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Author: PublicInvest   |   Latest post: Mon, 23 Nov 2020, 11:55 AM

 

PublicInvest Research Headlines - 17 Sept 2020

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Economy

Global: OECD upgrades global GDP forecast . The Organisation for Economic Cooperation and Development raised its global economic forecast for 2020 as output picked up swiftly following the easing of confinement measures and the initial re-opening of businesses. According to the interim economic outlook report, the global economy will shrink 4.5% this year instead of 6% fall estimated in June. Meanwhile, the growth projection for 2021 was revised down to 5% from 5.2%. The Paris-based agency noted that without the prompt and effective policy support introduced in all economies, the contraction in output would have been substantially larger. (RTT)

US: Fed forecasts interest rates at near-zero levels through 2023. Citing the economic hardships caused by the Covid-19 pandemic, the Federal Reserve left interest rates unchanged on Wednesday and signaled rates are likely to remain at near-zero levels for years to come. The Fed announced its widely expected decision to keep the target range for the federal funds rate at zero to 0.25%. The central bank said it expects rates to remain at current levels until labor market conditions reach levels consistent with maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time. The economic projections provided along with the announcement suggest most Fed officials expect interest rates to remain unchanged through at least 2023. (RTT)

US: Business inventories inch up in line with estimates in July. A report released by the Commerce Department on Wednesday showed a modest increase in US business inventories in the month of July. The Commerce Department said business inventories inched up by 0.1% in July after slumping by 1.1% in June. The uptick in inventories matched economist estimates. The modest rebound in business inventories came as retail inventories jumped by 1.2% in July after tumbling by 2.7% in the previous month. On the other hand, the report showed wholesale and manufacturing inventories fell by 0.3% and 0.5%, respectively. The Commerce Department also said business sales surged up by 3.2% in July after soaring by 8.6% in June. (RTT)

US: Retail sales growth falls well short of estimates in Aug . Retail sales in the US continued to increase in the month of Aug, according to a report released by the Commerce Department, lthough the pace of growth fell well short of economist estimates. The Commerce Department said retail sales rose by 0.6% in Aug after climbing by a downwardly revised 0.9% in July. Excluding sales by motor vehicles and parts retailers, retail sales climbed by 0.7% in August after leaping by a downwardly revised 1.3% in July. Ex-auto sales were expected to increase by 0.9% compared to the 1.9% spike originally reported for the previous month. (RTT)

US: Homebuilder confidence unexpectedly jumps to new record high . Reflecting historic traffic numbers, the National Association of Home Builders released a report showing homebuilder confidence jumped to a record high in Sept. The report said the NAHB/Wells Fargo Housing Market Index shot up to 83 in Sept from 78 in Aug. Economists had expected the index to come in unchanged. With the unexpected increase, the index rose to its highest level in the 35-year history of the series, surpassing the previous record high of 78 that was set last month and also matched in December 1998. (RTT)

US: Manufacturing output rises, but momentum slackening as Covid-19 lingers. US factory production increased for a fourth straight month in Aug, but the recovery is showing signs of strain, suggesting business investment in equipment could remain depressed through the end of the year, as the Covid-19 pandemic drags on. The report from the Fed added to data on the labour market that has indicated a stall in overall economic activity because of the coronavirus' persistence and fading fiscal stimulus. The ebbing economic recovery, accompanied by warming inflation, is likely to dominate the US central bank's two-day policy meeting, which started on Tuesday. (Reuters)

UK: Inflation eases to near 5-year low . UK inflation slowed to a near five-year low in Aug largely driven by subsidies provided for eating out and lower taxes, the Office for National Statistics reported. Inflation eased less-than-expected to 0.2% in Aug from 1% in July. Prices were forecast to climb 0.1%. But this was the lowest rate since December 2015. (RTT)

China: Recovery picks up speed on rebound in retail sales . China's economic recovery from Covid-19 accelerated, spurred by a rebound in consumption as virus restrictions eased and larger-than expected gains in industrial output. Retail sales rose for the first time this year in Aug, by 0.5% from a year earlier, while industrial production expanded 5.6%, against a forecast of 5.1%. In the first eight months, retail sales slid 8.6%, industrial production advanced 0.4%, and fixed-asset investment was 0.3% lower than the same period in 2019, the National Bureau of Statistics said. The data show the world's second-largest economy in recovery from the 1Q slump, in stark contrast to nations still struggling with virus outbreaks, lockdowns, and economic contraction. (Bloomberg)

Japan: Aug exports fall 14.8% YoY – MOF. Japan’s exports slumped 14.8% in August from a year earlier, down for the 21st straight month, Ministry of Finance data showed on Wednesday, underlining the coronavirus pandemic’s heavy hit to global demand. That compared with a 16.1% decline expected by economists in a Reuters poll and followed a 19.2% fall in July. Imports dropped 20.8% in the year to August, compared with the median estimate of an 18.0% decline. The trade balance came to a surplus of JPY248.3bn (USD2.36bn), against the median estimate of a JPY37.5bn deficit. (Reuters)

Markets

DRB-Hicom (Outperform, TP: RM2.45): Proton to take bookings for X50. DRB-Hicom's 51.1%-owned unit Proton Holdings will be taking orders for its X50 crossover sport utility vehicle (SUV). It said that customers can book their vehicles by paying RM500 at showrooms. "Customer preview sessions will be held at four separate locations beginning Sept 19, though these will be closed-door events," it said. The new SUV will be locally assembled at Proton's Tanjung Malim plant. (The Edge)

MGB: Bags RM231.1m construction contract. MGB’s (MGB) wholly-owned subsidiary, MGB Construction & Engineering SB (MGB), has accepted a letter of award from Seribu Baiduri SB for a construction contract worth RM231.1m. The project would include two blocks of 22-storey Rumah Selangorku Idaman MBI consisting of 656 units per block and a kindergarten on the ground floor. (SunBiz)

Anzo: Bags RM1.5bn copper scrap deal? Anzo Holdings may have bagged a new contract worth RM1.3bn to RM1.5bn to export copper scrap to Japan and South Korea. Sources said the company might announce the potential deal as early as next week. It is believed that Anzo will start exporting the copper scrap to Japan and South Korea effective next month via a company with an AP (approved permit) licence. The contract will create new business opportunities for Anzo in the export markets, said sources. (Business Times)

T7 Global: Wins RM16.9m construction contract for Endau Mersing Fish Processing Park. T7 Global’s wholly-owned subsidiary Tanjung Offshore Services SB has secured a RM16.93m contract from East Coast Economic Region Development Council (ECERDC) for the proposed construction and completion of Endau-Mersing Fish Processing Park in Endau, Johor. The duration of the contract is 78 weeks, commencing from Sept 9, 2020. The date of completion for the works is on March 8, 2022. (SunBiz)

Omesti: Unit secures RM14.4m JPJ contract. Omesti’s indirect 51% owned subsidiary Formis Network Services SB (FNS), has bagged a RM14.44m contract from the Road Transport Department (JPJ) for the maintenance & technical support services for ICT infrastructure and application systems for the department’s Automated Awareness Safety System (AwAS). The project is for a duration of 18 months, commencing on Sept 14, 2020 to March 13, 2022. (SunBiz)

MMAG: To provide ICT, worker transport and logistics services to ECRL consultant . MMAG Holdings has entered into an exclusive agreement that will see it providing ICT, worker transport and logistics services to a company involved in the East Coast Rail Line (ECRL) megaproject. (The Edge)

Brahim: Parts ways with white knight amid uncertainties. Brahim's Holdings has parted ways with its white knight MRI VC, which inked a heads of agreement (HOA) in Dec 2019 to help Brahim's with its regularisation plan. The deal, which required MRI to pay a RM2m deposit to Brahim's, was called off after taking into consideration current uncertainties surrounding the group's business, global economy and financial markets, the group said. (The Edge)

Market Update

The FBM KLCI might open softer today as U.S. benchmark stock indices closed mostly lower Wednesday, after the Federal Reserve said it would likely hold interest rates near zero until at least 2023 given the outlook for inflation and employment in the wake of the coronavirus pandemic, but also indicated risks to the economy remain. Initially, good earnings from the likes of FedEx provided some support, as did talk of coronavirus vaccine distribution plans by the White House, and upbeat sentiment about the latest batch of IPOs, including the cloud software company, Snowflake. The Dow Jones Industrial Average added 36.78 points, or 0.1%, to finish at 28,032.38, while the S&P 500 index shed 15.71 points, or 0.5%, closing at 3,385.49. The Nasdaq Composite index fell 139.85 points, or 1.3%, after flipping between positive and negative territory in the session.

In U.S. economic data, a reading on retail sales in August just missed the MarketWatch consensus forecast, rising 0.6% for the month. Sales topped pre-crisis levels during the month, but the rate of growth is slowing. Global equities closed mixed, with the Stoxx Europe 600 index up 0.6%, and the U.K.’s benchmark FTSE 100 down 0.4%. In Asia, Hong Kong’s Hang Seng Index closed fractionally lower and the Shanghai Composite lost 0.4%. Japan’s Nikkei closed 0.1% higher. The FBM KLCI was closed for Malaysia Day holiday.

Source: PublicInvest Research - 17 Sept 2020

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