PublicInvest Research

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PublicInvest Research Headlines - 29 Oct 2019

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US: Considers extending some tariff exclusions on Chinese imports as trade talks continue . The US will consider extending certain tariff exclusions on USD34bn of imports from China as the two nations work toward a trade agreement, the Office of the US Trade Representative said Monday. Nearly 1,000 products were exempted from the July 2018 tariff, and those exclusions are set to expire on Dec. 28. The extension would give the companies importing those products leeway, while mitigating tensions between the global superpowers as they hash out the details of their agreement. (CNBC)

US: Consumer sentiment improves slightly less than initially estimated. Revised data released by the University of Michigan on Friday showed US consumer sentiment improved by slightly less than initially estimated in the month of Oct. The report said the consumer sentiment index for Oct was downwardly revised to 95.5 from the preliminary reading of 96.0. Despite the downward revision, the consumer sentiment index for Oct was still up from the final September reading of 93.2. "Sentiment was insignificantly below the mid-month level, with the small loss spread over most components of the Index," said Surveys of Consumers chief economist Richard Curtin. He added, "The overall level of consumer confidence has remained quite favorable and largely unchanged during the past few years." (RTT)

US: Goods exports, imports drop as tariffs weigh on firms . US exports and imports of goods both slumped in Sept to the weakest levels in more than a year, the latest sign President Donald Trump’s tariffs are weighing on the economy. The steeper decline for imports unexpectedly narrowed the merchandise trade deficit to USD70.4bn from USD73.1bn in Aug, according to Commerce Department data released Monday that compared with a projected gap of USD73.5bn in Bloomberg’s survey. Exports declined 3% from a year earlier to USD135.9bn, the lowest in more than a year and a half, while imports were down 4.6% to a nearly two-year low of USD206.3bn. (Bloomberg)

US: Ebbing flows curb US goods trade deficit; inventories mixed . The US goods trade deficit fell in Sept as trade tensions restricted the flow of goods, but that did not change views that economic growth decelerated further in the third quarter amid slowing consumer spending and declining business investment. The report from the Commerce Department on Monday also showed inventories at retailers rising moderately last month but stocks at wholesalers dropping. The economy grew at a 2.0% rate in the second quarter, slowing from the Jan-March quarter's 3.1% pace. The economy is losing momentum largely because of a 15-month trade war between the US and China. Though President Donald Trump this month announced a truce in the trade war with China, delaying additional tariffs that were due in Oct, economists say the longest economic expansion on record remains in danger without all import duties being rolled back. Trump said on Monday that he expects to sign a significant part of the trade deal with China ahead of schedule, but did not elaborate on the timing. (Reuters)

US: Rejects sanctions sought by China in tariffs case, going to arbitration — trade official . The US rejected China's request on Monday for USD2.4bn in compensatory sanctions for alleged US failure to comply with a World Trade Organization (WTO) ruling, sending it to arbitration, Geneva trade official said. WTO appeals judges said in July the US did not fully comply with a WTO ruling about tariffs it put on Chinese solar panels, wind towers and steel cylinders. They said Beijing could impose retaliatory sanctions, if Washington did not remove the tariffs. Washington has challenged the ruling and at WTO's Dispute Settlement Body on Monday, it objected to the USD2.4bn sought, sending the matter to WTO arbitration to decide on the amount, the trade official said. (Reuters)

EU: Nations agree Brexit delay until Jan 31 as PM Johnson seeks election . The EU agreed a three-month flexible delay on Monday to Britain's departure from the bloc as Prime Minister Boris Johnson pushes for an election, after opponents forced him to request an extension he had vowed never to ask for. Just days before the United Kingdom is formally due to leave the EU on Oct 31 at 2300 GMT, Brexit is hanging in the balance, with British politicians no closer to reaching a consensus on how, when or even if the divorce should take place. Johnson, who became prime minister in July by pledging "do or die" to deliver Brexit on Oct 31, was compelled to request a postponement after he was defeated in Parliament over the sequencing of the ratification of his divorce deal. (Reuters)

EU: Germany gets glimmer of hope as firms say worst may be over . German business expectations improved in Oct from a decade low, a cautious sign that Europe’s largest economy may have stopped deteriorating at the start of the fourth quarter. The figures from the Ifo Institute offer a glimmer of hope a day after a survey showed manufacturing still stuck in a slump and industry employment falling at the fastest pace in almost 10 years. Germany’s economy is forecast to have slipped into a technical recession in the third quarter, though economists see a return to modest growth at the end of the year. (Bloomberg)

Japan: Tokyo inflation fails to pick up in october after tax hike . Consumer prices in Tokyo rose at the same pace in October even after a sales tax hike, underscoring the challenge the Bank of Japan faces in stoking inflation as it prepares for a review of the strength of prices later this week. Prices of goods excluding fresh food in Tokyo, a leading indicator of nationwide inflation figures, rose 0.5% from a year earlier, the ministry of internal affairs said Tuesday. The median of economists’ estimates was for a 0.7% gain. (Bloomberg)

China: Bond rout worsens as yield jumps most in six months. A sell-off in China’s government bonds is getting worse by the day. The plunge in the sovereign notes accelerated on Monday, pushing the benchmark 10-year yield up by the most since April. Selling momentum surged to the strongest since late 2017, according to the 14-day relative strength index on the rate. Risk appetite has returned as traders become increasingly optimistic that China and the US will sign a partial trade deal next month. Meanwhile, bets for aggressive monetary easing have waned as the Asian nation’s inflation grew at a faster-than expected pace in September. (Bloomberg)


IHH (Outperform, TP: RM7.00): No definitive decisions on Indian assets yet. IHH Healthcare has clarified that no definitive decisions have been made to sell its investments in Ravindranath GE Medical Associates Pvt Ltd (Global Hospitals) and Continental Hospitals Private Limited (Continental Hospital) in India. However, it admitted that there have been discussions on the strategic directions of the two hospitals.The group added that it constantly review and assess the strategic direction of the group’s investments. (SunBiz)

LBS (Outperform, TP: RM0.86): Launches first high-rise residential project in Alam Perdana. LBS Bina Group has unveiled the first high rise development in LBS Alam Perdana township, which has a GDV of RM562m. The project named Melodi Perdana, comprises four residential blocks offering a total of 1,520 units of apartments with average built-up size of 901 sqft. Melodi Perdana homes were built based on the company’s main pillars of affordability, connectivity and community. (The Edge)

TDM: No material impact from Indonesian Govt sanction following fire in its plantation. TDM announced that it does not expect material impact stemming from an Indonesian Government sanction following a fire on its plantations in Kalimantan. The sanction would not yield any material impact, while adding the area of the fire was under rehabilitation. The estimated impairment from the bearer plants on the 900 hectares affected amounted to RM16.55m. (The Edge)

Sarawak Consolidated: Awarded RM175.4m EPCC jobs. Sarawak Consolidated Industries (SCIB) has bagged RM175.4m worth of engineering, procurement, construction and commissioning (EPCC) contracts. The group has accepted letters of award and acceptance (LOA) for three EPCC contracts in Indonesia, Qatar and Oman while its wholly owned-owned subsidiary SCIB Properties SB accepted the LOA for two EPCC contracts in Malaysia. (SunBiz)

Sunway: To develop RM300m condo project. Sunway Property plans to undertake a condominium project with a potential GDV of RM300m in Wangsa Maju, KL. Its 55% -owned subsidiary Sunway Avila SB signed an agreement to acquire a parcel of freehold land measuring 1.5 hectares for RM36.97m. The proposed development comprising 468 condominium units is targeted for launch in the second half of 2021. It is anticipated to mirror the success of Sunway Avila, located just 200 metres away. (The Edge)

Unisem: Posts first quarterly loss since 2013, dragged by Batam unit closure. Unisem (M) incurred a net loss of RM3.21m for the 3QFY19, versus a net profit of RM35.15m a year ago, due to expenses arising from the closure of its Batam unit, PT Unisem. This is the group's first quarterly loss since 2013. Consequently, Unisem recorded a loss per share of 0.44sen during the quarter, versus earnings per share of 4.83sen in 3QFY18. Notwithstanding the weaker results, the group recommended a second interim dividend of 2sen. (The Edge)

Gagasan Nadi Cergas: To suspend trading on Tuesday pending material announcement. Gagasan Nadi Cergas will be suspending the trading of its shares on Tuesday, pending a material announcement. Trading in the company's shares will be suspended with effect from 9.00 a.m. At the current price, the group, which is involved in construction, facilities management services and concession projects, has a market capitalisation of RM188.25m. (The Edge)

Market Update

The FBM KLCI might open stronger today after U.S. stocks finished higher Monday, with the S&P 500 closing at a record, as investors waded into another busy week of earnings and a Federal Reserve policy meeting that’s expected to deliver another cut to interest rates. The S&P 500 index rose 16.87 points, or 0.6%, to end at 3,039.42, closing above its previous record of 3,027.98, set on July 26. The Dow Jones Industrial Average rose 132.66 points, or 0.5%, to finish at 27,090.72 and the Nasdaq Composite Index ended the session up 82.87 points, or 1%, at 8,325.99. Investors also continue to watch developments around Britain’s efforts to complete a deal dictating the terms of its exit from the European Union. The EU on Monday agreed to delay Brexit until Jan. 31.

Meanwhile, U.K. lawmakers were expected to vote later Monday on whether to hold an early election in an effort to break parliamentary deadlock over Brexit. U.K. Prime Minister Boris Johnson is seeking a Dec. 12 election, but faces an uphill battle in Parliament. In Europe, stocks were mostly higher, with the Stoxx Europe closing up 0.3%. Back home last Friday, the FBM KLCI index lost 1.11 points or 0.07% to 1,570 points. Trading volume decreased to 2.06bn worth RM1.40bn. Market breadth was negative with 322 gainers as compared to 429 losers. In the region Monday, stocks closed higher, with the China CSI 300 adding 0.8%, Hong Kong’s Hang Seng Index rising 0.8% and Japan’s Nikkei 225 advancing 0.3%.

Source: PublicInvest Research - 29 Oct 2019

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