PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 23 Jan 2020, 9:38 AM


PublicInvest Research Headlines - 11 Dec 2019

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US: Productivity dips slightly less than originally estimated in 3Q. Revised data released by the Labor Department on Tuesday showed US labor productivity dipped by slightly less than originally estimated in the 3Q. The report said labor productivity edged down by 0.2% in the 3Q compared to the previously reported 0.3% drop. Economists had expected the decrease in productivity to be revised to just 0.1%. The modest decrease in productivity in the 3Q compares to the 2.5% jump in productivity seen in the 2Q. A measure of output per hour, productivity edged lower in the 3Q as output climbed by 2.3% compared to a 2.5% increase in hours worked. (Reuters)

US: Powell's 'half-full' glass sturdy but still at risk for spills as Fed meets. Federal Reserve Chair Jerome Powell has taken a glass-half full view of the US economy but the trouble may be that the glass has gotten smaller and has a few cracks. Over the next week it risks losing a few drops as deadlines approach for the US to impose new tariffs on China, British voters decide what has been called a “nightmare” election between far-left and far-right candidates, and other central banks take stock of what seems an increasingly turgid global economy. Powell offered the upbeat assessment two weeks ago. James McCann, senior global economist with Aberdeen Standard Investments, said the metaphor is apt, given the resilience of the US labor market, but only to a point. (Reuters)

US, China: China sees US delaying Dec 15 tariffs as talks continue. Chinese officials expect President Donald Trump to delay a threatened tariff increase set for Sunday, giving more time to negotiate an interim trade deal that both sides continue to insist is close to fruition despite a series of missed deadlines, according to people familiar with the discussions. The two sides, staying in almost daily contact, have also come closer to an agreement on scaling back the tariffs already in place. But rather than removing or rolling back existing levies, the focus has been on reducing the rate of the tariffs already in effect, according to officials and other people familiar with the talks. (Bloomberg)

EU: ECB policy makers said to discuss central bank digital currency. ECB policy makers meeting in Frankfurt this week will discuss the prospect of launching their own digital currency, according to euro-zone officials familiar with the matter. Governing Council members expect to talk about the topic informally on Wednesday, the people said, asking not to be named as such deliberations are private. An ECB spokesman declined to comment. While there’s no expectation of an imminent decision, the symbolism of the debate on the eve of Lagarde’s first interest-rate decision shows how far she is willing to shake up the ECB by embracing modern-day challenges, as she has with climate change. It’s another signal that her upcoming strategic review could augur a radical overhaul of the two-decade-old institution. (Bloomberg)

UK: Economy fails to grow ahead of Brexit-dominated election. The UK economy unexpectedly stagnated in Oct, marking three straight months without growth for the first time since 2009. GDP was unchanged following two consecutive months of decline, the Office for National Statistics said on Tuesday. Economists had forecast a 0.1% expansion. GDP rose just 0.7% from a year earlier, the smallest increase since June 2012. The services sector grew from Sept, as did manufacturing as stockbuilding resumed ahead of the now-postponed Oct 31 Brexit deadline. However, this was offset by lower oil production and the steepest drop in construction output since the beginning of 2018. The figures, which provide the last economic snapshot before voters go to the polls on Thursday, highlight the toll being taken by years of Brexit uncertainty and a worsening global backdrop. (Bloomberg)

UK: Supermarket sales growth slows, shoppers delay festive spending - Kantar. UK supermarket sales growth slowed further in the 12 weeks to Dec 1, as consumers delay their Christmas shopping, survey data from the market research group Kantar showed on Tuesday. Supermarket sales rose only 0.5% YoY, Kantar said citing data from its Worldpanel FMCG data for the 12 weeks to Dec 1. The firm monitors the take home grocery purchasing habits of 30,000 representative households across Britain. (RTT)

China: Bank lending exceeds expectations. China's bank lending increased more than expected in November, data from the PBOC showed Tuesday. Banks extended CNY1.39trn new loans in Nov versus CNY661bn in Oct. Lending was forecast to rise to CNY1.2trn. Bank lending usually increases in Nov after reduction in Oct due to seasonal factors. Total social financing, a broad measure of credit and liquidity in the economy, climbed to CNY1.75trn from around CNY619bn a month ago. This was also above the expectations of CNY1.47trn. Broad money supply M2 grew at a slower pace of 8.2% on year, following an 8.4% increase in Oct. Economists had forecast the rate to remain unchanged at 8.4%. (RTT)

China: Inflation near 8-year high, PPI continues to fall. China's consumer price inflation accelerated to the highest since early 2012 in Nov as disruption to pork supply pushed up food inflation, data from the National Bureau of Statistics showed Tuesday. Another report from NBS showed that producer prices declined for the fifth consecutive month in Nov. Consumer price inflation rose more-than-expected to 4.5% in Nov from 3.8% in Oct. This was the highest since Jan 2012. Prices were expected to advance 4.3%. Food prices surged 19.1% annually in Nov. Pork prices increased sharply by 110.2% as the African swine flu dramatically reduced pig population causing disruption to the supply. At the same time, non-food prices gained only 1%. (RTT)


AmBank (Trading Buy, TP: RM4.50): Says will ‘vigorously oppose’ Najib’s suit. AMMB Holdings (AmBank Group) and its subsidiary AmBank Islamic have appointed solicitors to fight the suit filed by former prime minister Datuk Seri Najib Razak, in relation to the handling of his current accounts with AmBank Islamic. The bank confirmed it has been served with a writ and statement of claim by Najib on Dec 9, and that Najib is seeking damages in relation to the conduct of his accounts. “Both AMMB and AmBank Islamic have appointed solicitors to defend the suit and have been advised by solicitors that the allegations are not sustainable and AmBank Islamic and the company have a strong defence.” (The Edge) Comment: This will be an interesting test case and may open a floodgate of similar suits on negligent handling of accounts in various other financial institutions, if successfully proven the case by the plaintiff. With the quantum of damages to be determined by the courts, we are unable to quantify financial impacts to the Group, though AMMB believes it does have a strong case of defense against the suit. Sentiment on the stock may take a knock however. We retain our Trading Buy call and RM4.50 at this juncture pending further developments.

LFE Corp: Wins RM19m structural works contract. LFE Corp has won a RM19.1m contract to undertake structural works for the carpark and podium of a service apartment in Damansara. LFE has accepted the letter of award from Shiangly Athens Park SB. The nine-month contract is estimated to be completed by June 15, 2020. (The Edge)

TSR Capital: Gets nod to sell 70% in Menara TSR. Shareholders of TSR Capital gave the nod for the related-party disposal of 70% in its 17-storey flagship Menara TSR to a company linked to its deputy executive chairman Tan Sri Lim Kang Yew. All shareholders approved the 70% stake sale in U-Ni Magna SB for RM18.59m cash to Ivory Code SB, in which Lim owns 25%. The proceeds will be used for working capital, said TSR Capital’s CFO. (The Edge)

YGL: To establish research and education collaboration. YGL Convergence had entered into a cooperation agreement with Hongtian Intelligent Technology (Tianjin) Co. Ltd (Tianjin Hongtian) to establish a research and education collaboration under the proposed cooperation vehicle, known as MCITEC SB. YGL said the objective for the establishment of MCITEC is to promote cross nation sharing of research and development resources, co-development of intellectual property and promotion of national technology through the ‘One Belt One Road’ initiative. (NST)

Airlines (Neutral): Passenger traffic to grow more than 5% YoY in 2020 – Mavcom. Mavcom forecasts passenger traffic in 2020 to grow between 5% and 6% YoY, which translates to between 114.9m and 116.0m passengers. Mavcom forecasts the growth to be driven by Visit Malaysia 2020 and a 3.2% YoY increase in domestic seat capacity growth. The forecasted growth in 2020 follows Mavcom's revised 2019 passenger traffic forecast to between 109.1m and 109.7m, a growth of between 6.4% and 7% YoY, while actual traffic growth for 1H19 was 5.2% YoY. (The Edge)

Market Update

The FBM KLCI might open weaker today after US stocks ended lower Tuesday, setting a two-day losing streak, as a looming Dec. 15 deadline for additional tariffs on Chinese goods weighed down Wall Street. The Dow Jones Industrial Average shed 27.88 points, or 0.1%, at 27,881.7, while the S&P 500 index gave up 3.44 points, or 0.1%, at 3,132.52, while the Nasdaq Composite Index lost 5.64 points, or less than 0.1%, at 8,616.18. On the US economic data front, a report on small-business owners’ confidencein the US economy rose in November, its largest month-over-month gain since May 2018, as owners continued to invest, hire and increase wages, according to the National Federation of Independent Business. In Europe, the Stoxx 600 Europe index closed 0.3% lower at 405.34.

Back home, the FBMKLCI ended the day down 0.06% or 0.92 point lower at 1,561.79. Some 2.66bn shares worth RM1.51bn were traded across Bursa Malaysia today. A total of 443 counters declined versus 365 that climbed, while 372 counters were unchanged.

In the region, the Hang Seng closed off 0.2%, the China CSI 300 inched up 0.1%, while the Shanghai Composite Index gained about 0.1%, following a similar gain on Monday. Japan’s Nikkei 225 retreated 0.1% and South Korea’s Kospi was 0.45% higher.

Source: PublicInvest Research - 11 Dec 2019

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