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PublicInvest Research

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PublicInvest Research Headlines - 6 May 2021

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Economy

US: Services index unexpectedly pulls back off all-time in April. The Institute for Supply Management (ISM) released a report showing the pace of US service sector growth also unexpectedly slowed in April. The ISM said its services PMI edged down to 62.7 in April after jumping to an all-time high of 63.7 in March. Economists had expected the index to inch up to 64.3. "There was slowing growth in the services sector in April; however, the rate of expansion is still strong," said ISM Services Business Survey Committee. "Respondents' comments indicate that pent-up demand is continuing." "Production-capacity constraints, material shortages, weather and challenges in logistics and human resources continue to affect deliveries, which has resulted in a reduction of inventories," it added. (RTT)

US: Private sector job growth accelerates but misses estimates in April. Private sector job growth in the US accelerated in April but still came in below economist estimates, according to a report released by ADP. ADP said private sector employment spiked by 742,000 jobs in April after surging by an upwardly revised 565,000 jobs in March. However, economists had expected private sector employment to soar by 800,000 jobs compared to the jump of 517,000 jobs originally reported for the previous month. "The labor market continues an upward trend of acceleration and growth, posting the strongest reading since September 2020," said ADP. The report showed notable job growth in the goods-producing sector, which added 106,000 jobs amid increases in both manufacturing and construction jobs. (RTT)

EU: Private sector growth accelerates in April. The euro area private sector economy expanded further in April driven by gains in manufacturing and service sectors, final data from IHS Markit showed. The composite output index rose to 53.8 in April from 53.2 in the previous month. The flash reading was 53.7. Manufacturing output advanced at a rate little-changed from March's survey record. At the same time, services output returned to growth following seven months of continuous contraction. The final services PMI came in at 50.5, up from 49.6 a month ago and the flash score of 50.3. "Barring any further wave of infections from new variants, Covid restrictions should ease further in the coming months, driving a strengthening of service sector business activity which should gain momentum as we go through the summer," IHS Markit said. (RTT)

EU: Business growth accelerated in April as services expanded – PMI. Euro zone business activity accelerated last month as the bloc's dominant services industry shrugged off renewed lockdowns and returned to growth, according to a survey. Europe is enduring a third wave of coronavirus infections, forcing some governments to renew lockdown measures to contain its spread, but factories have largely remained open and the services industry has adapted. So IHS Markit's final composite PMI, seen as a good gauge of economic health, climbed to 53.8 last month from March's 53.2. That was just ahead of the preliminary 53.7 reading. (Reuters)

Singapore: Retail sales rise in March. Singapore retail sales increased in March, data from the Department of Statistics showed. Retail sales rose 6.2% YoY in March, after a 5.3% growth in February. Motor vehicle sales accelerated 15.2% annually in March, after a 9.1% drop in the previous month. Excluding motor vehicles, retail sales rose 4.4% in March, after a 7.8% gain in the preceding month. Sales of watches and jewellery surged 60.2% yearly in March and those of wearing apparel and footwear surged 35.6% . Sales recreation goods increased 28.3%. Sales of petrol service stations, and computer and telecommunications equipment grew by 18.6% and 19.9%, respectively. (RTT)

Indonesia: Recession eases as government boosts spending, exports recover. Indonesia's economy shrank for the fourth straight quarter in January-March but at a much more modest pace as the government boosted spending and higher commodity prices helped exports, statistics bureau data showed. Its economy contracted 0.74% YoY in January-March, compared with a 2.19% contraction in October-December. "This shows signs of economic recovery will become even more apparent. And of course, we hope that economic recovery in 2021 can come true," Suhariyanto, head of the statistics bureau said. On a QoQ, non-seasonally adjusted basis, the economy contracted 0.96%, compared with a drop of 0.42% in October December and forecasts of a 1.04% decline. (Reuters)

Thailand: Central bank keeps policy rate at record low, warns of Covid-19 risks. Thailand’s central bank left its key interest rate unchanged at a record low of 0.50%, preserving its limited ammunition to support its economy struggling with a third wave of coronavirus infections. The latest outbreak has slowed domestic activity for the tourism-reliant economy at a time when it was preparing to reopen to travellers, but increased exports, another key growth driver, have lent some support. The Bank of Thailand’s (BOT) monetary policy committee voted unanimously to keep the one-day repurchase rate unchanged for the eighth meeting in a row. “The Thai economy would expand at a much lower rate due to the third wave of the Covid-19 outbreak,” the central bank said. (Reuters)

Markets

UEM Sunrise (Neutral, TP: RM0.55): IRB slaps two units with RM82.2m tax bill. Two wholly-owned subsidiaries of UEM Sunrise have been slapped with additional taxes and penalties amounting to RM82.18m by the Director General of Inland Revenue Board (IRB). (The Edge)

Comments: We understand that the notice issued to UEM Sunrise was for the years of assessment from 2013 to 2018 in relation to the removal of Bumiputera quota and low cost requirements for selected developments in Iskandar Puteri totalling RM8.5m while the other notice issued raised for the amount of RM73.7m was for the reversal of tax losses utilisation for the years of assessment from 2006 to 2017. The Group is going to appeal and contest the basis of the assessments after taking into account the advice from both the company’s tax consultant and solicitors and hence, will be seeking judicial reviews and of the view that there will not be any significant financial and operational impact.

Kerjaya Prospek: Bags RM28.4m contract in Penang. Kerjaya Prospek has bagged a RM28.4m contract for construction of service apartments in Penang from Persada Mentari SB, a unit of Eastern & Oriental (E&O). The contract is expected to commence on May 18, 2021 and will take 12 months to complete from the commencement date. (BTimes)

DNeX: Seeks to raise RM641.96m via private placement. Dagang Nexchange (DNeX) expects to raise up to RM641.96m through its proposed issuance of new placement shares representing 30% of its existing number of issued shares. The proceeds would be used for acquisitions and/or other business expansion or investment. (The Edge)

AEON, Malakoff: In solar power pact. AEON Co. (M) has inked a solar power purchase agreement (SPPA) with Malakoff Corp for the development and use of solar energy system at Aeon Taman Maluri Shopping Centre. This was a significant breakthrough for Aeon. (BTimes)

Supermax: Delivers 3Q net profit of RM1.01bn, declares special dividend of 13sen. Supermax Corp net profit for its 3Q ended March 2021 jumped more than 14 times to RM1.01bn from RM71.06m in the same quarter of the previous year, mainly due to the surge in demand for gloves amid the Covid-19 pandemic. (SunBiz)

Gas Malaysia: 1Q net profit up 16.2% on higher volume of gas sold. Gas Malaysia net profit rose 16.2% to RM55.63m in the 1QFY21, from RM47.86m a year ago, on higher volume of natural gas sold and higher contribution from joint ventures. EPS increased to 4.33sen, from 3.73sen in 1QFY20. (The Edge)

Dufu Tech: 1Q net profit up 38% amid rise in volume loading by HDD-related customers. Dufu Technology Corp 1QFY21 net profit grew 38% to RM19.52m as revenue rose on the back of an increase in volume loading by customers related to hard drives (HDD) components. (The Edge)

Prestar: 1Q net profit up on strong demand for steel. Prestar Resources net profit rose to RM18.33m in its 1Q ended March 31 attributed to strong demand for its steel products from various customers in different segments of the industry. (SunBiz)

Market Update

The FBM KLCI might open flat today as Wall Street gave away its early gains on Wednesday after the White House triggered a late sell-off in some of the largest pharmaceutical companies by announcing it would support a suspension of intellectual property rights for Covid-19 vaccines. The S&P 500 closed just 0.1% higher for the day, having traded up by as much as 0.6% earlier in the session. The Nasdaq Composite gave up its gains after it had battled back from a near 2% loss on Tuesday, finishing the day down 0.4%. The sell-off was led by some of the leading manufacturers of Covid jabs, which fell sharply after Katherine Tai, the US trade representative, said she would back plans at the World Trade Organization for a temporary waiver of IP protections for the development of vaccines around the world. Moderna closed more than 6% lower, while BioNTech’s shares trading in New York swung almost 18 percentage points, going from a 10% gain early in the day to an intraday low of 9% on Tuesday’s close. Yellen, a former Fed chair herself, suggested those might need to rise to cool the rapidly recovering economy. However, Yellen later clarified her remarks, saying she did not foresee “an inflationary problem”. Ahead of the US government’s comprehensive non-farm payrolls numbers due on Friday, ADP data released on Wednesday showed US private sector employers added 742,000 new jobs in April, below the 800,000 forecast by economists. In Europe, the region-wide Stoxx 600 benchmark closed up 1.8%, with the continent’s tech subsector climbing 2.7%, having fallen 3.8% a day earlier, its worst performance since October.

Back home, the FBM KLCI extended losses for the fourth consecutive session, as most of the key index's components succumbed to selling pressure amid news of the reimplementation of the Movement Control Order or MCO 3.0 in parts of Selangor. And just as market closed, the movement restriction was expanded to include Johor Bahru as well as Kuala Lumpur, starting Friday, after rumours went around earlier that the capital city would not be spared given rising new Covid-19 cases. At 5pm, the local benchmark index closed 12.58 points or 0.79% lower at 1,575.67. Seoul's Kospi rose 0.64%, while Hong Kong’s Hang Seng fell 0.49%.

Source: PublicInvest Research - 6 May 2021

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