PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 4 Aug 2020, 6:43 PM


PublicInvest Research Headlines - 8 Jul 2020

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US: NY, Nevada lead GDP contraction in the 1Q . The economies of all 50 American states and the District of Columbia contracted in the 1Q2020, even before the full effects of the pandemic took hold, according to data released today by the U.S. Bureau of Economic Analysis. Both New York, which is heavily tied to financial services, and hospitality-dependent Nevada contracted by more than an 8% seasonally adjusted annual rate. New York has the third-largest share of the country’s gross domestic product, behind California and Texas. Accommodation and food services declined 26.8% nationally and contributed to the downturns in all 50 states and Washington, D.C. It was the leading cause of the decreases in 29 states. Nebraska, South Dakota and Texas showed the smallest declines in the 1Q. By sector, utilities remained positive in 49 of the 50 states, falling just in Hawaii. (Bloomberg)

US: Fed’s Bostic says virus spread threatens to undermine confidence. Fed’s Bank of Atlanta President Raphael Bostic said the renewed spread of Covid-19 may be threatening the pace of the US recovery, as businesses and consumers put plans on hold. There is a real sense that this might go on longer than we had hoped and we had expected and we had planned for. While recent US economic data has been better than expected, including the addition of 4.8m jobs in June, Bostic said he was worried that more employment losses would become permanent rather than temporary if the economy fails to gather strength as hoped. (Bloomberg)

US: Job openings unexpectedly increase as hires climb to record. The number of available positions rose to 5.4m during the month from 5m in April, according to the Labor Department’s Job Openings and Labor Turnover Survey. The median forecast in a Bloomberg survey of economists called for 4.5m openings. The increase in job openings was concentrated in accommodation and food services, retail, and construction. Separations, which include layoffs and quits, plummeted by 5.83m in May. The rate of layoffs and discharges dropped to 1.4% from 5.9% in April and closer to the pre-pandemic rate of 1.2%. The number of hires, which does include rehired employees, surged a record 2.44m to an all-time high of 6.5m. The hires rate jumped to an unprecedented 4.9% from 3.1%. (Bloomberg)

EU: Sees deeper recession, less steep rebound for euro zone. The downbeat assessment of Europe’s economy comes amid concern the US recovery may also be faltering as a surge of new coronavirus infections prompts states to delay and in some cases reverse plans to let stores reopen and activities resume. The EU executive said the 19-nation single currency area would contract by a record 8.7% this year before growing by 6.1% in 2021. In early May, the Commission had forecast a 2020 downturn of 7.7% and a 2021 rebound of 6.3%. The Commission said it had revised its forecasts because the lifting of COVID-19 lockdown measures in euro zone countries was proceeding less swiftly than it had initially predicted. (Reuters)

EU: Germany's industrial production recovers in May. Industrial output grew 7.8% on a monthly basis in May, in contrast to a revised 17.5% fall in April. Production was forecast to grow 10% in May. On a yearly basis, industrial production declined 19.3% versus a revised 25% decrease in April. Excluding energy and construction, industrial production was up 10.3% in May. Energy production gained 1.7% in May and construction output grew 0.5%. Production in the automotive industry increased markedly in May, after a very low level in April 2020. However, it was still by just under 50% lower than in February 2020. (RTT)

UK: Global trade deals still pose a huge pre-Brexit challenge. The UK’s trade deal with the EU isn’t the only massive project that British negotiators must contend with before they quit the bloc at the end of the year. If the UK leaves the EU with no agreement, it will trade with 27 countries under terms set by the WTO. Fresh agreements with the US, Australia and New Zealand are also a priority. The government’s own analysis shows that leaving the EU will lead to GDP loss of around 5% in the long term even with a free-trade agreement in place. A pact with the US would only add a fraction of that to UK growth. (Bloomberg)

Japan: Leading index rises in May. The Japan leading index increased in May. The leading index, which measures the future economic activity, rose to 79.3 in May from 77.7 in April. The coincident index that reflects the current economic activity decreased to 74.6 in June from 80.1 a month ago. This was the lowest level since June 2009. The lagging index declined to 94.0 in June from 97.8 in the prior month. The latest reading was the lowest since July 2013. (RTT)

Australia: Keeps interest rate, QE unchanged. Australia's central bank maintained its key interest rate and the target yield on three year government bonds unchanged. The board of RBA, governed by Philip Lowe, decided to maintain cash rate and the targeted yield on three-year government bonds of 25bps. The bank said it is prepared to scale-up its bond purchases again and will do whatever is necessary to ensure bond markets remain functional and to achieve the yield target for 3-year Australian government securities. The RBA had reduced the key interest rate to the current record low of 0.25% at the March meeting. Also in March, the bank had introduced asset purchase programme to combat the downturn caused by the pandemic. (RTT)


AirAsia (Neutral, TP: RM0.78): Auditor raises material uncertainty related to going concern. AirAsia Group’s auditor Messrs Ernst & Young PLT has issued an unqualified audit opinion with emphasis of matter on material uncertainty relating to going concern in view of the current economic condition and Covid-19 pandemic, in respect of the Group’s audited financial statements for FY19 ended Dec 31. However, with the recent progressive uplifting of restriction on interstate travel and domestic tourism activities within the operating countries, the Group has seen positive developments on its business operations as passenger seat booking trends, flight frequencies and load factors are gradually improving to cater for the increasing demand. (SunBiz)

Paramount: Buys 137 acres to expand Bukit Banyan township project in Sungei Petani. Paramount Corp’s acquisition of 137.1 acres in Sungai Petani, Kedah, for a consideration of RM24m, will expand its existing 520-acre Bukit Banyan township by 26%. It said the purchase will be funded by the proceeds received from its divestment of the pre-tertiary education business earlier this year. The CEO Jeffrey Chew, a GDV of RM400m is expected from the development of residential and commercial properties after the conversion of the land status. (SunBiz)

Advancecon: Signs solar power project MoU with Peritone Health. Advancecon Holdings’ wholly owned subsidiary Advancecon Solar SB inked a MoU with pharmaceutical manufacturing plant Peritone Health SB to develop a rooftop solar photovoltaic system at the latter’s premises in Kulim Hi Tech Park, Kedah. It will undertake the engineering, procurement and construction of a 461.12kWp solar photovoltaic system installed on Peritone’s premises, and subsequently invest in, own, operate and maintain the system throughout the power purchase agreement (PPA) and the lease agreement period. (SunBiz)

Pestech: Announces RM1bn perpetual sukuk programme. Pestech International plans to issue perpetual Islamic notes of up to RM1bn in nominal value to raise proceeds for refinancing and working capital purposes, based on the syariah principle of Musharakah. (The Edge)

KNM: Group founder Lee Swee Eng retires. KNM Group has announced that its founder and group CEO Ir Lee Swee Eng is leaving the company. Meanwhile, KNM has also announced the appointment of Tan Koon Ping as new group CEO effective July 9. On a separate development, KNM said wholly-owned subsidiary, KNM Process Systems SB, has signed a JV agreement with ADAP Capital SB to form a company to undertake oil, gas and petrochemical project in Sarawak. KNM said the company would hold 51% equity in the JV company while ADAP would hold the remaining 49%. (SunBiz)

Lotus KFM: PN17 status to be uplifted. Lotus KFM (previously known as Kuantan Flour Mills) said it will be uplifted from being classified as a PN17 company from July 8. Lotus said it has regularised its financial condition and no longer triggers any of the criteria under the PN17-related clause of the Main Market Listing Requirements. (The Edge)

Market Update

  • The FBM KLCI might open lower today as U.S. stocks on Tuesday ended sharply lower, with the S&P 500 snapping its 5-day win streak, as investors grew wary of the economic, public-health and policy response to the coronavirus pandemic. Equities lost steam after the White House reiterated a call to cap the next round of COVID-19 stimulus at $1 trillion or less, but accelerated their losses in the final hour of trade, after several Federal Reserve officials warned of challenges to the economy as infection rates soar across several states. The Dow Jones Industrial Average tumbled 396.85 points, or 1.5%, to end at 25,890.18, the S&P 500 index shed 34.40 points, or 1.1%, closing at 3,145.32 and end a 5- session win steak; while the Nasdaq Composite Index fell 89.76 points, or 0.9%, to finish at 10,343.89, after carving out an intraday 10,518.98 record. In European equities, the Stoxx Europe 600 index ended 0.6% lower, and London’s FTSE 100 declined 1.5%.

    Back home, the FBM KLCI reversed earlier gains to close 10.18 points or 0.65% lower at 1,566.72 as investors chose to take profit after six consecutive days of gains, while mixed performance at regional markets also weighed down the benchmark index. In Asia markets, the Shanghai Composite Index closed up 0.4%, the CSI 300 Index finished 0.6% higher after yesterday’s 5.7% rally. Hong Kong’s Hang Seng Index fell 1.4% and South Korea’s Kospi Composite Index fell 1.1%

Source: PublicInvest Research - 8 Jul 2020

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