PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 28 Oct 2020, 11:02 AM


PublicInvest Research Headlines - 30 Mar 2020

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US: Consumer sentiment drops much more than initially estimated in March. Consumer sentiment in the US deteriorated by much more than initially estimated in March, according to revised data released by the University of Michigan. The report said the consumer sentiment index for March was downwardly revised to 89.1 from the preliminary reading of 95.9. The consumer sentiment index is now down sharply from the final February reading of 101.0, reflecting the fourth largest one-month decline in nearly a half century. An economist noted the steepest monthly drop was the 12.7-point nosedive seen in response to the deepening recession in October 2008. He said there were also two 12.2-point slumps in response to the 1980 recession and Hurricane Katrina in September 2005. (RTT)

US: Personal income climbs more than expected in February. The Commerce Department released a report showing personal income in the US increased more than expected in February, while personal spending rose in line with economist estimates. The report said personal income climbed by 0.6% in February, matching the increase seen in January. Economists had expected income to rise by 0.4%. Disposable personal income, or personal income less personal current taxes, increased by 0.5%, while real disposable income, which is adjusted to remove price changes, rose by 0.4%. Meanwhile, the Commerce Department said personal spending edged up by 0.2% for the second straight month, matching expectations. Excluding price changes, personal spending inched up by just 0.1% for the third consecutive month. "The rise in spending last month was arguably weaker than it looks given that it was largely driven by a weather-related jump in utilities spending, with underlying goods spending little changed," said Andrew Hunter, Senior U.S. Economist at Capital Economics. (RTT)

EU: ECB tells banks to skip payouts as virus hits economy. The European Central Bank told EU banks to skip dividend payments and share buybacks until October at the earliest, and use their profits to support the economy, as it is hit by the coronavirus pandemic. With large parts of the EU in lockdown and the economy braced for an unprecedented contraction, most banks have acknowledged they would struggle to pay a dividend for this year. But many large lenders, including Spain's Santander and Italian duo Intesa Sanpaolo and UniCredit were still clinging to plans for paying out part of last year's profits. "To boost banks’ capacity to absorb losses and support lending...they should not pay dividends for the financial years 2019 and 2020 until at least 1 October 2020," the ECB said. "Banks should also refrain from share buy-backs aimed at remunerating shareholders." (Reuters)

UK: BoE warns of long term damage to economy. The Bank of England has warned there are mounting risks of widespread job losses and companies going out of business across Britain as the economic costs of the coronavirus outbreak become more apparent. Leaving interest rates on hold at the lowest levels in its 325-year history, the Bank said long-term damage to employment and growth was likely as the government steps up its efforts to contain the disease. Threadneedle Street has already cut interest rates twice this month to 0.1% and pumped more than GBP200bn into the economy through its quantitative easing programme, in an effort to ease borrowing costs for households and businesses and to calm panicked investors. In a reflection of the scale of the crisis, the central bank’s rate-setting monetary policy committee declared after its scheduled meeting that it “stands ready to respond further as necessary to guard against an unwarranted tightening in financial conditions, and support the economy”. (The Guardian)

China: Industrial firms post steepest fall in profits in a decade. Profits at China’s industrial firms slumped in the first two months of the year to their lowest in at least a decade, with the mining, manufacturing and power sectors all seeing sharp falls, as a virus epidemic battered China’s economy. Profits earned by Chinese industrial firms in the first two months dropped 38.3% YoY to CNY410.7bn, worsening from a 6.3% fall seen in December last year, the National Bureau of Statistics (NBS) data showed. It marked the steepest decline in data going back to 2010. The reading combines the results for January and February to exclude distortions caused by the week-long Lunar New Year. (Reuters)

India: Cuts key rates unexpectedly to mitigate Covid-19 economic impact. India's central bank reduced its key interest rate unexpectedly and unveiled measures to improve liquidity to combat the economic downturn caused by the spread of coronovirus and preserve financial stability. The Monetary Policy Committee of the Reserve Bank of India voted to cut the repo rate by 75bps to 4.40%, Governor Shaktikanta Das said. Accordingly, the marginal standing facility, or MSF rate and the Bank Rate were reduced to 4.65% from 5.40%. Further, widening the liquidity adjustment facility corridor, the central bank trimmed the reverse repo rate by 90bps to 4.00%. The purpose of adjusting the corridor was to make it relatively unattractive for banks to park funds with the RBI and instead, use these funds for productive sectors, the governor said. (RTT)

India: To miss sugar export target as lockdown roils ports, mills. Sugar mills in India, the world’s third-biggest shipper, will probably miss their export target this year as a nationwide lockdown to prevent the spread of the coronavirus disrupts logistics at ports. The country won’t be able to ship 5m tons in the year to September, as expected earlier, because of a shortage of labor at ports and mills, said Adhir Jha, MD and CEO of Indian Sugar Exim Corp. India, struggling with record stockpiles, is seeking to boost sales of raw sugar to countries such as Indonesia and Malaysia to reduce a domestic glut. Any disruption in supplies could support global prices. Though Indian ports are exempted from the lockdown, many workers are grappling with transport problems and have left for their hometowns. (Bloomberg)


Top Glove (Outperform, TP: RM8.60): Overwhelmed by international orders. Top Glove Corporation, expects a product shortage as demand from Europe and the US spikes because of the widening Covid-19 coronavirus outbreak is exceeding its capacity. Orders received in the past few weeks, mainly from Europe and the US, were almost double the company’s production capacity. This month, they stepped up their factory utilisation by 10% to 95% and expects to reach near maximum utilisation in April. (NST)

TNB (Neutral, TP: RM13.28): Pledges another RM150m in electricity rebates. Tenaga Nasional Bhd has pledged RM150m to support the government’s announcement on tiered electricity rebate to assist Malaysians hit by the economic slowdown following the extension of the Movement Control Order. Under the tiered rebate, 3m domestic consumers (monthly consumption below 200kWh) will receive a 50% rebate; while 1.5m consumers (monthly consumption between 201kWh and 300kWh) will receive a 25% rebate; and another 2.2m consumers (monthly consumption between 301kWh and 600kWh) will receive a 15% rebate. (NST)

Xin Hwa: Subsidiary appointed logistics subcontractor for MMHE unit. Xin Hwa Holding’s has been appointed by Malaysia Marine and Heavy Engineering SB as a subcontractor of logistics services. The tenure of the contract is three years commencing from 1 April. However, the company said the contract had no firm value as it does not constitute a commitment for volume of orders, and the execution of the contract is depending on agreed unit rates and work orders to be issued to XHTT at the discretion of Malaysia Marine and Heavy Engineering. (The Edge)

Karex: World's top condom producer in Malaysia warns of shortage. A global shortage of condoms is looming, the world’s biggest producer said, after a coronavirus lockdown forced it to shut down production. That’s already a shortfall of 100m condoms, normally marketed internationally by brands such as Durex, supplied to state healthcare systems. Karex was in the process of appealing to the government for an exemption to operate under specific conditions. (NST)

Mlabs Systems: To collaborate with online pharmaceutical platform provider. Mlabs Systems is going to provide its video conferencing products to Ipharmacare Malaysia SB to complement the latter's online pharmaceutical platform. Mlabs inked a collaboration and cooperation agreement with Ipharmacare for the proposed partnership. The agreement is for a period of three years, commencing on and from 27 March this year, unless otherwise mutually extended or terminated. (The Edge)

Airlines (Underweight): Mavcom cuts passenger traffic forecast to factor in bleak travel outlook. Mavcom has lowered its passenger traffic forecast for Malaysia to range between 68m and 70m passengers in 2020, in light of reduced travel demand during the Covid-19 outbreak. That is a contraction of between 36.2% and 38.1% YoY stressed Mavcom. The revised forecast, took into account existing flight cancellations by both Malaysian and foreign carriers totalling 14m seats for the period between Jan and Dec 2020, in addition to further seat reductions of 15% for domestic routes and 20% for international routes. (The Edge)

Market Update

The FBM KLCI might start the week with a negative note after US stock indices ended sharply lower last Friday, failing to get a lasting lift from approval by Congress of a USD2trn economic stimulus package to counter the effects of the coronavirus pandemic, but equities mostly booked double-digit weekly gains to take back a chunk of losses seen this month. The Dow Jones Industrial Average dropped 915.39 points, or 4.1%, to end at 21,636.78, while the S&P 500 index fell 88.60 points, or 3.4%, to 2,541.47. The Nasdaq Composite Index lost 295.16 points, or 3.8%, to finish at 7,502.38. European markets also finished sharply lower on Friday with shares in London leading the region. The FTSE 100 was down 5.25% while France's CAC 40 was off 4.23% and Germany's DAX was lower by 3.68%.

Back home, the FBM KLCI rose 1.13% or 15 points at the close of trading last Friday, as overnight gains seen on Wall Street following optimism over the US government's USD2trn plan to combat the Covid-19 pandemic's fallout lifted regional markets. Hong Kong’s Hang Seng closed 0.56% or 131.94 points higher at 23,484.28 points, while the Shanghai Composite climbed 0.26% or 7.29 points to 2,772.20 points. Japan's Nikkei 225 also finished the trading day higher after gaining 3.88% or 724.83 points, while the Kospi in South Korea rose 1.87% or 31.49.

Source: PublicInvest Research - 30 Mar 2020

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