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PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 20 Oct 2020, 10:04 AM

 

PublicInvest Research Headlines - 28 May 2020

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Economy

US: Mortgage applications rise for sixth straight week. US applications for home mortgages jumped last week, in a sixth straight weekly increase, suggesting the housing market could lead  the economy’s recovery from the novel coronavirus crisis even as high unemployment is expected to linger. The Mortgage Bankers Association (MBA) said on Wednesday its seasonally adjusted Purchase Index increased 8.6% from a week earlier. On an unadjusted basis, the index rose 7.4% from the prior week and was 9% higher compared to the same week a year ago. It was the sixth consecutive weekly gain and a 54% surge since early April. (Reuters)

US: Williams says Fed thinking ‘hard’ about yield-curve control. Federal Reserve Bank of New York President John Williams said policy makers are “thinking very hard” about targeting specific yields on Treasury securities as a way of ensuring borrowing costs stay at rock-bottom levels beyond keeping the benchmark interest rate near zero. “Yield-curve control, which has now been used in a few other countries, is I think a tool that can complement, potentially complement, forward guidance and our other policy actions,” he said. “So this is something that obviously we’re thinking very hard about. We’re analyzing not only what’s happened in other countries but also how that may work in the US.” (Bloomberg)

US: Salaries get chopped for many Americans who manage to keep jobs. Companies across the US are cutting salaries as they fight to survive the coronavirus, upending a key assumption in modern economics and raising another hurdle to rapid recovery. The hard numbers won’t be in for months, but anecdotal evidence is piling up. The pandemic has triggered unemployment on a scale not seen since the Great Depression. Pay cuts for Americans who’ve managed to hold onto their jobs may hobble the return to normal. People will have to use a bigger chunk of their income for fixed obligations such as housing and other debts, leaving less for the kind of spending that can help spark the economy back into life. Americans taking pay cuts “might have little, and in some cases maybe nothing, left over after that for discretionary purchases.” (Bloomberg)

EU: Eurozone likely to contract 8-12% in 2020, ECB chief says. ECB President Christine Lagarde said the euro area economy is likely to contract as much as 12% in 2020 as member countries struggle to emerge from the coronavirus pandemic. Lagarde said on Wednesday, the actual economic outcome would come between the ECB's "medium" and "severe" scenarios. The mild scenario is outdated. The governing council of the ECB meets next on June 4. The bank will update its outlook for both growth and inflation next week. The currency bloc had contracted 3.8% in the 1Q, which was the biggest contraction since the series began in 1995. In March, the ECB had launched a new EUR750bn Pandemic Emergency Purchase Programme to combat the risks posed by coronavirus, or Covid-19. ECB Executive Board member Isabel Schnabel, said the bank is ready to expand its monetary policy tools after taking into account the updated forecast for inflation and growth next week. (RTT)

UK: Virus costs taxpayers another USD12bn in just one week. The cost of the UK government’s programs to support the economy through the coronavirus crisis increased by more than GBP10bn (USD12.3bn) in the space of a week, a stark reminder of the heavy price the Treasury is paying to keep businesses afloat. Data released Wednesday showed the government spent nearly GBP50bn across its various jobs and loans plan as of May 24, up from less than GBP40bn a week earlier. As part of that plan, the government is now paying the wages for about 10.7m jobs. The figures underscore the enormous challenge facing UK Chancellor of the Exchequer Rishi Sunak as he tries to find ways to gradually withdraw support package without causing unemployment to surge to levels not seen since 1930s. (Bloomberg)

China: Industrial profits drop at slower pace in April. China's industrial profits declined at a much slower pace in April suggesting that the economic activity gradually started to recover following the coronavirus pandemic, data from the National Bureau of Statistics revealed Wednesday. Industrial profits dropped 4.3% on a yearly basis, following a sharp 34.9% decrease in March. During Jan to April period, industrial profits decreased 27.4% from the same period last year compared to 36.7% fall in the first three months of 2020. Profits of state-owned enterprises plunged 46% and that of private companies fell 17.2% during Jan to April. Data showed that automobiles, electrical machinery and electronics reported a notable recovery in April. Production and sales increased in April, NBS official Zhu Hong said. The significant improvement in April profits was also partly due to the substantial increase in investment returns and the low base during the same period. (RTT)

China: PMIs to show services playing catch up in rebound. China’s PMI should show the recovery making more headway in May. Most notably, the services sector probably continued to rebound at a robust pace. Despite weak external demand, the manufacturing sector likely also expanded further. We project the non-manufacturing PMI to rise to 54.8, higher than the consensus forecast of 53.5. The key point to watch in the manufacturing PMI is to what extent weak demand constrains production. We expect the official reading to edge up to 51, in line with the consensus forecast. The export-oriented Caixin manufacturing PMI is projected to rise to 50.1, back above the 50 threshold into expansionary territory and higher than the consensus forecast of 49.8. (Bloomberg)

Japan: Doubles down to deliver world’s ‘biggest’ stimulus package. Prime Minister Shinzo Abe doubled Japan’s stimulus measures as he looked to deliver on his bold promise to keep businesses and households afloat with the world’s biggest virus response package. His cabinet approved Wednesday a JPY117trn (USD1.1trn) set of measures that includes financing help for struggling companies, subsidies to help firms pay rent and several trillion yen for health care assistance and support for local economies. The spending will be funded by a second supplementary budget that breaks a record for an extra budget set only last month. The latest aid was finalized after data last week confirmed Japan has sunk into a deep recession and polls showed support for Prime Minister Abe’s cabinet dropping to a fresh low over its handling of the outbreak. (Bloomberg)

Australia: 1Q construction work falls 1.0%. The total value of construction work done in Australia declined a seasonally adjusted 1.0% on quarter in the 1Q20 - standing at AUD49.5bn. That exceeded expectations for a decline of 1.5% following the 3.0% drop in the three months prior. On a yearly basis, total construction work was down 6.5%. The seasonally adjusted estimate of total building work done also fell 1.0% and was down 8.0% on year to AUD28.9bn in the 1Q20. Residential building was down 1.6% on quarter and 12.5% on year to AUD17.2bn. Non-residential building was flat on quarter and eased 0.3% on year at AUD11.7bn. The seasonally adjusted estimate for engineering work done fell 1.1% on quarter and 4.4% on year to AUD20.5bn in the March quarter. (RTT)

Markets

Ho Hup: Receives LOAs from CCC-ECRL for ECRL section 6 works. Ho Hup Construction has received LOAs from China Communications Construction (CCC-ECRL) SB for the engineering, procurement, construction and commissioning of the ECRL project. The works include Section 6, namely construction and completion of subgrade, drainage works and culvert work from chainage 364+507.00 to chainage 375+852.00, for a duration of 30 months, commencing June 15 for a total contract sum of RM53.79m. (NST)

MSM: To consolidate sugar-refining operations. MSM Malaysia will be consolidating its refined sugar production by relocating its factory operations for MSM Perlis SB (MSMP) in Chuping to MSM Sugar Refinery (Johor) SB (MSMJ) in Pasir Gudang and MSM Prai (MSMPB) in stages from June 20. The consolidation exercise consists of staff mobilisation plans to support MSMPB and MSMJ headcount. (Sun Biz)

BLand: Wins RM595m arbitration award against Chinese mall buyer. A Berjaya Land (BLand) unit has won an arbitration award of RM595.45m plus costs against the buyer and guarantors of a mall under construction in China. Under the decision, Beijing SkyOcean must pay Berjaya (China) Great Mall (GMOC) the outstanding RM595.45m, along with liquidated damages at a rate of 4.75% from the initial payment due date until full payment has been made. (The Edge)

Southern Steel & Ann Joo: Abort partnership in long steel products given 'uncertain market conditions'. After nearly eight months, Southern Steel and Ann Joo Resources have mutually agreed to terminate its planned partnership to synergise opportunities in the long steel product manufacturing business. Southern Steel noted that both the companies have agreed to terminate the MoU with immediate effect due to uncertain market conditions caused by the COVID-19 pandemic. (The Edge)

Lambo: Signs last mile delivery services deal with Presto Mall. Lambo Group said its subsidiary has been engaged as a fulfilment agent for last mile delivery by the operator of Malaysia’s largest homegrown online shopping platform. The logistics group said the agreement is between its subsidiary Lambomove SB and Presto Mall SB, the operator of PrestoMall (previously known as 11street Malaysia). (The Edge)

KAB: Bags RM11m contract from Kerjaya Prospek. Kejuruteraan Asastera (KAB) has received a LoA for a contract worth RM11m from Kerjaya Prospek SB. KAB will act as the nominated subcontractor for supply, delivery, installation, testing and commissioning of electrical service works for Patsawan Properties SB. The date of commencement of the contract is May 27, 2020 and are expected to complete by Jan 31, 2023. (The Edge)

GDeX: 3Q Profit falls amid virus-led disruptions, accounting adjustments. GDex reported a 96% Y-o-Y fall in its net profit for its 3QFY20 as its business was affected by supply chain disruptions that started since Jan due to the coronavirus outbreak, which has also impacted its customers' operations. Decline in performance for the current quarter under review is mainly due to most of the B2B non-essential customers’ business operation being affected by the MCO. (The Edge)

Market Update

The FBM KLCI might add a few points today as major U.S. stock benchmarks roared higher Wednesday, despite the battered state of the American economy and rising tensions between Beijing and Washington as investors focused on efforts to reopen more states for business. The Dow Jones Industrial Average advanced 553.16 points, or 2.2%, to finish at 25,548.27, while the S&P 500 rose 44.36 points, or 1.5%, ending at 3,036.13. The Nasdaq Composite gained 72.14 points, or 0.8%, to close at 9,412.36. The Federal Reserve reported Wednesday that economic activity through May 18 fell sharply in most of its 12 districts, amid mass unemployment and challenges in bringing employees back to work during the pandemic, as workers feared for their health, faced limited access to child care and received “generous unemployment benefits,” according to the central bank’s latest “Beige Book” report. Across the Atlantic, the Stoxx Europe 600 index finished 0.2% higher on the eurozone stimulus proposal.

Back home, the FBM KLCI closed 14.97 points or 1.04% higher to settle at 1,451.73 points. Hong Kong’s Hang Seng Index finished 0.36% or 83.3 points lower at 23,301.36, while the Shanghai Composite dropped 0.34% or 9.74 points to 2,836.8. Japan’s Nikkei 225 inched up 0.7% or 148.06 points to 21,419.23, and South Korea’s Kospi rose 0.07% or 1.42 points to 2,031.2.

Source: PublicInvest Research - 28 May 2020

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