PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 29 Sep 2020, 12:06 PM


PublicInvest Research Headlines - 26 Jun 2019

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US: Fed pushes back on aggressive rate cut views. Federal Reserve officials on Tuesday pushed back on market expectations and presidential pressure for the central bank to deliver a significant US interest rate cut of half a percentage point as soon as its next meeting. Chairman Jerome Powell defended the central bank’s independence from President Donald Trump and financial markets, both of which seem to be pushing for aggressive rate cuts, in remarks at the Council on Foreign Relations in New York. “The Fed is insulated from short-term political pressures,” said Powell. Asked later about the possibility of disappointing markets by not delivering a cut, Powell added, “We’re not in the business, really, of trying to work through short-term movements in financial conditions. We have to look through that.” But he said he and his colleagues are currently grappling with whether uncertainties around US tariffs, Washington’s conflict with trading partners and tame inflation require a rate cut. (Reuters)

US: Consumer confidence dives, trade tensions hurting economy. US consumer confidence tumbled to a 21-month low in June as households grew a bit more pessimistic about business and labor market conditions amid concerns about a recent escalation in trade tensions between the US and China. The economy’s prospects were further dimmed by other data on Tuesday showing sales of new single family homes unexpectedly fell for a second straight month in May. The Conference Board said its consumer confidence index dropped 9.8 points to a reading of 121.5 this month, the lowest since Sept 2017, from a downwardly revised 131.3 in May. This month’s drop in the index was the largest since July 2015. The index, which was previously reported at 134.1 in May, still remains at lofty levels, suggesting consumer spending remains supported. (Reuters)

US: New home sales unexpectedly plunge 7.8% in May. A report released by the Commerce Department on Tuesday unexpectedly showed a steep drop in new home sales in the US in the month of May. The Commerce Department said new home sales plunged by 7.8% to an annual rate of 626,000 in May after tumbling by 3.7% to a revised rate of 679,000 in April. Economists had expected new home sales to climb by 1% to a rate of 680,000 from the 673,000 originally reported for the previous month. The unexpected drop in new home sales came as sales in the West plummeted by 35.9% to a rate of 125,000 and sales in the Northeast showed a 17.6% nosedive to a rate of 28,000. On the other hand, the report said new home sales in the Midwest and South increased by 6.3% and 4.9%, respectively. (RTT)

US, China: US set to delay more China tariffs with Trump, Xi set to meet. The US is willing to suspend the next round of tariffs on an additional USD300bn of Chinese imports while Beijing and Washington prepare to resume trade negotiations, people familiar with the plans said. The decision, which is still under consideration, may be announced after a meeting between Presidents Donald Trump and Xi Jinping set for Saturday at a Group of 20 summit in Japan. The US won’t accept any further conditions on tariffs as part of reopening negotiations and no detailed trade deal is expected from the leaders’ summit, a senior administration official said Tuesday. The Trump administration has said the goal of the meeting is to create a path forward for a trade agreement, after negotiations broke down last month. (Bloomberg) 

EU: ECB's de Guindos warns bank profitability may erode amid economic slowdown. Euro area banks could see their profitability prospects weaken as the economic growth slows, making the operating environment more challenging, ECB Vice President Luis de Guindos said Tuesday. "Recently, profitability concerns have again come to the fore as the operating environment for banks has become more challenging, with economic growth projected to slow down in 2019," de Guindos said. "Banks' profitability prospects could thus be dampened by deteriorating growth expectations, adding to structural weaknesses." The policymaker pointed out that persistently low profitability can limit banks' ability to generate capital organically, thus make it harder for them to build up buffers against unexpected shocks and limit their capacity to fund loan growth. (RTT)

EU: Germany construction orders fall in April. Germany's construction orders declined in April from the previous month, data from Destatis showed on Tuesday. The price-adjusted orders in construction industry decreased by a seasonally and working-day adjusted 1.7% MoM in April. This decline was due to the high order intake last month on the back of particularly good development, the agency reported. Compared to the previous year, price-adjusted order intake in the main construction industry increased 6.4% in April. From the Jan to April period, construction orders advanced 7.5% from the same period last year. (RTT)

UK: Retail sales fall most since 2009 financial crisis. UK retail sales volume declined the most since the financial crisis a decade ago with poor weather signaling weak economic growth in the second quarter, the latest survey from the Confederation of British Industry showed Tuesday. A balance of 42 percent reported a decline in retail sales volume in June from last year, compared to the expected level of -3%. Grocers were the largest contributors to the fall in sales volumes, while the only sub-sector to see rising sales this month was internet and mail order retailers, the Distributive Trades survey revealed. Nearly 16% forecast retail sales volumes to grow in July, while 27% expect a decrease, resulting in a balance of -11%. This month's drop in sales should be taken with a pinch of salt, given the backdrop of last June's heatwave and the start of the World Cup, Alpesh Paleja, CBI principal economist, said. (RTT)

Japan: Producer prices rise 0.8% on year in May. Producer prices in Japan were up 0.8% on year in May, the BOJ said on Tuesday. That was shy of expectations for an increase of 1% and down from the upwardly revised 1% gain in April (originally 0.9%). On a monthly basis, producer prices dipped 0.3% after easing 0.1% in the previous month. Individually, prices were down for communications, transportation, advertising and maintenance, while prices were up for real estate. Finance was roughly flat. (RTT)

Indonesia: Finance minister sees weaker growth, rate cuts. Indonesia’s finance minister said the economy will probably expand at a slower pace than previously forecast, and that she would be happy if the central bank lowered interest rates to help stoke economic growth. The US-China trade war is hitting Indonesia’s exports, curbing its imports and reducing commodity prices, all of which will weigh on the country’s growth, Sri Mulyani Indrawati said Tuesday. “These are all the downside risks that Indonesia is going to face when we are talking about the projection of growth,” Indrawati said. The economy is still projected to grow between 5.17% and 5.2% this year, she said. (Bloomberg) 


Tri-Mode: Partners Taiwan’s Oriental Logistics in Vietnamese venture. Tri-Mode is partnering with a Taiwanese logistics firm to expand its geographical footprint to Vietnam, where it sees high demand for international logistics services. The company said it has entered into a JV agreement with Oriental Freight Services and Vietnamese investor Le Thi Thuy An to set up the company in Ho Chi Minh City. Oriental Freight will own a 79% stake, followed by Tri Mode at 20% and Le Thi Thuy An at 1%. Tri-Mode is to make an initial contribution of USD80,000 (c.RM331,422), which it said will be funded through internally generated funds. "The proposed JV is aimed to expand Tri-Mode's logistics business to Vietnam, where the potential of international trade transaction is growing tremendously and demand for international logistics services is high due to rapid economic growth of the country. (The Edge)

Petronas Chemicals, Scomi: To jointly develop and market chemical solutions. Petronas Chemicals and Scomi have inked two agreements for collaboration in research, development and marketing of chemical solutions. The first agreement is to formalise the ongoing research and development of chemical solutions mainly targeted for the oil and gas industry, which has been ongoing since 2016. Meanwhile, the second agreement is for the commercialisation of a high performance water-based mud additive — the first product developed under the collaboration. The additive, developed by Scomi, is designed to improve shale inhibition in offshore and on shore drilling activities. (The Edge)

Cahya Mata Sarawak: Unit has no plans to increase cement prices. Cahya Mata Sarawak’s unit has no plans to increase the prices of its cement anytime soon, said its CEO Suhadi Sulaiman. Responding to Finance Minister Lim Guan Eng's recent call for the authorities to probe the difference in cement prices between Sarawak and the peninsula, he said the enquiry would show that CMS had not raised its prices since Jan 2016. Suhadi said other industry players were welcome to set up shop but choose not to venture into Sarawak, because the initial start-up costs for development of infrastructure and haulage made it non-viable. (The Edge)

TRC Synergy: Tenders for projects worth RM2b this year. TRC Synergy is actively bidding for RM2b worth of projects this year while striving to reduce reliance on the segment. ED Datuk AbdulAziz Mohamad said the company has set a realistic target of RM2b this year as compared with a RM5b tender book last year, As for this year, the total value of projects that we have tendered and will tender for is RM2bn, including projects related to the Pan Borneo Highway in Sarawak,” he said. (StarBiz)

Hai-O: 4Q net profit falls 36%, declares 9 sen dividend. Hai-O Enterprise 4QFY19 net profit fell 36% YoY to RM10.02 million, on lower revenue generated from its Multilevel marketing (MLM) and wholesale divisions. EPS for 4QFY19 fell to 3.45 sen, from 5.40 sen previously.Hai-O said revenue for the quarter fell 37% to RM69.94m, versus RM110.56 million previously. The group said lower number of members’ recruitment and renewal, coupled with lower sales registered, had affected the division's financial performance. The Group announced a 9 sen dividend.(The Edge) 

Market Update

The FBM KLCI might open weaker today after information technology shares and those related to telecoms suffered sharp losses overnight on Wall Street, as commentary from the Federal Reserve moderated hopes for a substantial reduction of benchmark borrowing costs. Rate-cut hopes have thus far underpinned equity market's record rally. The Dow Jones Industrial Average fell 0.7%, to 26,548 and the S&P 500 index finished 1% lower at 2,917. As tech-related stocks got clobbered, the technology-heavy Nasdaq Composite Index endured the brunt of the day's selling, down 1.5% at 7,885, representing the worst day for the index since June 3. European markets finished mixed as of the most recent closing prices. The FTSE 100 gained 0.08%, while the DAX led the CAC 40 lower. They fell 0.38% and 0.13% respectively.

Back home, the FBM KLCI index gained 0.48 of a point or 0.03% on Tuesday. Trading volume decreased to 1.78bn worth RM1.75bn. Market breadth was negative with 364 gainers as compared to 413 losers. The regional markets finished broadly lower with shares in Hong Kong leading the region. The Hang Seng was down 1.15% while China's Shanghai Composite was off 0.87% and Japan's Nikkei 225 was lower by 0.43%.

Source: PublicInvest Research - 26 Jun 2019

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