PublicInvest Research

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PublicInvest Research Headlines - 6 Oct 2020

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US: Service sector activity rises above pre-pandemic level in Sept - ISM survey. US services industry activity picked up in Sept, pulling above a level that prevailed before the COVID-19 pandemic struck the nation, amid increases in new orders and employment. The Institute for Supply Management (ISM) said its non manufacturing activity index rose to a reading of 57.8 last month from 56.9 in Aug. That put the index just above its 57.3 level in Feb. Economists had forecast the index slipping to 56.0 in Sept. The improvement in services industry activity fits in with expectations for a record rebound in economic growth in the 3Q after a historic plunge in gross domestic product in the April-June period. The economy got a boost over the summer from fiscal stimulus. (Reuters)

US: Fed’s Evans says he’d welcome 2.5% inflation rate in US. Federal Reserve Bank of Chicago President Charles Evans said he would welcome 2.5% inflation in the US for a time in order to average out the current period in which price pressures are running below the central bank’s 2% target. “I think we have to cross over, beyond 2%, with some momentum,” Evans said Monday. “I would be quite pleased if we could get core inflation up to 2.5% for a time.” The Chicago Fed president’s comments followed earlier remarks Monday at a virtual conference in which he predicted it would be several years before the inflation rate, which by the Fed’s preferred measure was 1.4% in August, rises back to the target, and foreshadowed a debate about when and how fast to raise interest rates once the target is achieved. (Bloomberg)

EU: Eurozone Sentix investor confidence falls marginally. Eurozone investor confidence dropped marginally in Oct after five consecutive rises, data from Sentix showed. The investor confidence index fell to -8.3 in Oct from -8.0 in Sept. However, the score was better than economists' forecast of -9.5. Current conditions continued to improve to reach its highest level since March 2020. The current situation index rose to -32.0 from -33.0 a month ago. Meanwhile, the expectations indicator fell to 18.8 in Oct from 20.8 in the previous month. The data does not reveal any significant risk element in the short term, as the expectations index remained at a higher level despite a decline of 2 points. The outlook for Germany was somewhat better than for the euro area as a whole. In Germany, the investor confidence index advanced to an eight-month high of 1.4 in Oct from -0.1 in Sept. (RTT)

EU: Eurozone economic recovery floundered in Sept as services struggled - PMI. The eurozone’s economic recovery faltered in Sept as the re-imposition of some restrictions on activity to halt resurgence in the coronavirus sent the bloc’s dominant service sector into reverse, a survey showed. To support the economy, the European Central Bank plans to make EUR1.35trn of pandemic-related additional asset purchases and the European Union has announced a EUR750bn recovery fund due to kick in next year. But that didn’t stop IHS Markit’s final composite Purchasing Managers’ Index, falling to 50.4 in Sept from Aug’s 51.9, close to the 50 mark separating growth from contraction. It was dragged down by the PMI for services industries, which accounts for around two thirds of GDP. (Reuters)

EU: German economic recovery remains on course despite slacking services - PMI. Germany’s service sector barely grew in Sept, but strong manufacturing helped the private sector in Europe’s largest economy to remain on track for a solid recovery in the third quarter, a survey showed. IHS Markit’s final services Purchasing Managers’ Index (PMI) fell to 50.6 from 52.5 in the previous month. The reading, which came in higher than a flash reading of 49.1, marked the third month in a row that the services index was above the 50 mark dividing growth from contraction. The final composite PMI covering both the services and manufacturing sectors rose to 54.7 from 54.4 the previous month. That was higher than the flash figure of 53.7. (Reuters)

UK: Service sector continues to expand on orders. The UK service sector continued to log strong growth in September underpinned by another upturn in new work amid reduced pandemic restrictions, final data from IHS Markit showed. The IHS Markit/Chartered Institute of Procurement & Supply services Purchasing Managers' Index came in at 56.1 versus 58.8 a month ago. Although the lowest reading since June, this was above the flash score of 55.1. The survey suggested that the withdrawal of the government's Eat Out to Help Out scheme, plus an introduction of some tighter restrictions on activity in September softened the growth in new business. Sentiment among service providers remained comfortably inside the positive territory but eased to a four-month low in September. (RTT)

Singapore: Retail sales decline slows in Aug. Singapore retail sales declined at a softer rate in Aug, data from the Department of Statistics showed. Retail sales declined 5.7% YoY in Aug, following an 8.5% fall in July. Motor vehicle sales grew 12.1% annually in Aug, after a 12.8% fall in the previous month. Excluding motor vehicles, retail sales fell 8.4% in Aug, following a 7.7% decrease in the preceding month. Sales of food and alcohol declined 42.6% yearly in Aug and department stores decreased 35.3%. In Aug, sales of cosmetics, toiletries and medical goods, and wearing apparels and footwear fell by 29.0% and 28.6%, respectively. Meanwhile, sales of furniture and household equipment gained 18.7% and those of supermarkets and hypermarkets grew 21.9%. On a monthly basis, retail sales rose 1.4% in Aug, after a 27.2% increase in the prior month. (RTT)

South Korea: Inflation jumps 1.0% on year in Sept. Consumer prices in South Korea were up 1.0% on year in Sept, Statistics Korea said, exceeding expectations for a gain of 0.7%, which would have been unchanged from Aug. On a monthly basis, inflation rose 0.7% - again beating forecasts for 0.4% and up from 0.6% in the previous month. Core CPI, which excludes volatile food prices, rose 0.1% on month and 0.6% on year after rising 0.2% on month and 0.4% on year in Aug. (RTT)


AirAsia (Underperform, TP: RM0.50): AirAsia Japan ceases operations . AirAsia Japan (AAJ) has decided to cease operations effective immediately, as the strain caused by the Covid-19 pandemic proved too difficult to overcome. The cessation only affects the domestic and international flights operated by AAJ in Japan with letter code DJ, and does not affect other flights into and out of Japan operated by other airlines within the AirAsia Group. (SunBiz)

Guan Chong: To raise up to RM800m via sukuk for overseas expansion. Guan Chong plans to raise up to RM800m from the issuance of Islamic medium-term notes (sukuk wakalah) to support the group's ongoing expansion of its international operations. The programme will have a tenure of 20 years from the date of the first issuance. Proceeds will be used to fund its general working capital and capital expenditure, as well as to refinance its borrowings. (The Edge)

7-Eleven, Caring Pharmacy: Goes on acquisition trail in northern region. 7-Eleven Malaysia Holdings’ 75%-owned subsidiary Caring Pharmacy Retail Management SB proposed to acquire stakes in pharmacy companies and business assets in the northern region for RM48.8m cash. Upon completion of the proposed acquisitions, which is expected to be completed by the end of 2020, the Caring group pharmacy outlets will increase from 139 to 165, by an additional of 26 pharmacy outlets operating under three brand names namely Caring Pharmacy, Georgetown Pharmacy and Wellings Pharmacy. (SunBiz)

Westports: Gets RM120m tax bill from IRB. Westports Holdings said its subsidiary has been slapped with a RM120.6m bill by the Inland Revenue Board (IRB) for additional tax liabilities, inclusive of penalties, for years of assessment from 2013 to 2018. The additional tax assessment is in relation to the annual lease payment made by wholly-owned subsidiary Westports Malaysia SB (WMSB) to the Port Klang Authority (PKA) totalling RM299.9m for the six years. (The Edge)

MSCM: Forms JV to pursue distributorship opportunities for medicine, vaccines from China. MSCM Holdings, to be known as Hong Seng Consolidated, has teamed up with a pharmaceutical firm, RP Integrated, to pursue distributorship and opportunities relating to medical drugs and vaccines from China based Shanghai Fosun Pharmaceutical Group Co Ltd (Fosun). (The Edge)

LFE: To raise up to RM39m via rights issue to fund acquisition . LFE Corp is planning to raise up to RM39.2m, equivalent to 87% of its market capitalisation of RM44.9m, through a rights issue, mainly to fund its 51% stake acquisition in Cosmo Property Management SB (CPMSB) and for working capital. The issue price for the right shares has been fixed at eight sen apiece. (The Edge)

Hil Industries: Gets approval to manufacture 3-ply surgical face masks. Hil Industries is venturing into the face masks and medical devices industry in a bid to capitalise on the Covid-19 pandemic. Hil said its wholly-owned unit the Hil Medic SB has received approval from the Medical Device Authority (MDA), which is part of the Ministry of Health, to manufacture three-ply surgical grade face mask and face shields. (The Edge)

Market Update

The FBM KLCI might open with a positive bias today after US stocks close higher as Trump prepares White House return and stimulus deal looks likely to happen. U.S. stock benchmarks closed sharply higher Monday as President Donald Trump said he would depart Walter Reed Medical Center Monday evening after receiving treatment for COVID-19, and some analysts suggested that the odds of another stimulus package had increased. The Dow Jones Industrial Average rose 1.7%, 465 points, to close near 28,148, while the S&P 500 was up 1.8%, 60 points, settling near 3,409. The Nasdaq jumped 257 points, 2.3%, to touch 11,332 at the close. Trump's prognosis helps calm markets nervous over the idea of a temporary transfer of power, but it also suggests that some of the experimental treatments he received may be beneficial in fighting the coronavirus. Still, as election odds turn in favor of former Vice President Joe Biden, many analysts believe it offers Trump a bigger incentive to deal with Congressional Democrats, who want another round of fiscal aid. European markets also finished broadly higher today with shares in Germany leading the region. The DAX was up 1.10% while France's CAC 40 added 0.97% and London's FTSE 100 rose 0.69%.

Back home, the FBM KLCI closed up 12.13 points or 0.81% at 1,512.43 after Asian equity indices ended higher on easing concerns about US President Donald Trump’s health after he tested positive for Covid-19 although news on the rising number of global infections continue to dictate sentiment. In the region, the Hang Seng gained 1.32% while the Nikkei 225 rose 1.23%

Source: PublicInvest Research - 6 Oct 2020

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