PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 27 Mar 2020, 10:29 AM


PublicInvest Research Headlines - 24 May 2019

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US: New home sales pull back much more than expected in April. After reporting an unexpected jump in new home sales in the US in the previous month, the new home sales pulled back by much more than anticipated in April. New home sales plunged by 6.9% to an annual rate of 673,000 in April after spiking by 8.1% to an upwardly revised rate of 723,000 in March. Economists had expected new home sales to drop by about 2.5% to a rate of 675,000 from the 692,000 originally reported for the previous month. With the upward revision, the annual rate of new home sales in March was the highest since reaching 727,000 in Oct 2007. The bigger than expected pullback in new home sales came as notable decreases in sales in the South, Midwest and West more than offset a jump in sales in the Northeast. (RTT)

US: Weekly jobless claims unexpectedly edge down to 211,000. First-time claims for US unemployment benefits unexpectedly edged lower in the week ended May 18th, according the Labor Department. The report said initial jobless claims dipped to 211,000, a decrease of 1,000 from the previous week's unrevised level of 212,000. The modest decrease came as a surprise to economists, who had expected initial jobless claims to inch up to 215,000. The Labor Department said the less volatile four-week moving average also fell to 220,250, a decrease of 4,750 from the previous week's unrevised average of 225,000. (RTT)

US: Manufacturing gauge drops to nine-year low amid trade war. US factory activity took a hit this month as the tariff war with China and an overhang of inventory dampened orders, adding to signs the economy could slow in 2Q. The preliminary US manufacturing purchasing managers' index from IHS Markit fell two points to 50.6, the lowest reading since 2009. The drop was led by the new orders gauge, which showed a contraction for the first time since August 2009. IHS Markit's gauge of US services also fell to a three-year low. Factories in the world's largest economy have been thrown into uncertainty, amid the intensifying trade conflict with China. (The Edge)

EU: Business growth fails to shine in May – PMI. A recovery in euro zone business activity was weaker than expected in May as a deepening contraction in the bloc's manufacturing industry is increasingly holding back services firms, survey showed. Last month, ECB’s President raised the prospect of more support for the struggling EU economy if its slowdown persists and the survey is likely to add to the concerns of policymakers. IHS Markit's Flash Composite PMI, which is considered a good guide to economic health, only nudged up to 51.6 this month from a final April reading of 51.5, below the median expectation of 51.7. (The Edge)

EU: German recovery hopes damped after business confidence weakens further. German business confidence eroded to the lowest level in over four years in May amid rising concerns over global trade tensions, thus shrugging off the positive impact of the modest economic growth in the first quarter, and damping hopes of a recovery in the biggest EU economy in the near term. Business confidence weakened for a second straight month to its lowest level since November 2014, results showed. The Ifo business confidence index fell to 97.9 from 99.2 in April. (RTT)

Japan: Inflation ticks up in April with help from fuel costs. Japan’s key inflation gauge ticked higher in April as fuel costs helped support price growth, yet multiple factors are set to weigh on price momentum over the coming months. Consumer prices excluding fresh food rose by 0.9% YoY in April. Among the factors helping push up inflation were higher gasoline and accommodation prices. Gains of more than 35% in oil prices since the beginning of the year have helped reignite some upward movement in Japan’s consumer prices. (Bloomberg)

Japan: Shrinking factory activity points to renewed trade. Japanese companies are becoming less confident about the future amid signs of renewed weakness in Asia’s economies and the breakdown of trade talks between the US and China, an early measure of factory activity suggests. The Nikkei Japan PMI for manufacturers slipped to 49.6, down from last month’s 50.2 reading, signaling the third contraction in factory activity this year. The result will likely temper some of the cautious optimism generated by unexpected growth in Japan’s economy during the 1Q. (Bloomberg)


Techbond: To spend USD2.7m to build Vietnam factory. Techbond Group , which raised almost RM40m via its IPO last Dec, will be spending USD2.7m to build a factory complex in Vietnam for the group’s expansion. Techbond said its wholly-owned subsidiary Techbond MFG (Vietnam) Co Ltd has signed a construction contract with main contractor Trung Hau Construction Corp for the construction of a factory complex in Vietnam-Singapore Industrial Park in Binh Duong province. The contract is scheduled to be completed by the first quarter of 2020. The group said the main contractor will hand over the project with a certified construction warranty of 24 months and a warranty guarantee of 5% of total contract value. (The Edge)

Leong Hup: Slides after IPO despite stabilising efforts . Leong Hup International , which was listed on Bursa Malaysia last week, said its stabilising manager Maybank Investment Bank Bhd (Maybank IB) bought 25.4m shares at an average price of RM1.031. This was the fourth and largest attempt by Maybank IB to stabilise the integrated poultry player’s share price. Nonetheless, Leong Hup’s share price still fell two sen or 1.9% to close at RM1.03. (The Edge)

UMW: Plans RM607m capex for 2019. UMW Holdings has allocated RM607m as capital expenditure (capex) mainly to upgrade its manufacturing plants and buy new equipment for its heavy industry division. Its president and group CEO Badrul Feisal Abdul Rahim said the group was also working on a two-year plan to have more Toyota models assembled in Malaysia. “We are allocating about RM170m to upgrade our plant in Shah Alam for automation and additional manufacturing capacity,” he said. “Last year, we completed the new Toyota manufacturing plant in Bukit Raja which increased our manufacturing capacity for completely knocked down (CKD) models.” (The Star)

Mestron: To raise RM25.28m from listing on ACE Market . Steel pole maker Mestron Holdings plans expects to raise RM25.28m as it seeks to list on the ACE Market of Bursa Malaysia. The company said it would use RM13m of 51.4% of the proceeds from the IPO to expand its main manufacturing plant and purchase machinery. They will also use RM5.18m (20.5%) to purchase raw materials such as steel plates and steel pipes; RM4m (15.8%) to repay bank borrowings and the remaining RM3.10m (12.3%) to defray listing expenses for the IPO. Mestron MD Por Teong Eng said the proposed expansion of its factory would increase the production capacity of steel poles by about 5,700 tonnes per annum to about 11,400 tonnes per annum. The move would also enable Mestron to focus on high mast poles and telecommunication monopoles. Por said the company wanted to expand its sources of income as the gross profit margin for specialty poles was higher than the margin for standard street light poles. Under the floatation exercise, Mestron is issuing 158.0 million new shares at RM0.16 per share. (The Star)

KPS: More acquisitions to follow, says Kumpulan Perangsang Selangor . Fresh from proposing the acquisition of mould fabrication firm Toyoplas Manufacturing (M) SB for RM311.25m, Kumpulan Perangsang Selangor (KPS) said that it will continue to look into potential companies with value-accretion to increase its earnings base. “Toyoplas is just one of them [our planned acquisitions],” says KPS group chairman Raja Shahreen Raja Othman. “We are continuously looking into what can be value-accretive to the group. The review of our portfolio is [still] ongoing,” Raja Shahreen said. (The Edge)

Market Update

The FBM KLCI might open softer today after Wall Street fell sharply on Thursday, extending a broad and deep sell-off across global stock markets as concern about the potential impact of the deepening trade dispute between the US and China took a tighter grip on sentiment. The slide in US equities coincided with a brisk rally in Treasuries, pushing yields to their lowest level since 2017. The S&P 500 dropped 1.2%, with the tech-heavy Nasdaq Composite down 1.6%. Sectors with the most direct exposure to the latest round of tension, which was particularly focused on technology stocks, led the declines. Political uncertainty stemming from Brexit fears weighed on the FTSE 100 index, as UK voters headed to the polls for the European Parliament elections. The London benchmark closed 1.4% down. Frankfurt’s Xetra Dax 30 lost 1.8%. The Europe-wide Stoxx 600 fell back towards the two month lows it touched earlier in May, losing 1.4%.

Back home, the FBM KLCI index lost 1.87 points or 0.12% to 1,601.87 points on Thursday. Trading volume increased to 2.38bn worth RM2.11bn. Market breadth was negative with 188 gainers as compared to 718 losers. The regional markets finished mixed to lower. Shares in Hong Kong fell as the Hang Seng dropped 1.58%. The Shanghai Composite lost 1.36% while the Nikkei 225 in Japan closed unchanged.

Source: PublicInvest Research - 24 May 2019

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