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Author: PublicInvest   |   Latest post: Mon, 6 Jul 2020, 10:13 AM

 

PublicInvest Research Headlines - 29 May 2020

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Economy

US: Pending home sales plummet more than expected in April. Pending home sales in the US plunged by more than expected in the month of April, the National Association of Realtors revealed in a report on Thursday. NAR said its pending home sales index plummeted by 21.8% to 69.0 in April after tumbling by 20.8% to 88.2 in March. Economists had expected pending home sales to slump by 15.0%. A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. With nearly all states under stay-at-home orders in April, it is no surprise to see the markedly reduced activity in signing contracts for home purchases," said Lawrence Yun, NAR's chief economist. The steep drop in pending home sales in April reflected the biggest decline since NAR begin tracking such transactions in January 2001. (RTT)

US: Durable goods orders fall sharply for second straight month. US orders for durable goods sank sharply for a second month in April as the coronavirus pandemic wreaked havoc on the manufacturing industry. Bookings for goods meant to last at least three years decreased 17.2%, the most since August 2014, after a revised 16.6% decline in March, Commerce Department data showed Thursday. The median projection in a Bloomberg survey of economists called for a 19% decrease. Revised data on Thursday from the Commerce Department showed 1Q GDP shrank at an annualized 5% pace as consumer spending and business investment dropped sharply. Factories in the last two months bore the brunt of the sharp cutback in demand amid the nationwide lockdown. (Bloomberg)

US: Initial jobless claims drop to 2.1m. A report released by the Labor Department on Thursday showed a continued decrease in first-time claims for US unemployment benefits in the week ended May 23rd. The Labor Department said initial jobless claims dropped to 2.1m, a decrease of 323,000 from the previous week's revised level of 2.4m. Economists had expected jobless claims to fall to 2.1m from the 2.4m originally reported for the previous week. With the decrease, jobless claims pulled back further off the record high of 6.9m set in the week ended March 28th. While jobless claims have steadily decreased over the past several weeks, the number of claims since the coronavirus-induced lockdown now exceeds 40m. The Labor Department said the less volatile four-week moving average also fell to 2.6m, a decrease of 436,000 from the previous week's revised average of 3.0m. (RTT)

EU: Euro-area confidence inches up from record low as lockdown eased. Economic sentiment in the euro area rose from a record low after companies started to reopen across the continent following the easing of pandemic restrictions. A small pickup in the European Commission gauge is consistent with similar reports in recent weeks that suggest the 19-nation region is slowly working its way out of the worst crisis in living memory. At the same time, the loss of jobs and business to weeks of lockdowns is likely to leave lasting damage on the fabric of the economy. The recovery in industry confidence in May was driven entirely by higher production expectations, which reversed roughly half their slide of the previous two months. (Bloomberg)

EU: Italy producer prices fall for tenth month; consumer confidence weakens. Italy's producer prices fell for the tenth straight month in April, data from the statistical office Istat showed on Thursday. The producer price index declined 5.1% YoY in April, following a 3.7% fall in March. On a monthly basis, producer prices decreased 2.6% in April, following a 1.1% fall in the preceding month. In the domestic market, producer prices fell 3.4% MoM and declined by 6.7% from a year ago in April. Producer prices in the foreign market fell by 0.7% monthly in April and decreased 1.0% annually. Separate data from the statistical office showed that the consumer confidence decreased to 94.3 in May from 100.1 in March. Economists had expected a score of 88.5. The economic confidence index fell to 71.9 in May from 94.4 in March. The expectations index decreased modestly. (RTT)

UK: BOE's Saunders says too little stimulus to push economy into 'lowflation trap'. BOE policymaker Michael Saunders said the UK economy could slip into a 'lowflation trap' in case of too little stimulus. "If we overdo the stimulus somewhat and then find the economy recovers strongly, we have ample tools and time to tighten policy again before persistent excess demand and inflation become a problem," Saunders said on Thursday. However, a 'lowflation trap' caused by too little stimulus will be much harder to escape, with greater long-term costs from business failures and high unemployment, Saunders noted. "The costs of policy error are, to an extent, asymmetric at present," he said. It is safer to err on the side of easing somewhat too much rather than ease too little. (RTT)

China: Premier Li says economy can grow if key tasks done. China’s economy can grow this year if the key tasks set out by the government, including ensuring employment and people’s livelihoods are achieved, according to Premier Li Keqiang. It is “practical and realistic” to not set a numerical growth target this year as China is not immune from the economic shocks brought about by the pandemic, the premier said on Thursday. Li said the government has the ability to take further action should the outlook deteriorate. “We have also reserved policy space on the fiscal, financial, social security and other fronts, and we are in a strong position to quickly introduce new measures should the situation call for it, without any hesitation,” he said. “It is essential that we keep China’s economic development on a steady course.” (Bloomberg)

Taiwan: GDP to grow at slowest pace in 5 years. Taiwan's economy is forecast to grow at the slowest pace in five years in 2020 as Covid-19 pandemic has weighed on consumption, the Directorate General of Budget, Accounting & Statistics, or DGBAS, said on Thursday. GDP is forecast to grow 1.7% this year, much slower than the 2.7% growth logged in 2019. The 2020 full year outlook was downgraded from 2.4%. In the 1Q, GDP advanced 1.6% compared to the previous estimate of 1.5%. This was also slower than the 3.3% growth seen in the preceding quarter. On a QoQ, seasonally-adjusted annualized basis, GDP contracted 3.6% compared to 6.6% expansion seen a quarter ago. (RTT)

Japan: Economy worsening rapidly even as shutdowns ease. Japan’s government maintained its view that the economy continues to worsen sharply even as a nationwide state of emergency was lifted this week allowing businesses to start the slow process of reopening from shutdowns. Weakness in the jobs market is increasing, the Cabinet Office said in cutting its view of employment conditions. Business investment, which had been flat, is now showing signs of weakness, it said. The government also cut its view of exports, saying they are worsening rapidly. (Bloomberg)

Markets

Vizione: Unit wins RM96.3m construction contract. Vizione Holdings (VHB) wholly-owned subsidiary, Wira Syukur SB has been awarded a construction contract worth RM96.3m by Pinnacle Paradise SB. The contract is for the proposed construction of 214 condominium units and 31 units of superlink villas together with ancillary facilities in Bukit Rahman Putra, Shah Alam, Selangor. The work would commence in two phases; the first on May 27, 2020 and the second on Aug 27, 2020, to be completed within 29 months from the respective starting dates. (SunBiz)

Gadang: Secures two ECRL work packages worth RM81m. Gadang’s wholly-owned unit Gadang Engineering SB has secured two contracts worth a combined RM81.18m from China Communications Construction (ECRL) SB in respect of the ECRL project. The first contract, which commenced on May-28 and is expected to be completed on June 30, 2022, is worth RM24.11m, while the second contract, which shall start on June 15, 2020 and is slated for completion on Dec 15, 2022 and is worth RM57.07m. (The Edge)

LYC Healthcare: Makes second medical firm buy in Singapore in less than a month. LYC Healthcare is acquiring a controlling 51%-stake in Singapore-based HC Orthopaedic Surgery Pte Ltd (HCOS) for RM21.29m. The group will be acquiring 17,000 shares representing 17% of HCOS from the founder and main operator Dr Chan Ying Ho, and 34,000 shares representing 34% of HCOS from Beyond Wellness Group Pte Ltd (BWG). The deal is expected to be completed by the 4Q of the year and will be funded equally by internal funds and bank borrowings. (The Edge)

Hektar REIT: To raise up to RM14.8m via private placement. Hektar REIT proposed to undertake a private placement exercise of up to 23.1m new units, representing up to 5% of its total issued units to raise an estimated RM14.78m at an indicative price of 64 sen/unit. The private placement will allow it to raise the necessary funds for working capital and capital work in progress to help facilitate its existing day-to-day operations. The exercise will allow it to raise funds expeditiously without incurring interest cost as compared to bank borrowings. (The Edge)

Cypark: Buying Perak biogas plant for RM6m. Cypark said it is buying a 51% equity stake in biogas plant operator BAC Biogas (Kg Gajah) SB for a total consideration of RM6m. Cypark’s wholly-owned subsidiary Reviva SB had entered into an agreement to purchase 1.53m ordinary shares in BAC, representing a 51% share in the company. BAC is principally engaged in the business of developing and operating a 1.55 MW palm oil mill effluent biogas plant in Kg Gajah, Perak. The acquisition is to facilitate the group’s participation in renewable energy business. (The Edge)

Power Root: Record profit in FY2020. Power Root posted its highest ever net profit at RM51.4m in the FYE20 year ended from RM28.0m a year ago. The 83.5% increase in net profit was due to the higher topline, increased operational efficiency and improved cost management resulting from its transformation plan. Its domestic sales edged up 7.6% to RM177.4m from RM164.5m, while exports revenue jumped 20.3% to RM208.7m from RM173.5m previously. (NST)

Market Update

The FBM KLCI might open lower today after US stocks ended lower on Thursday as investors faced worries around an escalating US-China spat. The S&P 500 fell 0.2% to 3,030. The Dow Jones Industrial Average shed 148 points, or 0.6%, to 25,401, based on preliminary numbers. The Nasdaq Composite retreated 0.5% to 9,369. Equities turned south late in the session after President Donald Trump said he would hold a press conference on China on Friday. This comes as Washington and Beijing spar over a new national-security law on Hong Kong, raising concerns that its status as an Asian financial hub would come under threat. European markets closed meanwhile closed higher with shares in France leading the region. The CAC 40 was up 1.76% while London's FTSE 100 added 1.21% and Germany's DAX rose 1.06%.

Back home, the FBM KLCI closed 5.77 points or 0.4% higher tracking overnight gains on Wall Street on the back of optimism about the reopening of the US economy. The benchmark index closed at 1,457.5, after moving between 1,449.25 and 1,458.73. Elsewhere in region, Japan's Nikkei 225 grew 2.32%, while South Korea's Kospi fell 0.13% and Hong Kong’s Hang Seng was down 0.72%.

Source: PublicInvest Research - 29 May 2020

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