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PublicInvest Research

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

 

PublicInvest Research Headlines - 9 Dec 2019

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Economy

US: Consumer credit jumps more than expected in Oct. Consumer credit in the US increased by more than anticipated in the month of Oct, according to a report released by the Federal Reserve on Friday. The Fed said consumer credit surged up by USD18.9bn in Oct after climbing by USD9.6bn in Sept. Economists had expected consumer credit to increase by USD16bn. Revolving credit, which largely reflects credit card debt, rose by USD7.9bn in Oct after edging down by USD0.2bn in Sept. The report said non-revolving credit, such as student loans and car loans, also jumped by USD11bn in Oct after increasing by USD9.4bn in the previous month. (RTT)

US: Wholesale inventories inch up less than expected in Oct. Wholesale inventories in the US crept up by slightly less than expected in the month of Oct, according to a report released by the Commerce Department on Friday. The Commerce Department said wholesale inventories inched up by 0.1% in Oct after falling by a revised 0.7% in Sept. Economists had expected inventories to rise by 0.2% compared to the 0.4% drop originally reported for the previous month. Inventories of non-durable goods climbed by 0.7% in Oct after tumbling by 1.3% in Sept, but inventories of durable goods fell by 0.3% for the second straight month. Meanwhile, the report said wholesale sales slid by 0.7% in Oct after edging down by 0.1% in Sept. The continued decrease in wholesale sales came as sales of durable goods fell by 0.6% and sales of non-durable goods slumped by 0.9%. With inventories rising and sales falling, the inventories/sales ratio for merchant wholesalers ticked up to 1.37 in Oct from 1.36 in Sept. (RTT)

US: Employment soars amid return of striking GM workers. Job growth in the US showed a substantial acceleration in the month of Nov, according to a closely watched report released by the Labor Department on Friday. The report said non-farm payroll employment surged up by 266,000 jobs in Nov after climbing by an upwardly revised 156,000 jobs in Oct. Economists had expected an increase of about 180,000 jobs compared to the addition of 128,000 jobs originally reported for the previous month. The much stronger than expected job growth was partly due to a rebound in manufacturing employment, which climbed by 54,000 jobs in Nov after falling by 43,000 jobs in Oct amid the return of striking General Motors (GM) workers. The Labor Department also pointed to notable job gains in the healthcare and professional and technical services industries. (RTT)

US: Consumer sentiment climbs to seven-month high in Dec. Preliminary data released by the University of Michigan on Friday showed a much bigger than expected improvement in US consumer sentiment in the month of Dec. The report said the consumer sentiment index climbed to 99.2 in Dec from the final November reading of 96.8. Economists had expected the index to inch up to 97.0. With the much  bigger than expected increase, the consumer sentiment index reached its highest level since hitting 100.0 in May. The current economic index jumped to 115.2 in Dec from 111.6 in Nov, while the index of consumer expectations rose to 88.9 from 87.3. Surveys of Consumers chief economist Richard Curtin said nearly all of the improvement in consumer sentiment in Dec was among upper income households, who reported near record gains in household wealth due to record high stock prices. (RTT)

EU: Germany industrial production declines most in 6 months. Germany's industrial production declined at the fastest pace in six months in Oct, led by a sharp decrease in capital goods output in Oct, data from Destatis revealed on Friday. Industrial production decreased 1.7% on a monthly basis in Oct, much bigger than the 0.6% fall logged in Sept. Output decreased at the fastest pace in six months, while economists had forecast a 0.1% growth. On a yearly basis, industrial output declined 5.3%, following a revised 4.5% decrease in Sept. Production was expected to decline moderately by 3.6% in Oct. Excluding energy and construction, production was down by 1.7%. Energy output advanced 2.3%, while construction output decreased 2.8%. (RTT)

China: Nov exports fall, but import growth hints of recovering demand. China’s exports in Nov shrank for the fourth consecutive month, underscoring persistent pressures on manufacturers from the Sino-US war but growth in imports may be a sign that Beijing’s stimulus steps are helping to stoke demand. The 17-month long trade dispute has heightened the risks of a global recession and fueled speculation that China’s policymakers could unleash more stimulus as growth in the world’s second-largest economy cooled to nearly 30-year lows. Overseas shipments fell 1.1% from a year earlier last month, customs data showed on Sunday, compared with a 1.0% expansion tipped by a Reuters poll of analysts and a 0.9% drop in Oct. (Reuters)

China: Potential growth below 6% over next five years - central bank adviser. China’s potential economic growth will be below 6% over the next five years, an adviser to China’s central bank said on Saturday. The economy could grow between 5% and 6% from 2020 to 2025, Liu Shijin, a policy adviser to the PBOC said. China’s monetary policy is already quite loose, and attempting to stimulate the economy to grow faster than its potential could cause it to fall off a cliff, said Liu. China’s 3Q economic growth slowed more than expected to 6% YoY, marking its weakest pace in almost three decades, and at the bottom end of the government’s full-year target range of 6.0%-6.5%. Despite the growing strains on the economy caused by slowing domestic demand and a trade war with the US, Beijing remains reluctant to implement major stimulus for fear of heightening financial risks given already high levels of debt. (Reuters)

Japan: Household spending declines after sales tax hike. Japan household spending declined notably in Oct after the government implemented the sales tax hike on Oct 1, official data showed Friday. Data from the Ministry of Internal Affairs and Communications showed that household spending decreased 5.1% annually in Oct, in contrast to a 9.5% increase in Sept. This was the biggest fall since March 2016. Economists had forecast a moderate 3.5% fall for Oct. On a monthly basis, household spending declined 11.5% in Oct, following a 5.5% rise in Sept. Total cash earnings rose 0.5% YoY in October, the same as seen in Sept, report from the Ministry of Health, Labor and Welfare showed. Economists had expected a 0.2% increase. This was also the second consecutive growth. Contractual gross earnings increased 0.6% in Oct, while special cash earnings declined by 4.4%. (RTT)

Markets

AirAsia (Neutral, TP: RM1.87): Enters preliminary deal with Universal Music to set up record label. AirAsia Group has entered into a preliminary shareholders agreement with Universal Music Malaysia SB to set up a record label to promote Southeast Asian talents, it said. The JV company will be named RedRecords SB and aims to popularise Asian pop music through artists and repertoire, artist development, music recordings and contents, management and agency services related to all entertainment activities, and music publishing and merchandising. (The Edge)

Sime Darby Plantation (Neutral, TP: RM4.97): Confirms sale of Liberian ops. Sime Darby Plantation is divesting its entire stake in Sime Darby Plantation Liberia Inc (SDPL) to Mano Palm Oil Industries (MPOI). This was approved by the group’s BOD. The Government of Liberia has also consented to the divestment of SDPL’s shares to MPOI. "This decision is part of Sime Darby Plantation’s current asset monetisation exercise, which includes the divestment of underperforming assets or assets that have achieved its full value potential for disposal," it said. (The Edge)

MISC: Bags over RM1bn charter contract from Brazil Shipping. MISC has secured three long-term time charter contracts from Brazil Shipping I Ltd valued at USD245m (RM1.02bn). MISC will own and operate these newbuilding Suezmax class dynamic positioning shuttle tankers to operate in international and Brazilian waters. (StarBiz)

MMC: JV company bags RM131m gas pipeline EPCC contract. MMC’s JV company was awarded an RM131.4m contract for the EPCC of the PGU-I gas pipeline replacement project. MMC said the project comprises the NPS 36 pipeline and associated station works for the total length of 33km from Gas Processing Kertih to Bukit Anak Dara Kijal in Kemaman, Terengganu. It expects the project to be completed within 35 months from the effective date. (The Edge)

Cahya Mata Sarawak: Wins 10-year road maintenance contract from State Govt. Cahya Mata Sarawak (CMS) has been awarded a 10-year road maintenance and management contract in Sarawak by the State Government. CMS will undertake the road maintenance in Kuching, Serian, Samarahan, Kapit, Sibu and Sarikei for 10 years from Jan 1, 2020. The total road length covered under the contract is 3,300.65 km, while the contract is currently worth RM99.22m per annum, CMS said. (The Edge)

Magnum: IRB claims RM182.8m in income taxes. Magnum said it had received several notices of assessment for income tax from the IRB for 2014 up to 2018, totaling RM182.8m. “The IRB now claims that Magnum should be taxed under the Income Tax Act 1967 instead of the Labuan Business Activity Tax Act 1990. Since its establishment, Magnum’s income including its interest income had been duly assessed under the Labuan Business Activity Tax Act 1990, a position which the IRB had never questioned in the past. (The Edge)

Vsolar: Plans to raise up to RM66m via rights issue with free warrants. Vsolar Group plans to raise up to RM65.9m via a renounceable rights issue with free warrants to meet its capex for development and construction of biomass plants. The exercise entails the issuance of up to 1.32bn rights shares together with up to 878.64m warrants at an indicative issue price of 5 sen per rights share. (The Edge)

Market Update

The FBM KLCI might open stronger today as US stocks closed sharply higher Friday, with the Dow Jones Industrial Average having its best day in two months, after the employment report from the Labor Department beat economists’ consensus expectations, showing an estimated 266,000 new jobs created in November, the most since January, while the unemployment rate fell to a 50-year low. Investors also remained optimistic about the chances of a US — China trade deal, even though the deadline that will see import duties increased looms on Dec. 15. The Dow Jones Industrial Average rose 337.27 points, or 1.2%, at 28,015.06, while the S&P 500 index gained 28.48 points, or 0.9%, to 3,145.91, and Nasdaq Composite Index advanced 85.83 points to 8,656.53, a gain of 1%. European stocks also closed higher, with the Stoxx 600 Europe index ending the session up 1.2% at 407.35.

Back home, the FBM KLCI closed 4.86 points or 0.31% higher at 1,568.44. Trading volume increased to 2.49bn shares worth RM1.54bn, compared with Thursday's 2.39bn shares worth RM1.7bn. Gainers led losers by 497 to 355, while 363 counters remained unchanged.

In the region, the Hang Seng advanced 1.1%, the China CSI 300 rose 0.6%, while the Shanghai Composite Index closed 0.4% higher.

Source: PublicInvest Research - 9 Dec 2019

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