PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 24 Jan 2020, 2:52 PM


PublicInvest Research Headlines - 22 Aug 2019

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US: Home sales rise, boosted by lower mortgage rates. US home sales rose more than expected in July, boosted by lower mortgage rates and a strong labor market, signs the Federal Reserve’s shift toward lower interest rates was supporting the economy. A separate report released by the Labor Department on Wednesday suggested the level of employment in the country was slightly lower than previously estimated, taking a bit of the shine off the labor market. Despite headwinds from a global economic slowdown, the US housing market appears to be strengthening. The National Association of Realtors said existing home sales rose 2.5% to a seasonally adjusted annual rate of 5.42m units last month. June’s sales pace was revised slightly higher to 5.29m units from the previously reported 5.27m units. (Reuters)

US: Home refinancing activity hits three-year high - MBA. US homeowners filed the most applications to refinance their current mortgages in over three years as 30-year borrowing costs slipped to their lowest levels since late 2016, the Mortgage Bankers Association said on Wednesday. Overall mortgage activity, however, declined because of a pullback in loan requests for home purchases, the Washington-based industry group said. MBA’s seasonally adjusted index on mortgage refinancing activity edged up 0.4% to 2,754.7 in the week ended Aug 16, which was its highest since July 2016. The refinancing share of total applications grew to 62.7%, the biggest since Sept 2016, from 61.4% a week earlier. Interest rates on 30-year, fixed rate mortgages averaged 3.9%, down 3 basis points from the prior week. This was the lowest reading since the week of Nov 4, 2016. (Reuters)

US: Fed was divided on rate cut, wanted to avoid appearing on path for more cuts. Federal Reserve policymakers were deeply divided over whether to cut interest rates last month but were united in wanting to signal they were not on a preset path to more cuts, a message not likely to sit well with US President Donald Trump. Minutes from the two-day meeting released on Wednesday showed policymakers’ ultimate decision to lower the central bank’s benchmark interest rate by a quarter percentage point drew more opposition than was reflected in the rate-setting panel’s 8-2 vote, announced after the meeting adjourned on July 31. While a “couple” of participants favored a deeper cut of half a percentage point to help lift inflation toward the Fed’s target and thwart fallout from global trade tensions, a larger number - characterized in the minutes as “several” - favored no change at all. (Reuters)

US: IMF warns against rate cuts, currency intervention to improve trade balance. The IMF on Wednesday warned against governments trying to weaken their currencies through monetary easing or market interventions, arguing that this would hurt the functioning of the international monetary system and make all nations worse off. It said that policy proposals to use monetary easing and direct purchases of other countries' currencies are unlikely to work. "One should not put too much stock in the view that easing monetary policy can weaken a country's currency enough to bring a lasting improvement in its trade balance through expenditure switching. Monetary policy alone is unlikely to induce the large and persistent devaluations that are needed to bring that result," IMF chief economist Gita Gopinath and IMF researchers Gustavo Adler and Luis Cubeddu said. (Reuters) 

US: Trade woes are slowing economy, budget experts say. Higher trade barriers, including President Donald Trump’s tariffs, are slowing the US economy and cutting household income, congressional budget experts warned on Wednesday, as Trump heads toward a 2020 election showdown with Democrats. The nonpartisan Congressional Budget Office said changes in US and foreign trade policies since Jan 2018 will reduce inflation-adjusted US GDP by 0.3% from what it would be otherwise by 2020. It also predicted that trade would reduce real income for the average US household by 0.4%, or USD580. CBO also projected a deeper federal deficit of USD960bn for FY2019, which ends on Sept 30, due in part to higher government spending. The deficit is projected to top USD1trn next year and average USD1.2trn between FY2020 and FY2029. (Reuters)

UK: Budget balance posts small surplus in July. The UK budget balance showed a small surplus in July, figures from the Office for National Statistics showed Wednesday. Public sector net borrowing excluding public sector banks was in GBP1.3bn surplus in July. This was smaller by GBP2.2bn from July 2018 and also remained below economists' forecast of GBP2.7bn. While the central government borrowed GBP1.3bn, local government and the BOE registered surpluses of GBP2.2bn and GBP0.4bn, respectively. In July, accrued receipts are particularly high owing to receipts from self-assessed Income Tax. The ONS said receipts from self-assessed Income Tax increased GBP0.3bn to GBP9.4bn. This was the highest level of July self-assessed Income Tax receipts on record. (RTT)

UK: To sign post-Brexit continuity trade deal with South Korea. The UK and South Korea on Thursday are due to sign a continuity deal to ensure the two nations continue to trade on preferential terms after Britain leaves the European Union. The new free trade agreement replicates "as far as possible" the terms of the existing EU-South Korea deal that was signed in 2011, the UK Department for International Trade said. Trade Secretary Liz Truss and Korean Minister of Trade Yoo Myung-hee are due to sign the deal in London, it said. Britain has been working to protect trade relationships it enjoys through EU trade deals by rolling those terms over to apply after Brexit. (Bloomberg)

UK: Budget deficit soars as Britain prepares for Brexit. UK government borrowing surged in the first four months of the fiscal year, a reminder of the vulnerability of the public finances as Britain braces for a no-deal Brexit. The budget deficit between April and July stood at GBP16bn (USD19.4bn), 60% more than the same period last year, Office for National Statistics figures published Wednesday show. The increase was the fastest since the financial crisis a decade ago as spending rose at double of the pace of revenue, a possible sign that the economic downturn is taking a toll. Years of post-crisis austerity have brought down the deficit from almost 10% of GDP in 2009-10, the highest in peacetime history, to a 17-year low of just 1.1% last year. (Bloomberg)

Thailand: Continued monitoring of financial stability risks needed. Risks to financial stability such as high household debt, warrants continued monitoring, while property sector risks have abated, minutes of the Bank of Thailand Aug 7 rate-setting session revealed on Wednesday. "Financial system risks still posed vulnerabilities to financial stability," it said. In the 2Q, household debt increased steadily in line with credit expansion of commercial banks and non-bank financial institutions, the central bank said. Consumer loan growth that was underpinned by more lenient lending standards warrant monitoring, the bank stressed. Further, the bank noted that the share of households that are sensitive to negative income shocks have increased, weighing on household debt serviceability. (RTT)


Sasbadi: Inks MoU with Chinese publication for teaching materials. Sasbadi has inked a MoU with a publication under China’s Ministry of Education to develop Special Education Teaching Materials to be used in Malaysia and a Situational English Learning Programme to be used by learners in China. Sasbadi said it had entered into an MoU with the People’s Education Press (PEP) and that the MoU will expire in a year, to be terminated upon execution of a definitive agreement by both parties. The initiative aims to bring quality educational materials that are suitable and thoughtful to the learning needs of differently-abled children, whereas the Situational English Language Learning Programme aims to expand Sasbadi’s home grown English context to be used by learners in China. (The Edge)

Utusan Melayu: To continue operations, hikes prices. Utusan Melayu says it will continue to operate with its business and publish its newspapers namely Utusan Malaysia and Kosmo! “As such, the board of Utusan denies the rumours that Utusan will cease its printing and operation which has been widespread in other newspapers and social media,” it said. It also decided to increase the price of Utusan Malaysia from RM1.50 per copy to RM2 per copy and Kosmo! from RM1 to RM1.50 per copy effective Aug 23 and Aug 25 respectively. Utusan Group executive chairman Datuk Abdul Aziz Sheikh Fadzir said the company had to increase the price of its main newspaper and Kosmo! to sustain its survival. (StarBiz)

Matrix Concepts: Expects strong growth to continue. Matrix Concepts which recorded its best ever performance with revenue of RM1.05bn for FY19, expects to maintain its strong financial performance. Underpinning the strong performance since its listing was its launch mix of mainly affordable to mid-end offerings in Negeri Sembilan and Johor, group chairman Datuk Mohamad Haslah Mohamad Amin said. "We achieved our best ever performance in FY2019, reinforcing our track record of consistent growth since listing and delivering greater returns to our shareholders. The group also embarked on two JV in FY19 namely with reputed education player Bonanza Educare SB to manage and enhance the operations of Matrix Global Schools. (StarBiz)

Berjaya Land: To launch Tower B of The Tropika this year. Berjaya Land (B-Land) is targeting to launch its Tower B of The Tropika development project in Bukit Jalil by this year. Senior GM, property sales and marketing division Tan Tee Ming said, the current take-up rate for The Tropika Tower A is 70% while the Tower B will be launched once the take-up rate of Tower A reaches 80%. B-Land has entered into a lease agreement with Trendcell, which will see Trendcell operate a Jaya Grocer store with F&B outlets a the commercial space of The Tropika, measuring a total area of 23,695 square feet. The management of Jaya Grocer said Tan, adopts a very strategic and prudent approach in identifying a suitable location for its stores. (The Edge)

Tune Protect: Earnings slip to RM10.7m in 2Q. Tune Protect posted a lower net profit of RM10.71m in 2QFY19 compared with RM12.81m recorded a year earlier. Among others, itattributed the weaker bottom line to a decrease in net earned premiums of RM10m and RM5.2m increase in management expenses. Revenue declined as well to RM124.46m from RM141.26m previously due to an RM18.9m drop in gross earned premiums, which was offset by a RM2.1m increase in investment income. (The Edge) 

Market Update

The FBM KLCI might nudge higher at the opening today after US stocks held on to their gains following the release of minutes from the Federal Reserve’s July monetary policy meeting, as fresh optimism over consumer spending countered recent worries over economic growth. The S&P 500 jumped 0.8% higher on Wednesday, boosted by strong earnings from retailers Target and Lowe’s, which underlined the health of the American consumer even as concerns hang over the wider economy. Shares in the two retailers soared with Target leading the S&P, rising more than 20 percent and closing at a record high. The quarterly reports fuelled hopes for resilient growth in the face of global headwinds and trade tensions, after upbeat data on domestic retail sales and a brighter outlook from industry behemoth Walmart cheered investors last week. The Nasdaq Composite and blue-chip Dow Jones Industrial Average each added 0.9%. Stocks also rose across Europe. The continent-wide Stoxx 600 gained 1.2% in a broad-based advance that took it to its highest levels since early August.

Back home, the FBM KLCI index lost 8.16 points or 0.51% to 1,594.59 points on Wednesday. Trading volume decreased to 2.00bn worth RM1.62bn. The regional markets finished mixed with the Hang Seng gained 0.15%, the Shanghai Composite rose 0.01% while the Nikkei 225 lost 0.28%.

Source: PublicInvest Research - 22 Aug 2019

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