed merger of Apex Equity Holdings unit JF Apex Securities with Mercury Securities SB. On Dec 18 last year, Apex Equity said the group together with JF Apex Securities inked a business merger agreement (BMA) with Mercury Securities SB, following a preliminary agreement entered into on Sept 21. Under the BMA, Apex Equity will take over Mercury Securities’ stockbroking, corporate advisory and other related businesses for RM140m, and transferring them to JF Apex. Of the proposed consideration, RM48m will be settled in cash, and the balance RM92m via the issuance of new shares. To finance part of the portion, Apex Equity will place out 20m new shares or 10% of its existing issued share capital to seven individuals at an issue price of 94 sen a share. (The Edge)

Construction (Neutral): Guan Eng says government will fund LRT3 project. The Light Rail Transit 3 (LRT3) project, scheduled for completion by Feb 28, 2024, will receive government support in terms of the project funding, said Finance Minister Lim Guan Eng. He said most of the funding for the project, which now costs RM16.6bn compared with RM31.6bn previously, would come from the Ministry of Finance, as the employer of the project, Prasarana Malaysia, was a state-owned company. “We will fund the project through loans and government guarantees, whereby the contractors will have the government's assurance in terms of payment when they participate in the project,” Lim said. (Bernama)

Market Update

The FBM KLCI might open higher today as US stocks rose on Friday, in a quiet session marked by cautious optimism about US China trade talks. The S&P 500 index rose 0.6%, while the Dow Jones Industrial Average added 0.7% and the Nasdaq Composite advanced 0.9%. President Donald Trump told reporters on Friday it was more likely than not that a trade deal between the two countries would happen, and that the deadline for the talks could be extended. Across the Atlantic, the continent-wide Stoxx 600 index was up 0.2%, alongside strong performances from Germany’s Dax, up 0.3%, and France’s Cac 40, which increased 0.4%.

Back home, the FBM KLCI index lost 9.26 points or 0.54% to 1,721.42 points on Friday. Trading volume decreased to 2.67bn worth RM2.34bn. Market breadth was negative with 290 gainers as compared to 611 losers. Optimism over US-China trade talks helped Asia-Pacific shares turn higher. The Hang Seng was up 0.7%, while the CSI 300 index of major Shanghai and Shenzhen stocks fell in early trade before swinging higher to be up 0.3%, as the latest round of trade talks were set to wrap up in Washington.

Source: PublicInvest Research - 25 Feb 2019

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