PublicInvest Research

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PublicInvest Research Headlines - 17 Jun 2020

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US: Industrial production rebounds much less than expected in May. With a rebound in manufacturing output partly offset by sharp decreases in mining and utilities output, the Federal Reserve released a report showed US industrial production increased by much less than expected in May. The Fed said industrial production jumped by 1.4% in May after plummeting by a downwardly revised 12.5% in April. However, economists had expected industrial production to surge up by 2.9% compared to the 11.2% plunge originally reported for the previous month. The rebound in industrial production came as manufacturing output spiked by 3.8% in May following a 15.5% nosedive in April. Most major industries saw increases in output as many factories resumed at least partial operations following the coronavirus shutdowns, with the largest gain registered by motor vehicles and parts. (RTT)

US: Business inventories slump more than expected in April. A report released by the Commerce Department showed a bigger than expected decrease in US business inventories in April. The Commerce Department said business inventories tumbled by 1.3% in April after falling by a revised 0.3% in March. Economists had expected business inventories to decrease by 0.8% compared to the 0.2% dip originally reported for the previous month. The bigger than-expected decrease reflected a sharp pullback in retail inventories, which plunged by 3.7% in April after jumping by 1.1% in March. Manufacturing inventories also fell by 0.4% in April after slumping by 1.1% in March, while wholesale inventories rose by 0.3% after tumbling by 1.1%. The report also showed business sales plummeted by 14.4% in April following a 5.2% nosedive in the previous month. Wholesale sales plunged by 16.9%, while manufacturing and retail sales cratered by 13.5% and 12.7%, respectively. (RTT)

EU: German inflation slows for third month. German consumer price inflation eased for a third straight month in May to the lowest since 2016, final data from Destatis showed. The consumer prices rose 0.6% in May, following a 0.9% increase in April, as initially estimated. A similar lower rate of inflation was seen in September 2016. On a monthly basis, consumer prices dropped 0.1% in May, as estimated. Data showed that cost of goods fell 0.4% annually in May due to the decline in energy prices, while cost of services increased 1.3%. Excluding energy, inflation came in at 1.6%. Energy prices declined 8.5%. Meanwhile, food prices grew by 4.5%. Inflation based on HICP slowed to 0.5% in May, as estimated. On a MoM basis, the HICP remained flat in May from 0.8% in April, as initially estimated. (RTT)

EU: German investor confidence improves for third month. A measure of German investor confidence improved for a third straight month and at a faster-than-expected rate in June, as the lockdown restrictions that were imposed to slow the spread of the coronavirus pandemic were eased, survey data from the think tank ZEW showed. The ZEW economic sentiment indicator rose to 63.4 from 51 in May. Economists had forecast a score of 60. The index has improved steadily after plummeting to -49.5 in March as the Covid-19 pandemic began spreading in Europe. The further improvement in expectations probably reflects the lifting of lockdown measures as well as central bank and government actions, ING economist Carsten Brzeski said. The economist, however, cautioned that any initial sharp rebound will be followed by a flattening out as the structural challenges the German economy was already facing prior to Covid-19 have not suddenly disappeared. (RTT)

UK: More than 600k lose work as Covid-19 hits jobs market. The number of people on British employers' payrolls fell by more than 600k in April and May as the Covid-19 lockdown hit the labour market, and vacancies plunged by the most on record, data showed. The jobless rate unexpectedly held at 3.9% over the three months to April, but that was largely due to the government's huge job-retention scheme and a rise in the number of people not classed as unemployed as they were unable to seek work in lockdown. During the same period there was a record slump in Britain's overall economic output. Economists had mostly expected a jump in the unemployment rate to 4.7%. "Unemployment will get worse before it gets better," Nye Cominetti, an economist said. (Reuters)

Hong Kong: Jobless rate hits 15-year high amid virus, unrest. Hong Kong's unemployment rate rose to the highest level in 15 years in May, in the wake of the Covid-19 shutdowns and renewed anti-government protests. The jobless rate rose to 5.9% for the March-to-May period, compared with the 5.5% median forecast among economists. The underemployment rate climbed to 3.5%, the highest in almost 17 years, according to the government release. Unemployment in the city is the worst since April 2005, when Hong Kong was recovering from the SARS virus outbreak. It tops the post-financial crisis peak of 5.5% in August 2009, the data show. "While the local epidemic situation has abated, it will take time for local economic activities to return to normal," said Hong Kong Secretary for Labour and Welfare Law Chi-kwong. "The external environment also remains difficult as the pandemic continues to weigh on the global economy." (Bloomberg)

Japan: BoJ’s Kuroda warns of protracted battle with pandemic, keeps policy steady. Japan’s central bank is bracing for a protracted battle against the coronavirus pandemic as a second wave of infections cannot be ruled out, governor Haruhiko Kuroda said, signalling its readiness to top up monetary support. The BoJ stuck to its view that the world’s third-largest economy will gradually recover as the pandemic subsides in the latter half of the year, suggesting it has taken enough steps for now. But the central bank increased the nominal size of its lending packages for cash strapped firms to USD1trn from about USD700bn announced last month. “We can’t rule out the risk of a second wave of infections,” which would add to concerns over the surging number of cases in emerging economies, Kuroda told. Such uncertainties over the pandemic cloud Japan’s economic outlook and may force the BoJ to extend its crisis-response tools beyond the current March 2021 deadline, he said. (Reuters)

India: Wholesale prices fall in May. India's wholesale prices declined in May, data from the Ministry of Commerce & Industry showed. The wholesale price index dropped 3.21% YoY in May, after a 0.42% increase in March. Economists had expected a 1.05% fall. The figure of May is compared with the final figures of March due to limited information available for the month of April. The primary articles price index declined 2.92% annually in May, reversing a 2.16% rise in the previous month. Food price inflation increased to 1.13% in May, while prices for non-food articles declined 3.53%. Fuel and power prices decreased 19.83% in May, following a 2.93% fall in the prior month. (RTT)


Genting Malaysia (Trading Sell, TP: RM2.00): To reopen Kijal and Langkawi resorts. Genting Malaysia announced that the casino and hotel operator's Resorts World Kijal and Resorts World Langkawi will reopen on Thursday (June 18). However, Resorts World Genting and Resorts World Awana will remain closed until further notice. Resorts World Kijal is located in Terengganu, while Resorts World Genting and Resorts World Awana are situated in Pahang. Genting Malaysia's have been closed due to Malaysia's movement control order. (The Edge)

BHIC: Awarded RM154.3m submarine contract from Mindef. Boustead Heavy Industries Corp (BHIC)’s has been awarded a contract worth RM154.3m from the Ministry of Defence (Mindef). It received the letter of award which stated that it will be providing in-service support for prime minister's class submarines for the Royal Malaysian Navy. The contract duration is one year from Jan 1, 2020, adding that a formal contract between Mindef and BDNC will be signed at a later date. (The Edge)

KNM: Wins RM73m contract to supply heat exchanger for China petrochemical project. KNM Group has landed a RM73.09m contract to supply a heat exchanger for a petrochemical project in China. The contract was awarded by China Petroleum Materials Company Ltd is for the CNPC Jieyang–Refining Chemical Integration PJ project. The supply and delivery duration of the transaction is for a period of 16 months. “The transaction is expected to contribute positively to KNM group’s earnings for the FYE Dec 31, 2020 and 2021. (The Edge)

Green Packet: Acquires e-KYC specialist firm. Green Packet is acquiring Singapore-headquartered technology firm Xendity Pte Ltd which specialises in identity verification processes using e-KYC (electronic know your customer) technology for USD10m (RM43m). The acquisition will strengthen Green Packet’s digital identity verification service which is a fast-growing sector as more organisations move towards their digital transformations. (SunBiz)

PUC: Terminates deal to buy 67% stake in Pictureworks. PUC has mutually terminated its share sale agreement with its group managing director and CEO and Superb Go SB to acquire a 67% stake in Pictureworks Holdings SB, which was first proposed last year. It is also in the midst of executing a separate deed of mutual termination with Beauty World Holdings Pte Ltd in relation to the share sale agreement. The decision to abort the acquisition was made due to the uncertainties surrounding the speed of recovery of the world economy. (SunBiz)

Komarkcorp: Joins the face mask bandwagon, to invest up to RM20m. Komarkcorp is investing up to RM20m to venture into the manufacturing of face masks. The money will be raised via a private placement of up to 30% of its issued shares, as well as internally-generated funds and bank borrowings. The funds will be used on 30 production lines for the manufacturing of face masks, particularly KN95 and three-ply, with annual production capacity of up 120n and 522m pieces respectively within 24 months. (The Edge)

GDB: Tendering for projects worth RM2.8bn in Malaysia. GDB Holdings revealed that it is tendering for RM2.8bn worth of building construction and piling projects throughout Malaysia. The group’s piling and substructure segment has tendered for approximately RM400m worth of jobs. GDB’s construction tender book amounts to RM2.4bn, which comprises residential, mixed development and offices. The group is hard at work to mitigate the impact Covid-19 pandemic and remained buoyant of its long term prospects. (SunBiz)

Vsolar: Teams up with Mattan Engineering to explore development of large-scale solar facility. Vsolar Group is looking into developing a large-scale solar facility under the Energy Commission’s LSS@MenTARI programme. It plans to bid for a quota under the programme, with the support of Mattan Engineering SB as the EPCC partner to develop the project. Mattan has the expertise and a tremendous track record of managing and integrating multi-disciplined renewable energy projects in Malaysia. (The Edge)

AME Elite: Building high-performance factory for global EMS provider Enics. AME Elite Consortium is constructing a new 10,000sqm high-performance factory for global EMS provider Enics AG (Enics), the company’s first manufacturing site in Southeast Asia. The new high-volume manufacturing facility, to be situated at AME’s i-Park@Senai Airport City industrial park (pix), would be Enics’ eighth manufacturing site globally, complementing its existing sites in Europe and China. (SunBiz)

YTL Corp: Quarterly net profit down 66% as business hit by Covid-19. YTL Corp’s net profit for the 3Q ended March 31, 2020 dropped 66% to RM29.52m, from RM85.8m a year earlier, mainly due to the impact of the Covid-19 pandemic which affected some of its business segments such as hotels. EPS fell to 0.28sen from 0.8sen. Profits fell despite revenue rising 12% to RM4.81bn from RM4.31bn a year ago. Its construction business recorded higher earnings as a result of significant progress in construction work. (The Edge)

Allianz Malaysia: Q1 revenue rises but net profit falls. Allianz Malaysia net profit slipped 19.6% to RM79.5m in the 1Q ended March 31, from RM98.92m reported in the same quarter of the previous year, mainly due to lower contributions from general and life insurance segments. Revenue for the period rose 10.4% to RM1.48bn from RM1.34bn reported previously. Its general insurance segment’s PBT for the quarter declined by 13% to RM74.5m from RM85.6m, reported previously, attributed to higher claims. (The Edge)

RCE: FY20 net profit increases to RM110.58m. RCE Capital net profit for the financial year ended March 31, 2020 increased to RM110.58m from RM95.53m in the previous financial year. Revenue rose to RM282.61m from RM262.57m previously. The better performance was largely supported by higher net interest/profit income, partially offset by lower fee income arising from the sale of competitive products and campaigns to boost disbursements. (The Edge)

Hengyuan: Sinks into losses in 1Q amid oil price slump, MCO. Hengyuan Refining Company reported a net loss of RM124.12m for its 1QFY20, from a net profit of RM21.57m a year ago, as it was impacted by low refining margins following a sudden drop in global oil prices, while demand was impacted by the pandemic outbreak. The slump in global oil prices was the result of a price war while the demand impact came from the implementation of the MCO by the Malaysian government in mid March to curb the spread of Covid-19. (The Edge)

Market Update

The FBM KLCI might open higher today after US stocks closed higher Tuesday, but off the session’s best levels, after Federal Reserve Chairman Jerome Powell suggested more fiscal stimulus may be needed as the American economy may only make a slow recovery from the COVID-19 pandemic. Rising coronavirus cases in several U.S. states are also are concern for investors, even though retail sales and industrial production data show the economy is slowly recovering, and progress on the development of potential therapeutic drugs has been reported. The Dow Jones Industrial Average rose 526.82 points, or 2%, to end at 26,289.98. The S&P 500 index added 58.15 points to close at 3,124.74, a gain of 1.9%. The Nasdaq Composite Index advanced 169.84 points, or 1.8%, to end at 9,895.84. In Europe, the Stoxx Europe 600 index closed 2.9% higher, while the FTSE 100 index gained 2.9%.

Back home, the FBM KLCI closed 18.88 points or 1.26% higher at 1,517.71, while small market capitalisation (small cap) stocks rose by a larger quantum as factors including US and Japan central banks' stimulus revived market optimism despite lingering Covid- 19 pandemic concerns. In the region, China’s benchmark CSI 300 index closed 1.5% higher on Tuesday, while the Shanghai Composite Index picked up 1.4%, and the Japanese Nikkei surged 4.9%. Hong Kong’s Hang Seng climbed 2.4% and South Korea’s Kospi rose rallied 5.3%.

Source: PublicInvest Research - 17 Jun 2020

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