PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 23 Jan 2020, 9:38 AM


PublicInvest Research Headlines - 12 Mar 2019

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Global: Economy hits its weakest spell since financial crisis. The global economy’s sharp loss of speed through 2018 has left the pace of expansion the weakest since the global financial crisis a decade ago, according to Bloomberg Economics. Its new GDP tracker puts world growth at 2.1% on a QoQ annualized basis, down from about 4% in the middle of last year. While there’s a chance that the economy may find a foothold and arrest the slowdown, the risk is that downward momentum will be self-sustaining. The Federal Reserve’s decision to pause its interest-rate hikes, a US-China trade truce and the fading of the shocks that battered Europe in 2018 could mean stabilization is around the corner. (Bloomberg)

US: Retail sales rebound but not enough to jolt slowing economy. US retail sales rose modestly in Jan after a Dec drop that was even larger than originally estimated, but the recovery was not seen strong enough to alter the course of a US economy that was losing momentum in early 2019. The report from the Commerce Department was welcome news for the economy after a raft of weak Dec data, as well as a sharp moderation in the pace of job growth in Feb. Jan’s increase in retail sales recouped only a fraction of Dec’s plunge, leaving expectations for a slowdown in consumer spending in the 1Q intact. (Reuters)

US: Inflation expectations slide amid heightened focus from Fed. US households in Feb reduced their expectations for inflation to the lowest level in 18 months, according to a Federal Reserve Bank of New York survey of consumer expectations. The median respondent to the New York Fed’s monthly study reported an expected inflation rate of 2.8% in 3 years’ time, down from 3% the month before. Inflation expectations play a key role in the decision making of the Fed as it weighs policy decisions, with central bankers believing stabilizing them will go a long way toward stabilizing the economy. (Bloomberg)

US: Trump budget sees USD1trn deficits for next 4 years. President Donald Trump’s newest budget forecasts the US fiscal deficit surpassing USD1trn this year and staying above that level until 2022. The fiscal 2020 proposal sees the deficit expanding to USD1.1trn for 2019 and 2020, when Trump will run for re-election. The shortfall is seen narrowing slightly to USD1.07trn in 2021 and USD1.05trn in 2022, before shrinking every year through 2029. The budget deficit has already climbed 77% in the first 4 months of the current fiscal year through Sept, according to Treasury Department data. (Bloomberg)

US: Business inventories climb in line with estimates in Dec. Business inventories in the US increased in line with economist estimates in the month of Dec, according to a report released by the Commerce Department on Monday. The report said business inventories climbed by 0.6% in Dec; while revised data showed inventories were unchanged in Nov. Economists had expected inventories to increase by 0.6% compared to the 0.1% uptick originally reported for the previous month. Wholesale and retail inventories jumped by 1.1% and 0.9%, respectively, (RTT)

EU: German industrial output takes another hit from temporary issues. German industrial production unexpectedly fell in Jan as new temporary factors in the car industry damped momentum. Output declined 0.8% missing economist estimates for a 0.5%gain and was down 3.3% on the year. The Economy Ministry said car-model changes and strikes at suppliers emerged as new challenges. It revised Dec figures to show a solid increase, after initially reporting a drop. A separate report showed that factory orders in the same month saw an unexpected decline of 2.6%, though a Dec reading was also revised up. Trade data showed stagnation in exports in Jan and a 1.5% jump in imports. Labor costs slipped in the 4Q. (Bloomberg)

China: Zeros in on local hidden debt amid falling tax take. China’s multi-year campaign to contain financial risk is re-focusing on the so called “hidden debt” owed by local governments, as officials seek to reduce repayment pressures amid falling tax revenues. Provinces and cities from Jiangsu in the east to Qinghai in the west are looking for means to pay-off or restructure their implicit borrowings, a term which includes off-book funding via financing vehicles. Some authorities are seeking cheap refinancing from the nation’s largest policy lender, the China Development Bank, and others are selling off state-owned assets such as office buildings and housing. (Bloomberg)


Alam Maritim: Bags RM40m contract to provide underwater inspection services. Alam Maritim Resources has bagged a four year contract to provide underwater inspection services for Carigali Hess Operating Co SB facilities. The total value of the contract base scope of work and the unscheduled work will be contingent upon the unscheduled work performed by the group, adding that the initial total value of the contract is expected to be RM40m. The contract required Alam Maritim to perform a confirmed base scope of work and “call out” or unscheduled work for the inspection of Carigali Hess jackets, pipelines and floating storage and offloading unit (FSO). (The Edge)

Malaysia Pacific Corp: To sell Wisma MPL for RM189m. Malaysia Pacific Corp has signed a sale and purchase agreement (SPA) to dispose of Wisma MPL on Jalan Raja Chulan for RM189m to Asia New Venture Capital Holdings SB. This will allow the group to settle its debts with RHB Bank, to which it owes some RM148.54m as a redemption sum for the land. Both Malaysia Pacific Corp and RHB have been involved in a lengthy legal dispute after RHB served Malaysia Pacific Corp with a notice of default for revolving credit and bank overdraft facilities in March 2015. Malaysia Pacific Corp will also repay its creditors some RM19.92m and incur expenses of RM18.14m. (The Edge)

Zelan: Seeks RM305m in arbitration against architectural firm. Zelan has initiated arbitration proceedings against NRY Architects for as much as RM305.4m over the construction of buildings for the International Islamic University Malaysia (IIUM) in Kuantan. That NRC had breached a contract signed in May 2013 with Zelan Construction SB. Apart from seeking a declaration that NRY had breached the contract by failing to carry out its obligation, Zelan is claiming a refund on value of cost savings for deviation items amounting to RM5.97m. It is also seeking payment for IIUM’s claims for rental of temporary facilities, utilities bills and other costs from Jan 2016 until June 2018 amounting to RM38.31m. (The Edge)

Protasco: Sues sub-contractor, seeks refund of RM2.96m. Protasco has filed a legal suit against its former sub-contractor Kuasatek (M) SB for an alleged breach of contract. Its claims include a full refund of RM2.96m that Protasco’s unit HCM Engineering SB had been ordered to pay to Kuasatek, after an adjudication decision in July 2018. HCM filed the suit at the High Court, alleging a breach of contract by Kuasatek, pursuant to a March 2016 letter of appointment for mechanical and electrical (M&E) works packages. The work package had previously been awarded to HCM, with Kuasatek appointed the M&E works sub-contractor, for the construction of a four-storey office building with basement car parks at Bukit Jalil, Kuala Lumpur. (The Edge)

KIP Reit: Four new shopping malls in the pipeline. Property developer KIP Group will see the number of shopping malls in its portfolio increase to 12, from 8 currently, over the next three years. Group CEO Valerie Ong said this included six properties that had already been injected into its listed entity, KIP REIT, and four new shopping malls in the pipeline. Speaking at the ground breaking ceremony of one of the four new malls, KIPMALL Desa Coalfields, The other malls in the pipeline would be located in Kuantan, Sungai Petani and Raub. “At this point, we are concentrating more on the property development side, as opposed to the hospitality business." She said the group currently had two core businesses the development arm and retail. (StarBiz)

Market Update

The FBM KLCI might open higher today after US stocks bounced back from their biggest weekly drop in three months with their largest one-day gain since January as a burst of merger activity and speculation propped up the market. The S&P 500 and Nasdaq Composite, finishing up 1.5% and 2%, respectively, both had their largest advances since January 30, prompting a mild retreat for US Treasuries. Propping up tech stocks was Nvidia agreeing on Monday to buy Israeli chipmaker Mellanox Technologies for $6.9bn. That helped trigger a rally in rival semiconductor companies, which countered some of the pessimism from late last week after Japan’s Renesas warned on slowing demand in China. After starting in the red, the Dow Jones Industrial Average ended 0.8% higher. The blue-chip Dow’s early stumble was due to a sharp drop in Boeing shares, after one of the company’s 737 Max 8 jets operated by Ethiopian Airlines crashed on Sunday. Boeing finished 5.3% lower. The gains for the broader market follow five straight days of decline for the S&P 500 that were capped last Friday by a disappointing US jobs report. On the other side of the Atlantic, European banks bounced higher on speculation of a merger between German lenders Deutsche Bank and Commerzbank. That helped lift the broad Stoxx 600 off last week’s 12-session closing low. The Stoxx Europe 600 added 0.8% to 373.47 on Monday, after producing a weekly loss on Friday. The U.K.’s FTSE 100 meanwhile, added 0.4% to 7,130.62. Germany’s DAX advanced 0.6% to 11,543.48 and France’s CAC 40 climbed 0.7% to 5,265.96.

Back home, the FBM KLCI index lost 15.27 points or 0.91% to 1,664.63 points on Monday. Trading volume decreased to 2.54bn worth RM2.32bn. Market breadth was negative with 266 gainers as compared to 638 losers. The regional markets finished broadly higher with shares in China leading the region. The Shanghai Composite was up 1.92% while Hong Kong's Hang Seng added 0.97% and Japan's Nikkei 225 rose 0.47%.

Source: PublicInvest Research - 12 Mar 2019

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