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PublicInvest Research

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

 

PublicInvest Research Headlines - 2 Dec 2019

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Economy

EU: Unemployment rate lowest since 2008. The euro area unemployment rate declined to the lowest in more than a decade in Oct despite subdued economic growth. Data showed that the unemployment rate in the currency bloc fell to 7.5% in Oct, as expected,  from 7.6% in Sept. This was the lowest rate since July 2008. The number of unemployed decreased by 31,000 from Sept to 12.334m in Oct. On a YoY basis, unemployment declined 761,000. The unemployment rate among youth aged below 25, fell marginally to 15.6% from 15.7% in September. (RTT)

EU: Inflation accelerates in November. Eurozone inflation accelerated in Nov on food and services cost, flash data from Eurostat showed. Inflation rose more-than-expected to 1% in Nov from 0.7% in Oct. Economists had forecast the rate to rise to 0.9 percent. Headline inflation remained well below the ECB’s target of "below, but close to 2%." On a MoM basis, consumer prices dropped 0.3% in Nov. Core inflation that excludes energy, food, alcohol and tobacco, climbed to 1.3% from 1.1% in Oct. The rate also exceeded the expected 1.2%. (RTT)

UK: Mortgage approvals decline in Oct. UK mortgage approvals declined in October, data from the Bank of England showed. The number of mortgages approved for house purchases fell to 64,602 in Oct from 65,803 in Sept. Approvals were forecast to drop to 65,400. Lending secured on dwelling increased by GBP4.3bn or 0.3% in Oct. The extra amount borrowed by consumers in order to buy goods and services rose to GBP1.3bn. Annual growth in consumer credit advanced to 6.1% from 5.9%. (RTT)

Japan: Consumer confidence highest in 5 months. Japan's consumer confidence rose to the highest level in five months in Nov, data from the Cabinet Office showed. The consumer confidence index rose to a seasonally adjusted 38.7 in Nov from 36.2 in Oct. Economists had expected a score of 37.0. Among the four sub-indexes of the consumer confidence index, the index reflecting households' inclination to buy durable consumer goods rose to 35.3 in Nov, and the index for income growth increased to 40.1. The indicators measuring overall livelihood improved to 38.0, and the employment perception grew to 41.4 in Nov. (RTT)

Japan: Industrial output declines more than expected. Japan's industrial production declined more than expected in Oct signaling a notable contraction in GDP during 4QFY19, official data revealed. According to preliminary data, industrial production plunged 4.2% MoM in Oct, in contrast to Sept's 1.7% increase. Economists had forecast a moderate decrease of 2%. On a YoY basis, industrial production decreased sharply by 7.4% after rising 1.3% a month ago. Output was forecast to fall 5.2%. Further, data showed that manufacturers expect to cut production by 1.5% in Nov but to lift output by 1.1% in Dec. (RTT)

Hong Kong: Home prices fall for the 5 th straight month in Oct. Hong Kong private home prices slipped for a fifth consecutive month in Oct as it grapples with its biggest political crisis in decades, although the pace of decline slowed. Oct prices dropped 1.3% in Hong Kong property markets compared with a revised fall of 1.7% in Sept, government data showed. "Looking at the social and market situation, the price index will continue to decline in Nov and Dec," said Knight Frank. It added that low interest rates would provide some support. (Reuters)

Singapore: Producer prices fall in Oct. Singapore producer prices declined further in Oct, data from the Department of Statistics showed. The manufactured product price index fell 5.4% YoY in Oct, following the 4.5% decrease in Sept. Oil and non-oil prices plunged 24.9% and 1.7%, respectively. On a MoM basis, producer prices decreased 1.5% in Oct, following a 0.1% fall in the previous month. Another report showed that import prices dropped 6.8% annually in Oct, following a 4.9% decrease in September. (RTT)

Markets

SIme Darby (Outperform, TP: RM2.70 ): CCM awards Sime Darby RM27.9m power plant contract . Chemical Company of Malaysia (CCM) has awarded Sime Darby a RM27.9m contract to construct a co-generation plant in Pasir Gudang, Johor. Cogen, or combined heat and power, is the simultaneous production of electricity and usable thermal energy from a single fuel source which is significantly more efficient and cost effective. (The Edge)

LFE Corp: Bags 3 projects worth RM67m . LFE Corp has secured three new projects which contributed RM66.6m to the group's order book. The new projects secured are from Johor and Terengganu. LFE Corp said the new projects are part of its efforts to address the audit issues raised by its external auditor Morison Anuarul Azizan Chew. (The Edge)

Duopharma: To proceed with niche products . Duopharma Biotech will push ahead with its foray into specialty products as one of its strategies to create a pool of niche products. The company said that it had recently obtained registration approval and launched Erysaa, an Erythropoeitin (EPO) product. EPO is the protein present in the human body that adjusts the red blood cell generation in accordance with the oxygen requirement of the human body. However, Duopharma pointed out the recent strengthening of US dollar globally poses challenges as it affects its production and other operational costs. “It is expected to put pressure on manufacturing margin and hence our profit." (Starbiz)

Ikhmas Jaya: Auditor raises red flag on Ikhmas Jaya’s financial health . Ikhmas Jaya Group’s independent auditor Messrs KPMG PLT has highlighted material uncertainty on the group’s ability to continue as a going concern after reviewing its interim financial statements. Ikhmas Jaya said its external auditor has included a statement of material uncertainty in its independent auditors’ reported dated Nov 29, in respect of the company’s interim financial statements for the financial period ended Sept 30, 2019. The auditor highlighted that the group prepared and considered prospective financial statements based on assumptions and events that may occur for at least 12 months from the date of approval of the interim financial statements. (The Edge)

London Biscuits: Writes off receivables of RM363m . London Biscuit is writing off RM363.16m of receivables in the fourth quarter ended Sept 30, 2019 (4QFY19). On top of that, the company also booked in impairment of RM31.04m on investment loss in 4QFY19. The massive impairment of RM394.2m was indeed slightly more than the confectionery maker’s annual revenue of RM391.73m for the financial year ended Sept 30, 2019 (FY19) compared with RM326.3m in FY18. London Biscuits’ trade receivables have ballooned over the years. Consequently, London Biscuits was dragged into a net loss of RM443.19 million for 4QFY19. (The Edge)

Boustead: Impairments drag Boustead into the red . Boustead Holdings fell into the red in the 3Q due to huge impairments from its heavy industry and property divisions, as well as weaker results in other units. The conglomerate posted a loss of RM155m for the 3Q ended Sept 30 compared to RM7.3m net profit a year earlier. “The group’s bottom line was impacted mainly by impairments in the heavy industry and property divisions of RM161.3m,” it said. Nonetheless, its revenue for the period was 5% higher to RM2.73bn compared with RM2.60bn previously. (Starbiz)

Market Update

The FBM KLCI might open lower today after U.S. stocks turned lower Friday, snapping a four-day winning streak amid light volume, as a trade deal with China remained out of reach. The Dow Jones Industrial Average was down about 112.59 points or 0.4%, to close at 28,051.41. The S&P 500 fell 12.62 points or 0.4%, to close near 3,141.01. The Nasdaq was down about 39.70 points or 0.5%, at 8,665.47. Retail giant Walmart Inc. was one of the few retailers in the green on Black Friday: shares gained about 0.3% on the day, and are up nearly 28% for the year to date. European markets also finished lower on Friday with shares in London leading the region. The FTSE 100 was down 0.94% while France's CAC 40 was off 0.13% and Germany's DAX was lower by 0.07%.

Back home, the FBM KLCI closed lower again as foreign funds’ month-end rebalancing activities saw most reducing their holdings of Malaysian stocks in their portfolios. The benchmark index ended the day 22.03 points or 1.39% lower at 1,561.74, after having traded within a range of 1,560.72 points and 1,585.70 points, weighed down by Tenaga Nasional Bhd (TNB) — which lost 4.08% to close at RM13.16 after the utility giant was slapped with RM3.98bn in additional tax assessment by the Inland Revenue Board. Market breadth was negative with losers edging gainers by 631 to 295 while 332 counters traded unchanged. Total turnover stood at 2.6bn shares worth RM2.4bn. The Hong Kong Hang Seng Index fell 2.03% at market's close, while China’s Shanghai Stock Exchange Composite Index finished 0.61% lower. Hong Kong’s 2% drop put pressure on markets elsewhere, with Japan’s Nikkei 225 and South Korea’s Kospi losing 0.49% and 1.45% respectively.

Source: PublicInvest Research - 2 Dec 2019

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