PublicInvest Research

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PublicInvest Research Headlines - 22 Jun 2020

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Global: Wreckage of global economy now looks even worse to IMF. Two months after its dire predictions of the steepest recession in almost a century, the IMF will release new global economic forecasts this week that will probably look even worse. Officials at the Washington-based Fund have warned that a revised outlook due this week may feature a more pessimistic view than in April. Back then, they said the “Great Lockdown” caused by the coronavirus would force a global contraction of 3% this year. Any glimmers of hope the IMF can impart may channel optimism that the worst of the outbreak has passed in some countries, allowing them to ease restrictions. That would chime with the PMI from Japan to Europe to the US due on Tues, all of which are expected to show further improvement in sentiment and activity from historic lows. However, most countries still face a long path back to normality from a downturn that is remarkably synchronized. IMF Chief Economist Gita Gopinath, who is compiling the forecasts, noted that both advanced and emerging market economies will endure a recession this year, the first time both have suffered in tandem since the Great Depression of the 1930’s. (Bloomberg)

US: Fed officials signal rising caution on US economic recovery amid virus spread. Two US Fed officials sounded increasing pessimism on the swiftness of any economic recovery from the novel coronavirus epidemic and warned the unemployment rate could rise again if the disease is not brought under control. The central bank already made clear it expects a full economic healing from the impact of the virus to take years as it kept interest rate near zero at its policy meeting. But nascent signs of recovery in US economic data, with better-than-expected job gains and retail sales for the month of May, had fuelled some hopes that the US could bounce back more quickly. Fed officials pushed back on that view and cautioned against reopening the economy too hastily after the end of state lockdowns aimed at containing the virus. Minneapolis Fed President Neel Kashkari also said “the economic recovery would take longer than he had hoped just a few months ago, and warned the recent positive trend on job gains could soon be reversed if the virus is not tamed soon”. (Reuters)

EU: Eurozone current account surplus at 3-year low. The euro area current account surplus declined to a three-year low in April. The current account surplus fell to EUR14.4bn in April from EUR27.4bn in March. This was the lowest since April 2017, when the surplus was EUR11.7bn. The surplus on trade in goods narrowed to EUR13bn from EUR32bn a month ago. Meanwhile, the surplus on services doubled to EUR4bn from EUR2bn. Primary income rose to EUR9bn from EUR2bn. On the other hand, the deficit on secondary income widened to EUR12bn from EUR9bn. In the 12-month period to April, the current account logged a surplus of EUR334bn or 2.8% of euro area GDP, compared with a surplus of EUR329bn or 2.8% of euro in the 12 months to April 2019. In the financial account, euro area residents made net acquisitions of foreign portfolio investment securities totalling EUR394bn in the 12- month period to April, up from EUR64bn in the 12 months to April 2019. (RTT)

EU: Germany producer prices fall most in 4 years . Germany's producer prices declined at the fastest pace in four years in May. Producer prices fell 2.2% YoY in May, following a 1.9% decline in April. Economists had expected a 2.1% decrease. This was the biggest fall since May 2016. On a monthly basis, producer prices declined at a slower pace of 0.4% in May after easing 0.7% in the prior month. This was the fourth consecutive fall in prices. Energy prices decreased 7.9% and petroleum products declined 27.5% due to fall in demand amid coronavirus pandemic. Intermediate goods prices fell 2.6%. Meanwhile, prices of durable consumer goods and non-durable goods grew 1.5% and 1.3%, respectively. Capital goods prices increased 1.1% from a year ago. Excluding energy, producer prices dropped 0.2% from April and fell 0.3% from last year. (RTT)

UK: Retail sales recover; budget deficit widens. UK retail sales recovered at a faster than expected pace in May driven by non-food store sales and the budget deficit reached a record high amid high expenditure. Retail sales volume increased at a pace of 12% on month, in contrast to an 18% decrease in April. Sales were forecast to climb 5.7%. Similarly, sales volume excluding auto fuel, advanced 10.2% versus a 15% fall a month ago. Non-food stores provided the largest positive contribution to the monthly growth in May, aided by a strong increase of 42% in household goods stores. Retail sales including auto fuel, declined 13.1% on year, following a 22.7% decrease in April. This was slower than the 17.1% decrease economists' had forecast. Excluding auto fuel, retail sales dropped a slower pace of 9.8% after declining 18.5% in the previous month. Economists had expected an annual fall of 14.4%. The budget deficit widened to a record high in May. Public sector net borrowing excluding public sector banks, totalled GBP55.2bn, roughly nine times or GBP49.6bn more than in May 2019. This was the highest borrowing in any month on record since 1993. (RTT)

Japan: Economy is headed for a deep contraction in 2020. An unprecedented spending blitz, backed by a central bank that has thrown off the shackles on its government bond purchases will only do so much to offset the blow from the pandemic. The potential for a second wave of Covid-19 infections points to significant downside risk of a scarring recession with higher unemployment. Looking ahead, the strength of external demand will also be a critical factor. Even in Bloomberg’s base case, net exports of goods and services will reduce GDP growth by 0.3% in 2020. In the event a second outbreak impedes recoveries overseas, the drag would be as heavy as 1.3%. The sheer scale of the fiscal support measures that the government has rolled out in quick succession underlines a determination to prevent the economic crisis from snowballing into something much worse. The BOJ is playing a central role in the emergency support as they have pledged to buy as much government debt as needed to anchor the 10-year JGB yield around the BOJ’s 0% target under its yield curve control policy. This blank check has given the government free rein to increase spending without an associated rise in borrowing costs. (Bloomberg)


DNeX: Team up with MARii to develop info system for used vehicles. DNeX has signed a strategic collaboration agreement with the Malaysia Automotive Robotics and IoT Institute (MARii) to jointly develop and operate a web-based information system for used vehicles. DNeX said the Used Automotive Information System (Sistem Maklumat Automotif Terpakai – SMAT), would enable users to search, retrieve and authenticate used vehicle data such as make of vehicle and model, country of origin, chassis number, engine and fuel type as well as the date of original registration, simply by keying in a specific identity reference number. “The system is expected to reduce information irregularities and improve trust between buyers and sellers of used vehicles. (The Sun Daily)

JCorp: Identifies potential investments worth RM17.4bn for Pengerang. JCorp has identified potential investments worth RM17.4bn for the Pengerang Industrial Park (PIP). JCorp said the potential investments would involve aromatics complex operations, petrochemical plant as well as support services related to O&G industries. It said among the products to be produced was raw materials in the form of liquid and pellet for the manufacture of various plastic products for industrial use such as industrial plastic bags. (The Edge)

Key Alliance: Obtains first stage approval to sell PCR Covid- 19 test kits. Key Alliance has been issued the Good Distribution Practice for Medical Devices Certificate of Conformity, which allows it to act as a local authorised representative for the import, storage and handling, warehousing and documentation of medical devices, specifically in vitro diagnostic devices. It has received notification from Conformity Assessment Bodies Malaysia that it has passed the initial audit. (The Sun Daily)

OCR: JV co to participate in Pahang portion of ECRL. OCR’s associate company has entered into a JV agreement with Perbadanan Kemajuan Negeri Pahang (PKNP) to set up Taraf Raya for the ECRL project. Taraf Raya is to provide mechanical and civil works (excluding tunnelling works) relating to ECRL within Pahang. OCR is currently at negotiation stage with Malaysia Rail Link and China Communications Construction (ECRL) in regards to the project. (The Sun Daily)

GDB: 1Q net profit drops 18.7% to RM5.7m on higher expenses. GDB Holdings’ net profit for 1QFY20 fell 18.7% YoY to RM5.72m, due to higher profit recognition in 1QFY19, lower interest income, and higher administrative and other expenses incurred in the current quarter. GDB’s order book stood RM1.05bn. On its prospects, GDB said given the ongoing Covid- 19 pandemic and economic uncertainties on a global scale, it expects the outlook for the current financial year to be challenging. (The Edge)

Boustead: 1Q loss widens on coronavirus impact. Boustead’s loss in 1QFY20 widened YoY as the group took a beating from the Covid-19 pandemic. It a loss of RM73.1m in 1QFY20, compared with the RM22.4m in 1QFY19. Boustead said its hotels, heavy industries, properties and petrol stations businesses were hit from the MCO. Despite expecting a challenging year, Boustead’s chairman, Datuk Seri Mohamed Khaled Nordin, is bullish on the group’s transformation programme. (StarBiz)

Market Update

The FBM KLCI might open lower today as US stock indices gave up strong early gains to close mostly lower Friday, after the World Health Organization signaled that the coronavirus pandemic remains a deadly threat, and Apple said it will re-close some stores due to rising case counts in parts of America, casting doubt on the speed of economic recovery. All three equity benchmarks still made weekly gains though. The Dow Jones Industrial Average closed 208.64 points lower, down 0.8%, at 25,871.46, after being as much as 371 points higher at an intraday peak at 26,451.44. The S&P 500 index fell 17.60 points, or 0.6%, to close at 3,097.74, but hit an intraday peak at 3,155.53. The Nasdaq Composite Index added 3.07 points, less than 0.1%, to close at 9,946.12. Across the Atlantic, the Stoxx Europe 600 index closed 0.6% higher, at 365.46, while the FTSE 100 index added 1.1% to close at 6,292.60.

Back home, the FBM KLCI managed to crawl back above the 1,500-level to end the week at 1,507.26 points after it hit an intraday low of 1,496.76 points. The index went up barely 2.35 points or 0.16% despite the news of a new breakthrough in trade talks between China and the US. In the region, China’s benchmark CSI 300 index rose 1.3%, while the Shanghai Composite Index gained 1%, and the Japanese Nikkei climbed 0.5% in Asia trade on Friday. Hong Kong’s Hang Seng advanced 0.7% and South Korea’s Kospi rose 0.4%.

Source: PublicInvest Research - 22 Jun 2020

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