PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 30 Oct 2020, 10:22 AM


PublicInvest Research Headlines - 25 Jun 2020

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Global: IMF slashes its forecasts for the global economy and warns of soaring debt levels. The IMF slashed its economic forecasts once again and warned that public finances will deteriorate significantly as governments attempt to combat the fallout from the coronavirus crisis. The IMF now estimates a contraction of 4.9% in global GDP in 2020, lower than the 3% fall it predicted in April. “The Covid-19 pandemic has had a more negative impact on activity in the 1H2020 than anticipated, and the recovery is projected to be more gradual than previously forecasted” stressed the IMF. The fund also downgraded its GDP forecast for 2021. It now expects a growth rate of 5.4% from the 5.8% forecast made in April. The downward revisions were due to social distancing measures likely remaining in place during the 2H2020, with productivity and supply chains being hit. With those nations still grappling with high infection rates, the fund expects that longer lockdowns will dent economic activity even more. (CNBC)

US: Targets USD3.1bn of EU and UK imports for new tariffs. The US is weighing new tariffs on USD3.1bn of exports from France, Germany, Spain and the UK, adding to an arsenal the Trump administration is threatening to use against Europe that could spiral into a wider transatlantic trade fight later this summer. The US Trade Representative wants to impose new tariffs on European exports like olives, beer, gin and trucks, while increasing duties on products including aircrafts, cheese and yogurt. The new duties might be as high as 100%, which would double the price of such products for US importers and may prevent their entry into the US entirely. (Bloomberg)

US: Fed’s Evans says intermittent virus outbreaks will slow economy. Recurring coronavirus outbreaks will probably hold back US economic growth and leave unemployment at elevated levels in the coming years pointed by the Federal Reserve Bank of Chicago President Charles Evans. He projects growth to be held back by the response to intermittent localized outbreaks which might be made worse by the faster than-expected re-openings. (Bloomberg)

Germany: German investor confidence rises at record pace - ifo. Germany's investor confidence rebounded at record rate in June as lockdown restrictions imposed to slow the spread of the coronavirus were eased across Europe. The ifo business climate index rose to 86.2 points from 79.7 points in May, revised from 79.5. Economists had forecast a score of 85. This is the strongest increase ever recorded. The index rose for a second straight month. The current conditions index climbed to 81.3 from 78.9 in May. Economists had expected a score of 84. The expectations measure rose to 91.4 from 80.5 in May, revised from 80.1. Economists were looking for a reading of 87. (RTT)

China: To buck global economic downturn in 2020 as coronavirus continues to drive down activity. China is expected to post positive growth this year even as the global economy contracts 4.9%. The IMF’s World Economic Outlook Update estimated China’s economy will grow 1% in 2020, a downgrade of its April forecast, but better than other major economies like the US and the EU that will contract by 8% and 10.2%, respectively. (Reuters)

Japan: IMF now sees Japan GDP contraction worse than during 2009 crisis. The IMF forecast the world’s third-largest economy will shrink 5.8% in 2020. In April, when the damage from the coronavirus was less clear, the lender forecast a 5.2% contraction for Japan, slightly less bad than in 2009. Japan’s downgrade came amid a wave of cuts to growth forecasts for major countries and the globe. The lender now sees the world economy shrinking almost 5% this year, with the pandemic hitting harder and wider than initially expected. It also noted that recovery is likely to be slower than first thought. (Bloomberg)

Japan: Leading index weakest in over 11 years. The Japan leading index declined to the lowest in over eleven years in April. The leading index, which measures the future economic activity, fell to 77.7 in April from 85.1 in March. According to the initial estimate, the reading was 76.2. The latest reading was the lowest since March 2009, when it was 74.2. The coincident index that reflects the current economic activity decreased to 80.1 in April from 88.8 a month ago. In the initial estimate, the score was 81.5. The lagging index declined to 97.8 in April from 100.7 in the prior month. According to the initial estimate, the index was 98.1. (RTT)

India: Gets biggest GDP downgrade by IMF as lockdown hurts. The IMF sees India’s GDP declining 4.5% in the fiscal year through March 2021, compared with an April projection of 1.9% growth. The 6.4 percentage-point downgrade in the forecast is due to a longer period of lockdown and slower recovery than anticipated in April. The IMF forecasts the USD2.7trn economy will recover next year, growing at 6%. Weaker growth will also weigh on the government’s budget. The IMF is forecasting the combined fiscal shortfall of the federal government and states will reach 12.1% of GDP in the year through March 2021, up from 7.9% in the previous financial year. (Bloomberg)

Indonesia: Extends USD2.1bn to State Banks for virus fight. Indonesia’s government will place more than USD2bn at state owned banks at a lower interest rate to boost lending to industries ravaged by the coronavirus pandemic, expanding the scope of its fiscal stimulus to revive the nation’s economy. By extending cheaper funds to banks, President Joko Widodo is seeking to minimize the hit to Southeast Asia’s largest economy from the raging pandemic that’s showed no signs of easing. The placement of funds with state lenders is in addition to the already announced waiver of interest on loans taken by micro-small and medium enterprises and a moratorium on repayment of principal for six months. (Bloomberg)

Thailand: Thai central bank cuts 2020 GDP outlook to negative 8.1%. The Bank of Thailand (BOT) kept its policy rate steady, as widely expected, and downgraded its 2020 GDP forecast to a contraction of 8.1% from a 5.3% decline projected in March. The MPC voted unanimously to keep its one-day repurchase rate steady at 0.50%, after cutting it three times this year to help the export- and tourism-driven economy weather the pandemic. The BOT now forecasts 2020 exports will fall 10.3%, worse than the 8.8% drop estimated earlier. The economy is forecasted to grow 5.0% next year, faster than the 3.0% rate seen in March, while 2020 headline inflation will be -1.7% versus minus -1.0%. The BOT's target range is 1%-3%. (Nikkei Asian Review)


AirAsia (Neutral, TP: RM0.78): Sees strong demand rebound with daily sales hitting 41k seats. AirAsia registered its highest post-hibernation sale day yesterday; with 41k seats sold across the group in a single day, signifying a strong rebound in demand for air travel, said the budget airline. The group’s load factor averaged around 50% with AirAsia Malaysia hitting 70%. “AirAsia’s website is experiencing traffic growth of 170%. AirAsia said the group’s AirAsia Unlimited Pass, a product specifically designed to promote the government’s effort to stimulate and encourage domestic travel, sold out quickly. (The Edge)

TNB (Neutral, TP: RM13.28): Inks power purchase deals with three solar power companies. TNB inked three large-scale solar (LSS) Photovoltaic Power Purchase Agreements (PPAs) with three special purpose companies (SPCs) to build transmission connected LSS projects, which have a total capacity of 290.88 MW of alternating current (MWAC). The new agreements are in relation to the LSS3 competitive bidding exercise organised by Suruhanjaya Tenaga in the 1Q19 to develop, among others, the transmission connected LSS projects. (The Edge)

Cuscapi: Inks agreements to set up online management suite for F&B sector. Cuscapi has entered into an agreement to set up a new online management suite for F&B companies. It had entered into a strategic agreement with Presto and Hungry to develop a fully integrated and digitalised cloud-powered F&B management suite to help F&B operators manage items such as order-to-delivery cycle. This new platform is composed of food ordering, cashless payments and delivery. (The Edge)

Khee San: Sued for defaulting on RM4.7m loan. Khee San said the group is being sued by Alliance Bank for defaulting on an RM4.7m loan. Khee San said it had intended to restructure the facilities through its previously announced corporate exercise encompassing a subscription issue and right issue. “The company had engaged in discussions with all its bankers. However, given the recent departure of the previous subscriber, the previous proposed settlement efforts had lapsed, resulting in this default. It is concurrently putting together a new corporate proposal with other potential investors. (The Edge)

ARB: To dispose of remaining stake in timber business. ARB has entered into a conditional share sale agreement with AY Brothers SB for the proposed disposal of its remaining 51% interest in Aturmaju (Sabah) Holding SB for RM5.6m, as part of its plan to transform ARB’s business position from the timber sector to the information technology sector. ARB ED Datuk Seri Liew Kok Leong said the divestment will allow it to channel its strength and capabilities to activities that are aligned with its IT business. (The Sun Daily)

Yinson: Posts RM46.7m net profit for 1Q. Yinson recorded a net profit of RM46.71m for its 1QFY20, a 6.3% YoY drop, due to higher depreciation and amortization charges. Revenue, however, was higher at RM343.75 million, up 64.5% YoY, mainly due to the commencement of lease for FPSO Helang in Dec 2019. Yinson said the long-term outlook for the O&G industry remains challenging, with the emergence of new alternative energy sources and a lower risk appetite from financial institutions towards the sector. (The Sun Daily)

Market Update

The FBM KLCI might open with a downward bias today after US stocks finished sharply lower Wednesday, booking their worst drop in about two weeks, as investors worried that rising coronavirus cases in many American states will set back economic recovery. All 11 sectors in the S&P 500 index were lower after Florida and California booked daily records for new cases, while intensive-care unit beds in Houston, Texas were reported at 97% capacity. The Dow Jones Industrial Average shed 710.16 points, or 2.7%, ending at 25,445.94. The S&P 500 fell 80.93 points, or 2.6%, to end at 3,0501.33. The Nasdaq Composite gave up 222.20 points, or 2.2%, finishing at 9,909.17, a day after booking a fresh record closing high. In Europe, the Stoxx Europe 600 index closed 2.8% lower as concerns around a renewed tariff spat put investors on edge.

Back home, the FBM KLCI fell 4.41 points or 0.29% to close at 1,502.63 after trending lower for much of the day. In the region, China’s benchmark CSI 300 index rose 0.4%, the Japanese Nikkei was down 0.1%, and Hong Kong’s Hang Seng lost 0.5%.

Source: PublicInvest Research - 25 Jun 2020

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