PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 4 Dec 2020, 10:06 AM


PublicInvest Research Headlines - 26 Jun 2020

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US: Labour-market improvement shows further signs of slowing. A higher-than-expected number of Americans sought unemployment benefits for a second week, signalling a slowdown in US labour-market improvement. Initial jobless claims in regular state programs fell by 60,000 to 1.48m last week from an upwardly  revised figure the prior week. Economists surveyed by Bloomberg News had forecast 1.32m initial claims. Continuing claims, a closely watched figure that tracks the overall pool of recipients, declined by more than forecast to 19.5m in the week ended June 13. (Bloomberg)

US: Slump in US Economic activity unrevised at 5.0% in 1Q. Real GDP tumbled by 5.0% in the 1Q, unchanged from the estimate provided last month and in line with expectations. The steep drop in GDP in the 1Q reflects a notable turnaround from the 2.1% jump seen in the 4Q2019. The decrease was unrevised from the previous estimate as an upward revision to non-residential fixed investment was offset by downward revisions to private inventory investment, consumer spending and exports. The sharp pullback in GDP in the 1Q reflected negative contributions from consumer spending, private inventory investment, exports, and non-residential fixed investment. Positive contributions from residential fixed investment, federal government spending, and state and local government spending helped limit the downside along with a decrease in imports, which are a subtraction in the calculation of GDP. The 6.8% nosedive in consumer spending reflected a decrease in spending on services, led by healthcare as well as food services and accommodations. (RTT)

US: Durable goods orders rebound in May, led by orders for transportation equipment. Durable goods orders spiked by 15.8% in May after plunging by a revised 18.1% in April. Economists had expected durable goods orders to surge up by 10.9% compared to the 17.7% nosedive that had been reported for the previous month. The bigger than expected rebound in durable goods orders came as orders for transportation equipment skyrocketed by 80.7% in May after plummeting by 48.6% in April. Orders for motor vehicles and parts also soared by 27.5% in May after plunging by 53.7% in the previous month. Excluding the rebound in orders for transportation equipment, durable goods orders still surged up by 4.0% in May after tumbling by 8.2% in April. Economists had expected a 2.5% increase. (RTT)

EU: Govt bond purchase programme was an effective tool - ECB Minutes. Policymaker of the ECB observed that the government bond purchases under the pandemic emergency purchase programme, or PEPP, and asset purchase programme, or APP, were an effective tool in the current environment. "There was broad agreement among members that while different weights might be attached to the benefits and side effects of asset purchases, the negative side effects had so far been clearly outweighed by the positive effects of asset purchases on the economy in the pursuit of price stability. Using the ECB's capital key as the benchmark was one of the safeguards helping to maintain incentives for sound fiscal policies," the minutes highlighted. At the meeting, the Governing Council of the ECB increased the size of PEPP by EUR600bn to a total EUR1,350bn and retained the size of the monthly purchases under APP at EUR20bn. (RTT)

EU: ECB sets up new backstop for central banks outside Euro area. The ECB will set up a precautionary facility to provide euros to central banks outside the currency area to help ease any liquidity stress as a result of the coronavirus pandemic. The funds will be offered against adequate collateral of euro-denominated debt securities from euro-area governments and supranational institutions. The new backstop, called EUREP, will be available until June 2021. The new facility is most likely geared toward countries in Europe with close trade and financial links to the bloc. The ECB  said the new facility complements its other precautionary tools and reflects the importance of the euro in global financial markets. (Bloomberg)

Germany: German GfK consumer confidence to rise in July. German consumer sentiment is set to recover next month reflecting the rapid reopening of the economy and society, survey results published by market research group GfK showed. The forward looking consumer sentiment index rose to -9.6 in July from revised - 18.6 in June. The score was forecast to rise moderately to -12. Both economic and income expectations, as well as propensity to buy, increased in June. The economic expectations index rose 18.9 points to 8.5 points in June. Likewise, the income expectations indicator advanced 12.3 points to 6.6 points. At the same time, the propensity to buy indicator gained 13.9 points to 19.4 points. (RTT)

UK: Retailers log sharp fall in sales in June – CBI. UK retailers reported a steep fall in sales in June but stronger growth for grocers and stable volumes in the specialist food and drink sector ensured a slower pace of decline than in May. A balance of -37% said sales declined in June compared to -50% in May. This was weaker than the expected rate of -34%. A net 48% forecast sales to decrease further next month. The overall level of sales is expected to be poor for the time of year in July. (RTT)

China: Economy continues slow recovery, early data show . China’s economy continued its slow recovery from the coronavirus slump in June, with a better performance in the services sector and among smaller companies tempered by the still-grim global outlook. That’s the assessment from the earliest available indicators, which showed the economy continuing to strengthen, after a big pickup in May. The final result last month was stronger than initially seen, due to growth in the services sector, according to the purchasing manager indexes. The outlook for smaller firms continued rising in June, according to a Standard Chartered Plc survey of companies, with indexes tracking confidence, outlook and new orders at their highest since the coronavirus shutdown. Sales grew rapidly, mainly on stronger domestic demand. Production activities picked up, with capacity usage accelerating and hiring increasing mildly. (Bloomberg)

Japan: All industry activity falls for third month. Japan's all industry activity declined for the third straight month in April. The all industry activity index fell 6.4% MoM in April, following a 3.4% decline in March. Among components, construction activity remained unchanged on month, after a 1.9% rise in March. Industrial production fell 9.8% in April, following a 3.7% decrease in the preceding month. The tertiary industry activity declined 6.0% in April, following a 3.7% fall. On a yearly basis, the all industry activity index fell 11.8% in April, following a 5.1% decline in the prior month. (RTT)


Axiata (Neutral, TP: RM3.70): Great Eastern buys 22% stake in Axiata’s digital services arm, Boost Holdings SB, for USD70m. Great Eastern has made a “strategic” investment of USD70m (c.RM299.36m) for a 22% stake in a newly formed digital financial services (DFS) unit of Axiata, Boost Holdings SB. (The Edge)

Comment : Axiata will retain its control on Boost Holdings (BH) and hold the remaining 78% stake. BH is primarily involved in the operation of an e-wallet app (Boost) in Malaysia and Indonesia, micro-financing and micro-insurance digital financing and regional direct carrier billing payment. This is the third strategic investment secured by Axiata’s digital services arm. Previously in 2018 and 2019, Sumitomo and Mitsui invested USD20m and USD50m respectively. We note that the growth potential is significant for fintech and digital services but the cost of investment could also be hefty while to attain economic return may take time. We understand that Axiata’s digital business remains a loss-making unit to the group. We make no changes to our forecasts and maintain our Neutral rating on Axiata.

Anzo: Bags RM1.3bn contract to supply copper scrap. Anzo Holdings inked an agreement to supply up to 60,000 tonnes of copper scrap to CSTME Resources SB for RM23k per tonne or a total of RM1.3bn over 40 months. “This will strengthen Anzo’s trading business for sustainable earnings in a long period of time and create business opportunities in the international export market,” Anzo said. (The Edge)

Niche Capital: Bags RM12.82m construction deal. Niche Capital Emas has been awarded a sub-contract worth RM12.82m from YDI Synergy SB. The company said the contract entails structural works for the construction of an education complex located at Lot PT13825, Taman Teknologi Malaysia, Mukim Petaling. The sub-contract shall commence on July 3, 2020. (The Edge)

Widad: Buys UiTM Seremban 3 campus concessionaire for RM122m. Widad Group is acquiring the entire stake in Inovatif Mewah SB (IMSB) – the owner of a concession to develop and maintain the UiTM Seremban 3 campus (US3C) – for RM122m in cash. IMSB had in May 2010 entered into an agreement with the Government and UiTM in relation to a 23-year concession for the rights and authority to undertake the development as well as the maintenance works for US3C.

KUB: Sells 40% stake in KUB Enviro to Berjaya Group for RM80m. KUB disposed of its 40% equity interest in KUB-Berjaya Enviro SB (KUBE) comprising 9m share sale to Berjaya Group (BGB) for RM80m. This would make KUBE cease to be an associated company of KUB. The proceeds would potentially be used for general working capital, fund expansion of its core businesses, and explore further earnings-accretive business opportunities. (The Sun Daily)

EcoWorld: Posts lower 2Q net profit due to MCO, but sees big rebound in sales during CMCO. Eco World’s net profit fell 48% YoY to RM21.39m in 2QFY20 as a result of the MCO. However, the group experienced a significant rebound in sales and bookings which exceeded RM1bn since the CMCO started. In addition, the group said it also hoping to convert a pipeline of bookings of RM600m into sales over the next few months.

Market Update

The FBM KLCI might end the week with a positive note as U.S. stocks closed solidly higher Thursday, recovering a chunk of Wednesday’s ugly loss, ahead of a key update of the banking sector from the Federal Reserve. Investors have been struggling to balance the reality of the rise in the daily rate of new coronavirus cases against a marginal improvement in economic data and a rollback of red tape by U.S. financial regulators. The Dow Jones Industrial Average advanced 299.66 points, 1.2%, to close at 25,745.60, in turbulent trading, while the S&P 500 index closed 33.43 points, or 1.1%, higher at 3,083,76. The Nasdaq Composite Index was 107.84 points, or 1.1%, at 10,017. In Europe, the Stoxx Europe 600 index closed 0.7% higher, while the FTSE 100 Index finished up 0.4%.

Back home, the FBM KLCI fell 13.43 points or 0.89% to 1489.2 as investors reacted to the World Bank’s downgrade of Malaysia’s economic growth forecast with a larger contraction of 3.1% this year from 0.1% estimated in April. Japan’s Nikkei 225 index fell 1.22% and the Hang Seng index dropped 0.5%, while the Shanghai composite index gained 0.3%.

Source: PublicInvest Research - 26 Jun 2020

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