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Author: PublicInvest   |   Latest post: Fri, 27 Nov 2020, 10:57 AM

 

PublicInvest Research Daily - 15 October 2020

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Economy

  • US: Producer prices accelerate, but overall inflation trending softer. US producer prices increased more than expected in September, amid a surge in the cost of hotel and motel accommodation, leading to the first YoY gain since March. But the report from the Labor Department, which also showed a jump in the price of iron and steel scrap, did not change the view that overall inflation was cooling amid excess capacity at industries. It, however, confirmed that fears of deflation, which dominated when the Covid19 pandemic started in the US, were misplaced. Economists expect the Federal Reserve will keep interest rates near zero at least through next year. "The prices of some producer prices are climbing, but factories are not back to normal yet," said Chris Rupkey, chief economist at MUFG in New York. "Fed officials will remain cautious on the inflation outlook until producer price pressures heat up further." The producer price index for final demand rose 0.4% last month, after advancing 0.3% in August. A 0.4% increase in the cost of services accounted for nearly two-thirds of the gain in the PPI last month. Services increased 0.5% in August. (Reuters)
  • EU: Industrial production growth slows sharply in August. Eurozone industrial production grew at a slower pace in August despite the easing of coronavirus containment measures in many member countries, data published by Eurostat. Industrial production grew only 0.7% MoM, following July's 5 percent increase. Output was forecast to climb 0.8%. Among components, non-durable consumer goods and capital goods production dropped 1.6% each. Meanwhile, production of durable consumer goods advanced 6.8% and that of intermediate goods gained 3.1%. Energy production rose 2.3% from the last month. On a yearly basis, industrial output logged a decline of 7.2% after falling 7.1% in July. The rate of decline came in line with economists' expectations. In EU27, industrial output grew 1% MoM in August but declined 6.2% on a yearly basis. (RTT)
  • China: Bank lending exceeds expectations. China's bank lending grew more than expected in September as the economy started to recover from the coronavirus driven downturn, data from the PBoC showed. Banks extended CNY CNY1.9trn new loans in September compared to CNY1.28trn a month ago. Economists had forecast the lending to rise to CNY1.65trn. The broad monetary aggregate M2 advanced 10.9% annually versus a 10.4% rise seen in August. Total social financing, a broad measure of credit and liquidity in the economy, fell to CNY3.48trn from CNY3.58trn in August. Economists said net new lending is likely to slow in the coming months given that quantitative controls on bank lending are being tightened. But improving sentiment is boosting the appetite for bond and equity issuance among private firms and new lending should remain strong enough to keep growth in outstanding credit rising until the turn of the year, the economists added. (RTT)
  • Japan: Industrial production rises less than estimated. Japan's industrial production rose less-than estimated in August, final data from the Ministry of Economy, Trade and Industry said. Industrial production rose a seasonally adjusted 1.0% MoM in August. In the initial estimate, production increased 1.7%. Shipments grew 1.5% MoM in August versus a 2.1% rise in the initial estimate. Inventories declined 1.3% in August. According to the initial estimate, inventories fell 1.4%. The inventory ratio fell 2.0% versus a 2.5% decrease in the initial estimate. On a yearly basis, industrial production fell 13.8% in August. In the initial estimate, production fell 13.3%. Data also showed that the capacity utilization rose 2.9% monthly in August and fell 16.3% from a year ago. (RTT)
  • Singapore: Economy grows 7.9% in Q3. Singapore's GDP expanded a seasonally adjusted 7.9% QoQ in 3Q20, the Ministry of Trade and Industry said. That was roughly in line with forecasts following the 13.2% contraction in the three months prior. On a yearly basis, GDP was down 7.0% - missing expectations for a decline of 6.8% following the downwardly revised 13.3% drop in the previous three months (originally -12.6%). The manufacturing sector grew 2.0% YoYin 3Q20, a reversal from the 0.8% contraction in the previous quarter. Growth of the sector was supported by output expansions in the electronics and precision engineering clusters, which were in turn driven by robust global demand for semiconductors and semiconductor manufacturing equipment. On a seasonally-adjusted quarterly basis, the manufacturing sector expanded 3.9%, a turnaround from the 9.1% contraction in Q2.The construction sector shrank 44.7% YoY in 3Q, extending the 59.9% decline in Q2. Construction output in the 3Q remained weak on account of the slow resumption of construction activities due to the need for construction firms to implement safe management measures for a safe restart. (RTT)
  • Singapore: Holds monetary policy and say easy stance to stay. Singapore's central bank left its monetary policy unchanged and said its accommodative stance will remain appropriate for some time as the city-state's economy emerges from its coronavirus slump. The Monetary Authority of Singapore (MAS) manages policy through exchange rate settings, rather than interest rates, letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed band. "As core inflation is expected to stay low, MAS assesses that an accommodative policy stance will remain appropriate for some time," MAS said. (Reuters)
  • Thailand: Economic outlook highly uncertain, risks tilted to downside – Central Bank. Thailand's economic outlook remains highly uncertain with risks tilted to the downside and the central bank stands ready to use necessary tools to support an economy hammered by the coronavirus pandemic, central bank officials said. Southeast Asia's second-largest economy contracted the most in 22 years in the 2Q, with tourism hit hard. An economic recovery will take at least two years to return to pre-pandemic levels and will be "uneven", the Bank of Thailand (BOT) said. "We have to wait until the 2H22 to see economic activity back to pre-Covid levels, but there are still many downside risks," senior director Don Nakornthab said, adding reopening to foreign tourists would be key. The BOT expects 6.7m foreign tourists this year and 9m in 2021. Last year's 39.8m visitors accounted for 11.4% of GDP. Thailand's plans to receive visitors again have been delayed. The BOT expects the economy to contract by a record 7.8% this year before growing 3.6% next year. (Reuters)

Markets

  • Ho Hup: To buy 51% equity in Niaga Sari. Ho Hup Construction Company has entered into a share sale agreement with six persons to acquire 51% equity in Niaga Sari SB for RM12m. “The acquisition will allow Ho Hup Group to synergise the group’s effort to build up the construction division expertise and be more cost effective in competing for new businesses,” it said. The group said the synergetic benefits will enable the Ho Hup Group to bid for bigger contracts and handle bigger construction projects. (Bernama)
  • Press Metal: Impact of EU anti-dumping duties on China units is minimal. Press Metal Aluminium Holdings said the impact of the anti-dumping duties imposed by the European Commission (EC) on its China-based subsidiaries is minimal. “We understand that the market is concerned after learning that the EC has imposed a 38.2% duty each on Press Metal International Ltd and Press Metal International Technology Ltd’s products.“We have been monitoring this situation and would like to clarify that the current direct impact to our business is minimal,” the group said in a statement. Press Metal said for its financial year ended Dec 31, 2019, extrusion revenue to the EU contributed about 4.6% to the group’s revenue and about 2.8% to its profit after tax. (The Edge)
  • Key Alliance: Secures exclusive deal to distribute Wells Bio's Covid-19 diagnostic kits in Malaysia, Singapore. Key Alliance Group has secured an exclusive agreement with South Korean company Wells Bio Inc, through its global distributor ITDF Co Ltd, which will allow it to supply Wells Bio's reverse transcription polymerase chain reaction (RT PCR) test kits to Malaysia and Singapore. "This contract is renewable on a yearly basis automatically, providing exclusivity of the product in Malaysia and Singapore," Key Alliance said. (The Edge)
  • Handal: Bags job to provide offshore crane service. Handal Energy has won a contract to provide ad-hoc offshore crane operator services from Enquest Petroleum Production Malaysia Ltd. In a bourse filing, Handal said there is no specific value to the contract awarded to its wholly-owned subsidiary Handal Cranes SB. The tenure of the contract is for three years, starting Aug 3, with an option to extend for one year. (The Edge)
  • XOX: Buys 16.37% stake in Nexion Technologies for RM23m. XOX, through its wholly-owned subsidiary, XOX (Hong Kong) Limited has acquired 117,848,500 ordinary shares in Nexion Technologies Limited (Nexion), representing 16.37% of the company’s issued and paid-up share capital, for RM23m. In a filing with Bursa Malaysia, XOX said the acquisition was acquired today via delivery by transfer. The acquisition would benefit XOX in increasing its capability to secure the network, addressing cybersecurity challenges, and generate new revenue streams by reselling Nexion products to XOX’s customer. (Bernama)
  • Nexgram: Acquires 65% stake in plastic material manufacturer for RM19.5m. Nexgram Holdings has acquired 65% of Arita Holdings SB (AHSB), which makes plastic materials for the medical equipment market, for RM19.5m. Nexgram said the acquisition of AHSB shares would be funded via the issuance of redeemable convertible preference shares (RCPS) in NMEDI. (Bernama)

MARKET UPDATE

  • The FBM KLCI might open lower today after US stocks lost steam on Wednesday as investors weighed earnings news from Goldman Sachs and Bank of America, and as signs of a worsening global Covid-19 situation kept investors on edge. The Dow Jones Industrial Average lost 165 points, or 0.6%, while the S&P 500 fell 0.7% lower and the Nasdaq Composite is 0.8% lower at the close. Investors seemed glum over dimming stimulus hopes after Treasury Secretary Steven Mnuchin said Wednesday that it was unlikely a stimulus bill would pass before the election. European stocks also wavered, with the Stoxx Europe 600 index down 0.1%.

    Back home, the FBM KLCI slipped 0.13% or 1.95 points to close at 1,523.25 points. Overall market sentiment, however, was positive despite the benchmark index's fall, with 523 counters posting gains, 515 counters unchanged and 443 counters posting declines. Key indices across the region, meanwhile, were a mixed bag. While the Hong Kong Hang Seng finished 0.07% or 17.41 points higher at 24,667.09, its counterpart in Shanghai, the Shanghai Composite, fell 0.56% or 18.97 points to close at 3,340.78. Japan’s Nikkei 225 was up 0.11% or 24.95 points at 23,626.73, while the Kospi in South Korea was down 0.94% or 22.67 points at 2,380.48. Chinese President Xi Jinping gave a speech on Wednesday saying the country will keep doing business with the rest of the world.

Source: PublicInvest Research - 15 Oct 2020

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