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PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 4 Dec 2020, 10:06 AM

 

PublicInvest Research Headlines - 22 Apr 2020

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Economy

US: Existing home sales pull back sharply in March. Existing home sales plunged by 8.5% to an annual rate of 5.27m in March after spiking by 6.3% to a revised of 5.76m in Feb. Economists had expected existing home sales to plummet 8.1% to a rate of 5.30m from the 5.77m originally reported for the previous month. Despite the steep monthly decline, existing home sales in March were up by 0.8% compared to the same month a year ago, reflecting the ninth straight month of YoY growth. Median existing home price for all housing types was USD280,600 in March, up 3.8% from USD270,400 in Feb and up 8.0% from USD259,700 in the same month a year ago. There were 1.50m homes for sale at the end of March, up 2.7% from 1.46m at the end of Feb but down 10.2% from 1.67m at the end of March 2019.The unsold inventory represents 3.4 months of supply at the current sales pace compared to 3.0 months in Feb and 3.8 months a year ago. (RTT)

US: Debt to surge past wartime record, deficit to quadruple. The US budget deficit may quadruple this year to almost USD4trn. Projection from the Committee for a Responsible Federal Budget (CRFB) say that by 2023 US debt held by the public will surpass records set in the post-World War II years. And these projections only include spending enacted so far—in a three-month-old crisis that has seen emergency Congressional appropriations top USD2.3trn. Additional spending is almost certain as the coronavirus pandemic destroys millions of jobs and thousands of businesses while slashing tax revenues for local and state governments. Even before the crisis, US debt-to-GDP had more than doubled to 79% in 2019 from 35% in 2007. (Bloomberg)

EU: ECB may discuss junk debt collateral in call. ECB policy makers will hold a call on Wednesday evening where they may discuss whether to accept junk-rated debt as collateral from lenders. The video conference could be intended to head off concerns that some sovereign and corporate bonds will soon be downgraded to non-investment grade because of the cost of fighting the coronavirus pandemic. Governors expect collateral to be discussed on the call, asking not to be identified as the meeting is confidential. While the ECB’s current rules mean Italy would have to be cut to junk, the prospect of downgrades is unnerving investors. A cut in the sovereign would flow through to the corporate bonds and commercial paper that the ECB also buys and takes as collateral. (Bloomberg)

EU: German economic confidence improves in Apr. The ZEW Indicator of Economic Sentiment advanced 77.7 points to 28.2 points in April. This was well above the forecast of -42.3. Meanwhile, the current conditions index plunged 48.4 points to - 91.5 points. The expected reading was -77.5. This constellation of values currently witnessed for expectations and the assessment of the current situation roughly corresponds to that seen in Apr/May 2009 during the financial crisis. (RTT)

UK: Jobless claims rise in glimpse of losses to come. UK jobless claims increased in March and the number of people seeking welfare support during the lockdown topped the 1.5m mark, highlighting the growing financial pressure on households from the coronavirus pandemic. Jobless claims rose 12,200 from Feb, taking the rate to a six-year high of 3.5%. Separate figures showed the Department for Work and Pensions (DWP) is on average receiving five times the number of claims for Universal Credit benefits than it would in a normal week. The DWP figures don’t necessarily translate into a one-for-one increase in unemployment, since people can also claim for the benefit if they see a drop in income. The figure was also up only marginally on the 1.4m reported last week. (Bloomberg)

China: Hubei posts 1Q GDP slump. China’s central Hubei province, epicentre of the new coronavirus outbreak in the country, posted a 39.2% drop in economic output in the 1Q compared with a year earlier, weighed down by a sharp decline in manufacturing. The sudden outbreak of the new coronavirus has had an unprecedented impact on economic and social development in the province, with most economic indicators down significantly in the 1Q. Hubei’s manufacturing output plunged 45.8% in Jan-March from a year earlier, led by slumps in the auto, electrical machinery and general equipment industries. (Reuters)

Japan: BOJ warns banks face rising credit costs, investment losses. Japanese lenders must brace for rising bad-loan costs and investment losses even as the financial system shows resilience to the coronavirus caused economic slump. If the downturn is prolonged, more companies at home at abroad could face solvency problems, raising credit costs. Losses on banks’ securities investment “could deteriorate” due to financial-market moves, and foreign-currency funding may become destabilized. The pandemic is adding to pressures on Japanese banks that have increased risk taking to make up for declining profitability due to ultra-low interest rates and a shrinking population. To cushion the impact of the economic slump, the central bank has expanded asset purchases while the government has announced a record stimulus package. (Bloomberg)

Markets

CIMB (Outperform, TP: RM4.90): Has exposure to Singapore troubled oil trader Hin Leong . CIMB Group is believed to be the Malaysian bank that has significant exposure to troubled oil trader Hin Leong Trading, which owes almost USD4bn to more than 20 banks, including DBS Group Holdings Ltd, HSBC Holdings Plc and Standard Chartered Plc. Market talk has it that CIMB’s exposure to Hin Leong is to the tune of USD120m to USD130m. This will mean an exposure of more than RM500m in its loan book. (The Edge)

Genting (Outperform, TP: RM5.10): Plans unprecedented pay cut as virus shuts casinos . Genting and its units are planning the first group-wide salary cut since its founding in 1965. Genting, backed by tycoon Tan Sri Lim Kok Thay, is proposing as much as a 20% temporary reduction of basic salary for employees based on their ranks, while Genting Hong Kong Ltd suggested an up to 50% cut for those holding vice-president roles or higher, according to an internal memo seen by Bloomberg News. (Bloomberg)

Serba Dinamik (Outperform, TP: RM2.66): Optimistic on projections despite COVID-19 . Amidst global uncertainty due to the Covid-19 pandemic that had led to lockdowns and controlled movements worldwide, Serba Dinamik is optimistic on its projections, particularly its RM7.7bn project in Abu Dhabi. Its group CEO Datuk Mohd Abdul Karim Abdullah said the project, backed by a strong network of suppliers, consultants and contractors to support the job, would further strengthen the company’s position in the Middle East. He stressed that this project is diversification to reduce dependency on O&G revenue and does not deviate from its core competencies as it is highly competitive in engineering, procurement and construction (EPC) as well as IT - frontier technology. (Bernama)

TM (Neutral, TP: RM4.00): Completion of maintenance works by consortium. Telekom Malaysia (TM) has announced that preventive maintenance works on the Asia-America Gateway submarine cable network linking Malaysia and other Asian countries to the US and Hong Kong has been completed. TM said the maintenance works, which started on April 17, 2020, was carried out by a consortium of operators which maintains the submarine cable network. (Bernama)

HLT Global: To distribute rapid Covid-19 tests worldwide. HLT Global has signed a distributorship agreement with Accobiotech SB, to distibute Acco’s COVID-19 rapid test kit worldwide. HLT said the agreement is for a period of one year starting from April 20, 2020, and can be renewed upon mutual agreement between the parties. (SunBiz)

Tadmax: Sells 25% in Pulau Indah power project to Kepco, to focus on property, construction biz. Tadmax Resources has inked an agreement to sell a 25% stake in its Pulau Indah power plant project to Korea Electric Power Corp (Kepco) for RM41.75m. (The Edge)

Dataprep: To raise up to RM16.7m from private placement . Dataprep Holdings has proposed a private placement exercise to raise up to RM16.7m for working capital, repayment of bank borrowings and future investments. It intends to issue up to 139.06m shares, equivalent to 30% of its outstanding shares, at an issue price to be determined later. (The Edge)

Market Update

The FBM KLCI might have another weak opening today after US stocks closed sharply lower Tuesday, driving the major indices to their lowest levels in about two weeks, as high-flying technology shares gave up ground, and a historic collapse in oil prices eroded the bullish mood on Wall Street. The downbeat atmosphere more than offset reported progress in Washington on additional aid for businesses badly hurt by the coronavirus pandemic. The Dow Jones Industrial Average fell 631.56 points, or 2.7%, at 23,018, the S&P 500 index lost 86.60 points, or 3.1%, to close at 2,736.56, with both benchmarks finishing at their lowest levels since April 7. Meanwhile, the Nasdaq Composite Index retreated 297.50 points, or 3.5%, to end at 8,263.23, marking its lowest close since April 13. Across the Atlantic, the Stoxx Europe 600 slumped 3.4%.

Back home, the FBM KLCI closed down 31.39 points or 2.22% at 1,381.73, while Bursa Malaysia’s energy index fell by a significantly larger quantum, after prices of US crude oil futures fell below zero for the first time in history. In the region, stocks closed lower Tuesday, with the China CSI 300 losing 1.2%, Japan’s Nikkei 22 falling 2% and Hong Kong’s Hang Seng Index retreating 2.2%.

Source: PublicInvest Research - 22 Apr 2020

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