PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 23 Oct 2020, 9:35 AM


PublicInvest Research Headlines - 13 Mar 2020

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US: Weekly jobless claims unexpectedly edge lower. First-time claims for US unemployment benefits unexpectedly showed a modest decrease in the week ended 7 March. Initial jobless claims dipped to 211,000, a decrease of 4,000 from the previous week's revised level of 215,000. Economists had expected jobless claims to inch up to 218,000 from the 216,000 originally reported for the previous week. Meanwhile, the Labor Department said the less volatile four-week moving average crept up to 214,000, an increase of 1,250 from the previous week's revised average of 212,750. (RTT)

US: Fed to pump more than USD1trn into financial system. Amid the economic fallout from the coronavirus outbreak, the Fed is taking significant steps to provide liquidity to the financial markets. The New York Fed said that it will offer banks more than USD1trn worth of additional short-term cash loans as part of an effort to smooth operations in the Treasury and money markets. These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak. The Fed also said it will extend its monthly purchases of USD60bn worth of Treasury securities across a range of maturities beyond just short-term T-bills. The Fed has also scrapped plans to wind those purchases down in what some see as step toward a formal re-adoption of quantitative easing. (RTT)

EU: ECB surprises markets by not cutting rates, but announces stimulus to fight coronavirus impact. The ECB did not cut interest rates, despite market expectations for a reduction  amid the ongoing coronavirus outbreak. However, the central bank did announce measures to support bank lending and expanded its asset purchase program by EUR120bn. Market participants were expecting a rate cut of 10bps as a way to stimulate the euro economy amid fears that a recession is about to hit the region. The ECB did not cut its deposit rate more deeply into negative territory. Instead, the ECB will buy more assets with a focus on private sector bonds and inject even more liquidity at even more favourable terms into the banking system. The ECB’s main rate stands at -0.5%. The negative rate is meant to spur banks to loan money rather than park it at the central bank. (CNBC)

EU: German companies see bleak prospects for rest of 2020 after Covid-19 outbreak. Germany's main industrial sectors are no longer expecting any strong rebound this year and over half of the companies are likely to be impacted by the coronavirus. Results of a survey by the think tank ifo revealed that about 56% of German companies undergo negative effects from the spread of covid-19. Germany's engineering industry association, VDMA cut its production outlook for 2020. Output of the mechanical engineering is forecast to fall 5% this year. Trade conflicts, global economic weakness and the structural changes in the auto industry have weighed on the mechanical engineering industry last year. (RTT)

China: Auto sales decline sharply in Feb. Auto sales plunged 79.1% in Feb from the previous year. Auto sales totaled 310,000 units in Feb. On a monthly basis, sales were down 83.9%.The epidemic is perceived to have a significant impact on the automotive market in the 1H2020. In Jan to Feb, auto sales declined 42% from last year to 2.24m units. Sales of new energy vehicles declined sharply by 75.2% in Feb. (RTT)

Japan: Business sentiment falls in 1Q. Confidence among Japanese larger companies deteriorated in the 1Q. The Business Survey Index (BSI) of larger firms fell to -10.1 in the 1Q from -6.2 in the 4QFY2019. However, sentiment is expected to improve in the, with the outlook indicator rising to -4.4. In the manufacturing sector, the BSI of larger firms decreased to -17.2 in the 1Q from -7.8 in the 4Q. The outlook index improved to -5.5. Likewise, the BSI of large non-manufacturers dropped to -6.6 in the 1Q from -5.3 in the previous quarter, while the outlook rose to -3.9. (RTT)

Japan: BOJ's Kuroda meets with PM Abe and vows response to coronavirus. The BOJ is ready to take further steps to support the economy in the face of the coronavirus epidemic stressed Governor Haruhiko Kuroda. The government is working on a new spending package that may include cash payouts to households and subsidies to tourism companies hit by a slump in overseas visitors. The size of the package, to be compiled in April, may range from JPY10trn to JPY20trn, funded by government bonds. “There may be little choice but to issue deficit-covering bonds,” to finance the package, one official said. (Reuters)

India: Retail inflation falls for the first time in seven months. Retail inflation eased for the first time in seven months as prices of vegetables rose at a slower pace. The CPI based inflation stood at 6.58% in Feb compared with 7.59% in the preceding month. That was aided by a cooling off in inflation in food and beverages to 9.45% against 11.79% in Jan, led by a modest rise in prices of vegetables. Vegetable prices increased 31.61% compared with 50.19% in Jan. Core inflation remained steady at 4.03% in Feb compared to 3.92% last month. (Bloomberg)


Malakoff (Trading Buy, TP: RM1.06): Unit seeks damages from contractor over alleged failure to complete work at power plant. Malakoff Corporation’s subsidiary Tanjung Bin Energy SB (TBE) has commenced arbitration against the contractor that built its new coal unloading jetty and bulk handling system at its power plant in Tanjung Bin, Johor, saying there were multiple breaches of contractual duties. (The Edge)

Comments: The reason for the arbitration was due to the contractor who allegedly failed to complete all work stated in the contract for the purposes of taking over by March 6, 2019 as agreed. This resulted in the contractor owing Malakoff a sum of RM36.3m, being the liquidated and ascertained damages (LAD) under the EPCC contract. Malakoff is currently claiming the remaining balance of RM7.9m from the contractor, together with a warranty bond amounting to RM12.1m. To recap, TBE has been experiencing high utilisation at the shared jetty with Tanjung Bin Power (TBP) since the beginning of its commercial operation date in March 2016. As a result, TBE had incurred higher operating cost due to barging and demurrage costs until the construction of the new jetty is completed. We are positive on this development, though we believe the amount claim to be minimal compared to its cash balance of RM5bn.

YTL Power: To acquire assets of Singapore’s Tuaspring for RM1bn. YTL Power International plans to acquire the power plant and associated assets of Tuaspring Pte Ltd for SGD331.45m (RM1bn). The exercise is to be settled via SGD230m in cash and SGD101.4m comprising shares and loan notes amounting to 7.54% of the post-acquisition equity in YTL Utilities (S) Pte Ltd. The cash consideration for the proposed acquisition will be funded by a bank loan. (SunBiz)

Scomi Energy: Defaults on RM80m loan payment. KMCOB Capital, an indirect wholly-owned subsidiary of Scomi Energy Services, has defaulted on a loan payment amounting to RM80.4m that is immediately due and payable. (The Edge)

Pestech: Unit terminates MoU to enter Vietnam’s waste-toenergy sector. Pestech International has terminated a MoU to explore the possibility of participating in waste-to-energy (WTE) development projects in Cu Chi, Vietnam. The MoU was mutually terminated with immediate effect “in view that the parties’ intention as contemplated in the MoU has not materialized”. (The Edge)

AEON Credit: Issues RM200m sukuk under RM2bn programme. AEON Credit Service (M) issued subordinated sukuk or Islamic bonds with a nominal value of RM200m under the financial services provider’s RM2bn sukuk programme. It said proceeds from the RM200m subordinated sukuk will be utilised for financing disbursements to its customers in the ordinary course of business of providing consumer financing based on Shariah principles. (The Edge)

LTKM: Lodges police report on allegations of wrongful farm practices. LTKM said it lodged a police report and will consult lawyers on further action that can be taken against organisations or individuals found to be responsible for articles which alleged wrongful practices at its poultry farm. LTKM said it was referring to a news article published by Free Malaysia Today (FMT) last Thursday (5th March 2020). (The Edge)

Market Update

The FBM KLCI might see another bloodbath today after U.S. stocks tumbled Thursday with both the Dow Jones Industrial Average and the S&P 500 index suffering their worst day since the October 19, 1987 “Black Monday” crash, while the S&P 500 and Nasdaq Composite joined the Dow in ending a record-setting, 11- year bull market. Stock prices plunged despite a move by the Federal Reserve to offer some $1.5 trillion worth of funding to keep credit flowing through financial markets to businesses as governments move to restrict the movement of people in an attempt to contain the coronavirus pandemic. The Dow Jones Industrial Average plunged 2,352.60 points, or 10%, to end at 21,200.62. The S&P 500 shed 9.5%, or 260.74 points, to close at 2,480.64. The Nasdaq Composite Index tumbled 9.4%, or 750.25 points, to finish at 7,201.80. Stocks plunged at the opening bell, following on limit-down losses for stock-index futures, after President Trump on Wednesday evening announced restrictions on travel from Europe into the U.S. He also promised financial relief “for workers who are ill, quarantined or caring for others due to coronavirus.” European equities were hit hard, with the pan European Stoxx 600 Europe index tumbling 11.5%, its biggest daily recent drop on record, after airlines were hard hit after Trump’s announcement of the travel ban.

Back home, the FBM KLCI closed down 24.4 points or 1.69% to 1,419.43 points at its intraday low today while Bursa Malaysia’s index for small market capitalisation (small cap) stocks fell by a larger quantum after the World Health Organisation said on Wedesday (March 11) that COVID-19 is now a pandemic due the severity of the outbreak. In Australia, the S&P/ASX 200 fell into bear-market territory during Wednesday trading, and fell another 5.4% Thursday. Japan’s Nikkei also plunged around 4,4%, and Hong Kong’s Hang Seng slid 3.7%.

Source: PublicInvest Research - 13 Mar 2020

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