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Author: PublicInvest   |   Latest post: Tue, 18 Jun 2019, 10:37 AM

 

PublicInvest Research Headlines - 17 May 2019

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Economy

US: Jobless claims drop more than expected to 212,000 . A report released by the Labor Department showed first-time claims for US unemployment benefits dropped more than expected in the week ended May 11th. The report said initial jobless claims slid to 212,000, a decrease of 16,000 from the previous week's unrevised level of 228,000. Economists had expected jobless claims to dip to 220,000. On the other hand, the Labor Department said the less volatile four-week moving average climbed to 225,000 from the previous week's unrevised average of 220,250. A reading on the number of people receiving ongoing unemployment assistance known as continuing claims fell by 28,000 to 1.660 million in the week ended May 4th. (RTT)

US: Low inflation cloaks consumer pain inflicted by Trump's tariffs . Low US inflation is obscuring how Americans are already paying up for President Donald Trump’s trade war with China, foreshadowing further pain as the administration boosts tariffs and readies additional levies. The higher costs are already flowing through the supply chain and on to the US consumer, whose purchases make up nearly three quarters of the economy. The price of items on store shelves in seven tariff-hit categories, including furniture, appliances and auto parts, jumped 1.6% through April since the first round of tariffs in July. But the overall index for all goods excluding food and energy has weakened, showing a lack of price pressure in other areas untouched by the trade war. (Bloomberg)

US: Philly Fed Index indicates significantly faster growth in May . Growth in Philadelphia-area manufacturing activity has seen a significant acceleration in the month of May, the Federal Reserve Bank of Philadelphia revealed in a report on Thursday. The Philly Fed said its diffusion index for current general activity surged up to 16.6 in May after falling to 8.5 in April, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to inch up to 9.0. The jump by the headline index was partly due to a significant increase by the shipments index, which spiked to 27.6 in May from 18.4 in April. The number of employees index also climbed to 18.2 in May from 14.7 in April, indicating a notable acceleration in the pace of job growth. (RTT)

US: Trump wary of plunging into Iran war ahead of 2020 Re election . President Donald Trump is wary of drawing the U.S. into a war with Iran, in part out of concern that an armed conflict with the Islamic Republic would imperil his chances at winning a second term, according to people familiar with the matter. There is division within the administration over the approach to Iran, some of the people said. At the same time, the president is cognizant that he was elected in part on promises to withdraw the U.S. from Middle East wars -- not start new ones, they said. Privately, Trump has said he doesn’t want war with Iran, one person familiar with the matter said. “I hope not,” Trump told reporters on Thursday when asked about the prospect of war. (Bloomberg)

UK: May to agree departure after latest Brexit deal bid . British Prime Minister Theresa May will set out a timetable for her departure in early June after the latest attempt to get her Brexit deal approved by parliament, the chairman of a powerful Conservative committee said. The government has said lawmakers will be able to debate and vote on the Withdrawal Agreement Bill, the legislation required to enact May’s Brexit deal, in the week starting June 3. (Reuters)

EU: Trade surplus declines in March. The euro area trade surplus declined in March on higher imports, figures from Eurostat showed. The trade surplus fell to a seasonally adjusted EUR17.9bn from EUR20.6bn in Feb. The surplus was also below the forecast of EUR19.4bn. Exports grew only 0.9% in March, while imports logged a bigger growth of 2.5%. On an unadjusted basis, the trade balance showed a surplus of EUR22.5bn compared to last year's EUR26.9bn surplus. YoY, exports advanced 3.1% and imports grew 6%. (RTT)

China: Trade worst case - growth slows, debt rises. China’s economic growth could tumble, debt surge and foreign companies flee in a deepening trade war, economists warn as a week of escalating tensions forces them to ponder worst-case scenarios. China’s economic outlook would be badly damaged should the US act upon its threat of further tariff increases. Raising the rate to 25% on USD200bn in Chinese exports would increase the impact to 0.9 ppt in the year ahead. Increasing tariffs on the rest of Chinese imports, as flagged by President Trump, would mean a drag of around 1.5 ppts, Chang Shu, Chief Asia Economist in Bloomberg said. (Bloomberg)

China: Promises response if US slaps tariffs on all remaining imports. China’s government promised to respond to a US proposal to tariff the rest of the goods it buys from China, raising the stakes for the dispute between the world’s two largest economies. “The US bullying and application of extreme pressure goes against multilateral trading rules,” Chinese Ministry of Commerce Spokesman Gao Feng said on Thursday. “China is strongly opposed to such practices. If the US persists, China will be forced to take necessary actions.” Since trade talks in Washington ended with no progress last week, the two sides have stepped up their rhetoric and threats, with the US announcing plans to tax nearly USD300bn of imports not already subject to punitive tariffs. (Bloomberg)

Indonesia: Keeps rate unchanged as expected . Indonesia's central bank left the key interest rate unchanged for a sixth consecutive month. The Board of Governors agreed to hold the BI 7-day reverse repo rate at 6 percent, Bank Indonesia said in a statement. The decision came in line with expectations. The bank left the Deposit Facility and Lending Facility rates at 5.25% and 6.75%, respectively. The decision was consistent with efforts to maintain the external stability of Indonesia's national economy, the bank said. (RTT)

Markets

Petronas Chemicals: Buys Da Vinci for RM760.6m to venture into specialty chemicals. Petronas Chemicals Group made its foray into specialty chemicals via inorganic growth with the purchase of Da Vinci Group B.V. It had signed a sale and purchase agreement to buy 100% of Da Vinci from its shareholders including, amongst others, funds managed by Bencis Capital Partner. The purchase was EUR163m (RM760.60m). (StarBiz)

Pestech: Plans to work as joint contractor with solar energy firm. Pestech International proposes to work together with solar energy investment company Atlantic Blue SB as joint contractors. This is in the event Pestech secures the bid for the Large Scale Solar Photovoltaic Plants for Peninsular Malaysia (LSS 3 Project). The group has entered into a memorandum of understanding with Atlantic Blue for collaboration. (The Edge)

Perdana Petroleum: Secures work orders from Petronas Carigali for AHTS vessels. Perdana Petroleum has received work orders from Petronas Carigali for the provision of three anchor handling tug & supply (AHTS) vessels. Perdana Nautika received two work order awards for the provision of 2 units of its AHTS vessel, to commence in the 2Q2019, for a duration of 6 months with the option to extend for another 6 months. (The Edge)

YFG: To be delisted on May 23. YFG is to be delisted on May 23, after Bursa Securities maintained its decision to reject the PN17 Company’s regularisation plan. Bursa, in a letter, informed the engineering and construction company that its listing committee had considered all facts and circumstances of the matter, including the company’s written and oral representations. (The Edge)

Sedania: Optimistic on profit growth this year. Sedania Innovator is optimistic on profit growth for the current financial year, despite having suffered a setback in 2018. The company's performance last year due to lower revenue and non-cash loss related to the impairment of trade and finance lease receivables. The profit drop is due to lower sales, particularly from the Internet of Things and green technology segment. (StarBiz)

Gas Malaysia: Sees sustained growth in FY19, to ramp up capex by 20%-30%. Gas Malaysia having reported an encouraging set of earnings in its 1Q, expects continued growth for the rest of its FY19. It also plans to ramp up its capital expenditure for the next three years by at least 20%, compared with the RM500m it spent collectively in the last three years. (The Edge)

Censof: Acquires 51% stake in enterprise software provider. Censof Holdings is acquiring a 51% stake in a Singapore-registered enterprise software application and services provider. The purchase of a majority stake in Netsense Business Solutions Pte Ltd for RM1.3m was to aid in expansion plans, especially in the cloud ERP business. Netsense Business Solutions is the fastest growing ERP software provider in the Singapore. (StarBiz)

Tropicana: 1Q revenue halved on lower sales. Lower sales dragged Tropicana Corp revenue for its 1QFY19 down by 53.7% to RM209.77m, from RM453m a year ago. Despite this sharp fall in revenue, net profit for 1QFY19 slipped just 0.73% to RM46.06m, versus RM46.4m recorded in the previous year’s corresponding quarter. (The Edge)

Market Update

US markets ended the day on a stronger note with banking shares driving gains as benchmark 10-year yields crept up above the 2.4% mark again on stronger-than-anticipated economic data. Housing starts for April beat expectations while weekly jobless claims fell beyond expectations. Strong earnings from Walmart and Cisco Systems also helped lift sentiment. On the day, the Dow Jones Industrial Average was up 0.8% (+214.66pts) to close at 25,862.68. The S&P 500 and Nasdaq Composite gained 0.9% and 1.0% respectively, meanwhile. Over in Europe, markets also ended higher, having recovered from an early rattle caused by President Trump’s fresh salvo against China (ie. the targeting of Huawei). On a separate note, the European Commission revealed that Barclays, Citigroup, J.P. Morgan, MUFG and Royal Bank of Scotland have been fined a total of €1.07bn (USD1.2bn) by European Union antitrust regulators for rigging the spot foreign exchange market for 11 currencies, though having little effect on market sentiment. Germany’s DAX was the best performer amongst the continent’s major benchmarks, gaining 1.7%. Both France’s CAC 40 and Spain’s IBEX 35 rose 1.4% while UK’s FTSE 100 climbed 0.8%. Asian markets were mixed earlier in the day, in reaction to Trump’s actions against Huawei which threatens to flare up trade tensions even further. There is now firmer belief that Beijing is unlikely to continue serious trade negotiations when it feels held hostage by the US. Even if negotiations do proceed in this hostile climate, Beijing is even more unlikely to make significant concessions to the US, especially on the technology issues at the heart of the trade dispute. The Shanghai Composite gained 0.6% nonetheless though the Hang Seng Index (+0.02%) was largely unchanged. Japan’s Nikkei 225 slipped 0.6% as Singapore’s Straits Times Index gained 0.4%. The FBM KLCI succumbed to late selling to end 0.8% lower.

Petronas Chemicals is buying Netherlands-incorporated Da Vinci Group BV €163mn (about RM760.8mn), to venture into the specialty chemicals business. Perdana Petroleum has received work orders from Petronas Carigali for the provision of three anchor handling tug & supply (AHTS) vessels, all of which will run for about 6 months with the option to extend for another 6. SP Setia is confident of achieving its RM5.65bn sales target for FY19 despite registering lower property sales in 1QFY19 of RM718mn, down 35% YoY.

Source: PublicInvest Research - 17 May 2019

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