PublicInvest Research

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


PublicInvest Research Headlines - 18 Sept 2019

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US: Industrial production rebounds much more than expected in Aug. After unexpectedly reporting a modest drop in US industrial production in the previous month, the Federal Reserve released a report showing industrial production rebounded by much more than anticipated in the month of Aug. The industrial production climbed by 0.6% in August after edging down by a revised 0.1% in Aug. Economists had expected industrial production to rise by 0.2% compared to the 0.2% dip originally reported for the previous month. The bigger than expected rebound in production came as manufacturing output rose by 0.5% in August, more than reversing the 0.4% decrease in July. The Fed noted factory output has increased 0.2% per month over the past four months after having decreased 0.5% per month during the first four months of the year. (RTT)

US: Homebuilder confidence unexpectedly improves in Sept. Reflecting low interest rates and solid demand, the National Association of Home Builders released a report showing an unexpected improvement in US homebuilder confidence in the month of Sept. The NAHB/Wells Fargo Housing Market Index inched up to 68 in Sept from an upwardly revised Aug reading of 67. Economists had expected the index to come in unchanged compared to the 66 originally reported for the previous month. With the unexpected uptick, the housing market index reached its highest level since a matching reading in Oct of 2018. Solid household formations and attractive mortgage rates are contributing to a positive builder outlook. However, builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China. (RTT)

EU: German economic outlook remains negative despite improved investor morale - ZEW. The mood among German investors improved more than expected in Sept, a survey showed, but the ZEW institute warned that the outlook for Europe’s largest economy remained negative due to trade disputes and Brexit uncertainty. Its monthly survey showed economic sentiment among investors rose to -22.5 from -44.1 in Aug. Economists had expected a slight improvement to -37.0. A separate gauge measuring investors’ assessment of the economy’s current conditions fell to -19.9 from -13.5 in the previous month. That was the lowest reading since May 2010. Analysts had predicted a reading of -15.0. The rise of the ZEW Indicator of Economic Sentiment is by no means an all-clear concerning the development of the German economy in the next six months. (Reuters)

China: Home price growth at weakest in nearly a year, developers seen cutting prices. China’s new home prices grew at their weakest pace in nearly a year in Aug as a cooling economy and existing curbs on speculative buying put a dent on overall demand. Wary of property bubbles, Chinese regulators have vowed to refrain from stimulating the real estate sector as they roll out measures to boost the broader economy hit by the Sino-US trade war and slowing consumer demand. Average new home prices in China’s 70 major cities rose 8.8% in Aug from a year earlier, compared with a 9.7% gain in July and the weakest pace since Oct 2018, calculated from official National Bureau of Statistics (NBS) data. On a monthly basis, average new home prices rose 0.5% in Aug, less than July’s growth of 0.6% and the smallest increase since Feb. (Reuters)

China: Hong Kong jobless rate steady in August. Hong Kong's jobless rate remained stable during the June to August period, data from the Census and Statistics Department showed on Tuesday. The unemployment rate remained steady at 2.9% during the June to August period, same as in the previous three months. The number of unemployed persons increased to 120,600 during the June to August period from 118,500 in the previous three months. As economic conditions have deteriorated further lately, the local labor market will unavoidably be subject to increasing pressure in the near term," the Secretary for Labor and Welfare Law Chi-kwong said. (RTT)

Japan: Exports fall for ninth straight month in August. Japanese exports dropped for a ninth straight month in August as trade conflicts compound a global economic slowdown. The value of shipments abroad fell 8.2% in August from a year earlier, according to the finance ministry. Economists surveyed by Bloomberg had estimated a 10% drop. The trade balance was a deficit of Y136.3bn. Slowing demand overseas, especially in China, has weighed on Japan’s exports, one of the economy’s main drivers of growth. The US-China trade war makes the outlook for Japanese shipments uncertain, while Japan and South Korea have their own tensions. (Bloomberg)

Singapore: Exports decline less than expected. Singapore's non-oil domestic exports declined at a slower than expected pace in August, data from Enterprise Singapore revealed on Tuesday. NODX declined 8.9% year-on-year in August, after a 11.4% fall in July. Economists had expected a 10.6% fall. Exports of electronic goods decreased by 25.9% annually in August, following the 24.2% decrease in the previous month. Non-electronic NODX fell by 2.2% in August, after a 6.7% contraction in the preceding month. Exports to the top ten markets declined in July, except to the China. The annual fall was led by Hong Kong, Malaysia and US. On a monthly basis, NODX rose 6.7% in August, after a 3.5% increase in the preceding month. (RTT)


DKSH (Neutral, TP: RM2.60): FGV subsidiary and DKSH sign distributorship agreement. FGV Holdings has signed a distributorship agreement with DKSH (M) SB to widen the distribution of FGV’s downstream products across hotels, restaurants and cafes in Peninsular Malaysia. (The Edge) Comment : We view this positively as it is expected to increase sales volume for DKSH as Saji is a well-known household brand locally. Furthermore, we opine that Delima’s products complements well with Auric given that both companies are in the food manufacturing business. As we are unable to provide financial impact at the moment, we leave our earnings estimates unchanged for the time being. Maintain Neutral with a TP of RM2.60.

Yinson: USD1bn Vietnam charter contract terminated amid China-Vietnam dispute. Yinson Holdings JV in Vietnam for a charter contract worth USD1bn over a 15-year period has been terminated due to a “prolonged force majeure event”, which is widely understood to be the overlapping claims in South China Sea between Vietnam and China. Yinson said the JV will assert its rights under all relevant contracts and in laws, for any advances, claims, liabilities, losses or damages against or suffered by it in any way concerning the matter. The contract was meant for the supply of a FPSOfacility for the Ca Rong Do Field Development located in Block 07/03 in the Eastern Sea Offshore Vietnam (CRD Field). (The Edge)

Datasonic: Signs JV agreement to explore business opportunities in Nigeria. Datasonic Group has teamed up with a Nigerian firm to study business opportunities in the West African nation with a population of 202m. Datasonic said it has signed an agreement with Nigeria’s Chrome Group to establish a JV company, in which Chrome will have a 60% stake and Datasonic 40%. Datasonic said the JV company intends to explore and carry on business in information communications technology (ICT) in Nigeria. (The Edge)

TDM: Says 1201ha of plantation land in Indonesia affected by fire. TDM has confirmed that Indonesian authorities have sealed off its plantation land in the republic due to fire.TDM said some 1,201ha had been affected by fire. It said the affected areas are known as North 2 Estate at NB2 — Tapang Ria, NB3 — Kemantan, NB7 — Kancing, and NB8 — Kayan. TDM said the fire has been extinguished. The group said the sealing off of the affected areas is a normal procedure by the Indonesian authorities to ensure the affected areas are secured and investigation can be carried out accordingly. TDM said from the beginning of dry weather in early August, it has been on high alert and has put in place measures to manage and control fire incidents in the operating areas. (The Edge)

Consumer (Neutral): Supermarkets and hypermarkets in Malaysia going through consolidation . Supermarket and hypermarket operators in Malaysia are going through a consolidation stage, Retail Group Malaysia MD Tan Hai Hsin said. “They expanded aggressively throughout the country during the 2000s. With the current economic condition that has not improved until now, it is not a surprise for them to close under-performing stores,” he said. “The closure is not expected to be worsened than this year, unless a recession occurred next year,” Tan said. Malaysian consumers are not replacing hypermarket with mini-markets like KK Mart and 99 Speedmarts. he said. (StarBiz)

Market Update

The FBM KLCI might open without much fanfare after oil retreated sharply from a historic one-day jump as investors weighed a positive report on the outlook for bringing Saudi Arabia’s output back online after a strike on the country’s production infrastructure at the weekend. Brent crude, the international oil marker, was down 6.5% at $64.55 a barrel on Tuesday, while West Texas Intermediate, the US benchmark, settled 5.7% lower at $59.34 as they reversed some of the previous session’s gains. During afternoon trade in New York, Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, said at a press conference that oil supply from the kingdom was fully back online and that it will keep full oil supply to its customers for the month of September. Saudi Aramco’s chief executive said it took less than seven hours to extinguish the weekend’s fires and that all necessary activities to restore production will be finished before the end of this month. On Wall Street, the S&P 500 fluctuated between modest gains and losses, but steadied to finish 0.3% higher. The Nasdaq Composite added 0.4%. In Europe, the composite Stoxx 600 shed 0.1%, London’s FTSE 100 was flat and Frankfurt’s Dax was 0.1% lower.

Back home, the FBM KLCI closed 3.05 points or 0.19% higher at 1,604.30. Leading gainers included Petronas Gas Bhd, after the stock rose 18 sen or 1.11% to RM16.42. The regional equities were mostly lower on the day. Hong Kong’s Hang Seng dropped 1.2%, while China’s CSI 300 index of Shanghai- and Shenzhen listed stocks dropped 1.7% after the People’s Bank of China left its one-year medium-term lending facility rate unchanged at 3.3%.

Source: PublicInvest Research - 18 Sept 2019

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