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PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 5 Aug 2020, 11:25 AM

 

PublicInvest Research Headlines - 13 Jul 2020

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Economy

US: Producer prices unexpectedly drop 0.2% in June. Producer prices in the US unexpectedly decreased in June, according to a report released by the Labor Department. The Labor Department said the PPI for final demand fell by 0.2% in June following a 0.4% increase in May. Economists had expected prices to climb by another 0.4%. The unexpected drop in producer prices came amid a sharp pullback in food prices, which plunged by 5.2% in June after spiking by 6.0% in May. On the other hand, the report said energy prices soared by 7.7% in June after jumping by 4.5% in the previous month. Excluding food and energy prices, core producer prices inched up by 0.1% in June after rising by 0.3% in May. Core prices were also expected to increase by 0.4%. (RTT)

EU: Lays out long-term budget and recovery plan. European Council President Charles Michel laid out a plan for long-term budget and recovery for the coronavirus-hit members of the EU, one week ahead of a summit of the 27 leaders. In the revised proposal that Michel presented, the size of the European long-term budget called Multi-annual Financial Framework (MFF) is envisioned at EUR1.074trn. The proposal initially attracted strong opposition from some members. Subsequently, Michel held bilateral negotiations with all leaders. The rebates for Denmark, Germany, the Netherlands, Austria and Sweden will be maintained, Michel said. He proposed the size of the Covid-19 Recovery package to be EUR750bn and these funds can be used for back-to-back loans and spending through MFF programmes. (RTT)

EU: Unveils bid to break deadlock on EUR750bn plan. The EU made a fresh attempt to break the deadlock over its economic response to the Covid-19 pandemic, offering sweeteners to critics of the plan while sticking to the overall size of the package. Under the blueprint drafted by EU Council President Charles Michel, the EU still plans to distribute to governments EUR500bn in grants and EUR250bn in loans. As a concession to fiscally conservative countries, Michel proposed earlier repayments and the continuation of the bloc's system of budget rebates. EU leaders, who must agree unanimously, have been at odds over the balance between grants and loans, as well as the overall size of the stimulus. The EU is facing the biggest recession in its history, and the response has exposed deep divisions among its members. In an effort to appease those governments, the proposal foresees an earlier repayment of the debt the commission will raise on the market, starting from January 2027. (Bloomberg)

EU: ECB seen boosting stimulus by December to aid fledging recovery. The ECB isn’t done expanding its bond-buying program yet, according to economists, despite recent remarks by policy makers that the outlook has brightened slightly. More than half of respondents in a Bloomberg survey predict an increase in the ECB’s EUR1.35trn pandemic purchase program by December, with most expecting an extension and a top-up of EUR500bn. The Governing Council is seen keeping its policy unchanged when it meets next week. Expectations that the ECB will need to do more highlight the extraordinary uncertainty surrounding the recovery from the crisis. While officials have said the latest date point to a relatively sharp bounceback, they also stressed the EU economy is still on course for its biggest contraction ever of almost 9% this year and the extent of damage to companies and labor markets still hard to judge. (Blooomberg)

UK: Tells businesses to prepare for Brexit crunch. Britain is urging businesses and individuals to prepare for the end of the Brexit transition period with an information campaign titled: "The UK's new start: let's get going." The two sides have been working to agree a trade deal ahead of that period expiring at the end of the year. Cabinet Minister Michael Gove said progress was being made in talks but there were still divisions. "At the end of this year we are leaving the single market and Customs Union regardless of the type of agreement we reach with the EU," he said. "This will bring changes and significant opportunities for which we all need to prepare." A survey from lobby group the Institute of Directors (IoD) said only a quarter of companies were fully ready for the end of the transition period. Nearly half of 978 company directors polled in late June said they were not able to prepare right now, with one in seven distracted by the coronavirus and almost a third saying they needed details of changes to be clear, the IoD said. (Reuters)

China: Bank lending rises in June. China's bank lending increased in June as lower borrowing costs helped to lift demand for credit, data from the People's Bank of China showed. Banks extended CNY1.81trn loans in June. Economists had forecast bank lending to climb to CNY1.8trn from CNY1.48trn in May. The broad money supply M2 grew 11.1% annually, the same rate as seen in May and in line with economists' expectations. Total social financing, a broad measure of credit and liquidity in the economy, increased to CNY3.43trn in June from CNY3.2tr in May. Outstanding credit climbed 12.8% from last year. Broad credit growth hit a two-year high in June and the recent uptick in interest rates is unlikely to prevent a further acceleration in the coming months, an economist at Capital Economics, said. (RTT)

China: Renews push for increased global role for the Yuan. Faced with the prospect of restricted access to USD, China’s answer is to get more people to use its own currency instead. The increasing spillover of Sino-American tensions into the financial sphere has ignited a fresh push by China to promote the global use of the Yuan. A growing number of government officials and influential market watchers have in recent weeks urged greater efforts on the endeavor, which gained renewed significance after China’s new Hong Kong security law triggered the threat of retaliation from Washington. While such drastic action is far from being implemented by the US -- and could potentially do major damage to American interests and the entire global financial system -- the risks alone have raised alarm bells. (Bloomberg)

Markets

Sapura Energy (Neutral, TP: RM0.09): Sapura OMW reports positive results in Toutouwai exploration well. Sapura Energy's associate company, SapuraOMV Upstream SB and its JV partners, Mitsui Exploration and Production Australia Pty Ltd (Mitsui E&P Australia) and OMV New Zealand Ltd (OMV NZ) have made an oil discovery in the Toutouwai-1 exploration well in the Taranaki Basin, New Zealand. Sapura Energy pointed out that the oil discovery is located 50 kilometres off the Taranaki coast at a depth of 130 metres. Drilling commenced in early March and the target reservoir was successfully reached in April. (Bernama)

Mesiniaga: Bags RM10.6m maintenance contract from KDN. Mesiniaga has won a maintenance contract worth RM10.6m from the Ministry of Home Affairs. The contract involves comprehensive maintenance services of hardware and software systems for National Registration Department branches, the group said in an exchange filing. The three-year contract is expected to be completed by June 30, 2023. The proposed transaction will have a positive effect on the company’s net assets for the FYE Dec 2020. It is also expected to contribute positively to the company’s earnings over the period of the contract. (The Edge)

Tomypak: Sees rising demand from local F&B. The group is currently running at 30% of its total capacity (post-MCO), indicating significant potential for growth. Its transformation plan entails relocating a laminating line and 10 specialised bag making machines from its Tampoi plant to its Senai plant to achieve better operational efficiencies. This process will commence in the 3Q of the year and be completed by year end. Going forward, Tomypak will be intensifying its efforts to secure more orders and customers. Apart from that, Tomypak expects to tap into a new pool of customers, following the acquisition of a 51% stake in Melaka-based printing company SP Plastic & Packaging SB. (StarBiz)

Supercomnet Technologies: Catheter receives FDA approval. Supercomnet Technologies latest catheter for cardiovascular use has been approved by the US FDA. The product, D*Clot HD Rotational Thrombectomy Catheter, is classified as a catheter or embolectomy on the FDA website and registered under STB's wholly-owned subsidiary Supercomal Medical Products SB (SMP), which principal activities involve the manufacturing and sub-assembly of cables for the medical device market. The latest development is in line with STB's push to expand into new markets and acquire new clients and diversify its corporate footprint globally. Moreover, the company is also striving to solidify its position in current markets to achieve a leading original equipment manufacturer spot in the automotive cable and medical device players. (NST)

Construction (Neutral): CIDB allocates RM70m for programmes to enhance construction industry. The Construction Industry Development Board (CIDB) has allocated a total of RM70m to implement several strategic programmes aimed at boosting the capacity and capability of construction industry players who were affected by the MCO. The efforts are aligned with Malaysia’s policy to increase the use of technology, reduce reliability on foreign workers and create local jobs. (The Edge)

Market Update

  • The FBM KLCI might open higher today as US stocks ended higher Friday, with support attributed in part to optimism over a coronavirus treatment as investors attempt to gauge the threat to the economic outlook from a rise in COVID-19 cases. The Dow Jones Industrial Average rose 369.21 points, or 1.4%, to close at 26,075.30. The S&P 500 added 32.99 points, or 1.1%, to close at 3,185.04. The Nasdaq Composite closed at 10,617.44, up 69.69 points, or 0.7%, its 27th record of 2020. In Europe, the STOXX Europe 600 index finished 0.9% higher, while the U.K.’s FTSE 100 rose 0.8%.

    Back home, the FBM KLCI bucked the regional trend to close 0.54% higher, mainly on further gains recorded by glove makers Top Glove Corp Bhd and Hartalega Holdings Bhd. The index dipped into the red shortly after it opened at 1,578.92. But as trading progressed, it slowly inched up to end the day 8.59 points higher at 1,591.84. Elsewhere in Asia, Japan's Nikkei 225 fell 1.06%, South Korea's Kospi dipped 0.81%, Hong Kong's Hang Seng Index declined 1.84% and the Shanghai Stock Exchange Composite Index dropped 1.95%.

Source: PublicInvest Research - 13 Jul 2020

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