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Author: PublicInvest   |   Latest post: Mon, 17 Jun 2019, 12:08 PM

 

PublicInvest Research Headlines - 27 May 2019

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Economy

US: Durable goods orders show notable pullback in April. After reporting a significant rebound in new orders for US durable goods in the previous month, the Commerce Department released a report on Friday showing durable goods orders pulled back in the month of April. The report said durable goods orders tumbled by 2.1% in April after jumping by a downwardly revised 1.7% in March. Economists had expected orders to slump by 2.0% compared to the 2.6% spike that had been reported for the previous month. Orders for transportation equipment led the pullback, plunging by 5.9% in April after surging up by 5.9% in March. The report said orders for non-defense aircraft and parts plummeted by 25.1% in April after soaring by 7.8% in the previous month. Excluding the steep drop in orders for transportation equipment, durable goods orders were unchanged in April following a revised 0.5% drop in March. Economists had expected a 0.2% uptick. (RTT)

EU: ECB's Weidmann sees no need for policy action. ECB policymaker and presidential hopeful Jens Weidmann said on Sunday he saw no need for the ECB to change its policy at present, despite a weaker euro zone economy. The ECB’s Governing Council is due to meet on June 5-6 and decide on the terms of its third round of cheap loans to banks - one of several measures it has deployed to stimulate lending in the bloc. “This isn’t a situation where prices are falling and we have to react now,” the head of Germany’s central bank said. Weidmann added decreasing spare capacity in the economy, namely the extent to which labor, capital and other resources are used below their maximum level, would eventually push up prices. (Reuters)

UK: Retail sales fall at fastest pace since late 2017 - CBI. UK retail sales declined at the fastest pace since Oct 2017, quarterly Distributive Trades Survey from the Confederation of British Industry showed Friday. A balance of -27% reported a decline in sales volume in May. However, a 7% forecast a pick-up in volume. The survey showed that 42 were retailers, also showed that the volume of sales for the time of year were at their poorest since March 2009. The volume of orders placed on suppliers slumped in the year to May, with the balance at - 41%. "This month's survey paints a dismal picture of business conditions for retailers, who face a grim combination of tough trading conditions, Brexit uncertainty and a burdensome outdated business rates regime, which have collectively pushed investment intentions to a record low," Anna Leach, CBI deputy chief economist, said. (RTT)

UK: May quitting throws BOE governor race into unknown. Theresa May’s resignation threatens to turn the race to lead the BOE on its head. A new prime minister, and the new chancellor of the exchequer that might accompany them, could have very different priorities from May and Philip Hammond, potentially opening the door for a different slate of candidates for the top BOE job. The finance chief is the one formally responsible for making the appointment. The prime minister’s decision also ups the uncertainty faced by the UK, which Hammond has previously acknowledged could deter candidates. Potential governors don’t have long to make up their mind. The closing date for applying for the BOE role is June 5, two days before May will stand down, with a decision due in Oct. A new prime minister is likely to be in place by the end of July. (Bloomberg)

China: US demand on its state-owned enterprises is 'invasion' on economic sovereignty. The US has called on China to curb the development of its state-owned enterprises (SOEs), a demand that China sees as an “invasion” on its economic sovereignty, Chinese state news agency Xinhua said on Saturday. Trade tensions between Washington and Beijing escalated sharply earlier this month after the Trump administration accused China of having “reneged” on its previous promises to make structural changes to its economic practices. As trade talks stalled, both sides have appeared to be digging in. China has denied it had walked back on its promises but reiterated it would not make concessions to “matters of principles” to defend its core interests, although no full details were given. (Reuters)

China: Accuses US officials of misleading public on trade war. China on Friday accused US officials of lying to the public about their trade war, as rising tensions between the world's two largest economies kept financial markets in a state of unease. Talks to end the trade dispute collapsed earlier this month, with the two sides in a stalemate over US demands that China change its policies to address a number of key US grievances, including theft of intellectual property and subsidies for state enterprises. Washington has slapped higher tariffs on USD200bn in Chinese goods, prompting Beijing to retaliate, and effectively banned US firms from doing business with Huawei Technologies Co Ltd, the world's largest telecom network gear maker. (Reuters)

Japan: All industry index falls further in March. Japan's all industry activity fell further in March, figures from the Ministry of Economy, Trade and Industry showed on Friday. The all industry activity index declined 0.4% MoM in March, following a 0.2% drop in Feb. Economists had forecast a monthly fall of 0.2%. Among components, construction industry activity increased 0.3%, slower than 1.5% rise in Feb. At the same time, industrial production declined 0.6%, reversing a 0.7% gain in Feb. Tertiary industry activity fell 0.4%, following a 0.6% decline in Feb. On a yearly basis, all industry activity dropped 0.4% in March, after a 0.3% increase in the previous month. (RTT)

Malaysia: Inflation steady in April. Malaysia's consumer price inflation remained steady in April, figures from the Department of Statistics showed on Friday. The consumer price index rose 0.2% YoY in April, the same as seen in March. Economists had expected the inflation to rise 0.4%. Among main groups, housing, water, electricity, gas and other fuels prices grew 2.0%. Prices of alcoholic beverages and tobacco, and education rose by 1.2% each and those of food and non alcoholic beverages, and restaurants and hotels gain 1.1% and 0.8%, respectively, in April. Compared to the previous month, consumer prices remained flat in April. The core CPI rose 0.5% YoY in April. (RTT)

Markets

Dayang (Neutral, TP: RM1.25): Bags four-year contract from Roc Oil Sarawak. Dayang Enterprise Holdings said it has won a contract to provide procurement, construction, installation, hook-up and commissioning services for Roc Oil (Sarawak) SB. The services will be provided under Roc’s Siprod (Simultaneous Production and Drilling) and Infill Drilling Campaign from 2019 to 2023. The value of the contract is based on work orders issued by Roc Oil throughout the four-year contract duration, with an option to extend for another one year, the company said. Dayang said the contract will also include other work and services generally related to the scope of works in the contract, at a fixed schedule of rates. (The Edge)

Taliworks: Concludes talks with Air Selangor. Taliworks has completed its negotiations with Pengurusan Air Selangor SB (Air Selangor) on the operations and maintenance of the Sungai Selangor Water Treatment Plant Works Phase 1 (SSP1). Taliworks said towards this end various agreements were executed by Sungai Harmoni and the relevant parties. These include the termination and settlement agreement between Sungai Harmoni, Air Selangor and Syarikat Pengeluar Air Sungai Selangor SB (Splash) for the settlement of Sungai Harmoni’s outstanding receivables arising from its existing operations and maintenance of SSP1; bulk water supply agreement (BWSA) for the continued operations and maintenance of SSP1 and the supply of treated water between Sungai Harmoni and Air Selangor with the agreement period extended for another seven years. (StarBiz)

D’nonce: Plans rights issue to repay borrowings. D'nonce announced it aims to raise gross proceeds of at least RM8m via a renounceable rights issue to repay bank borrowings. This involves the issuance of up to 315.11m rights shares and 315.11m irredeemable convertible preference shares (ICPS), on the basis of one rights share and one ICPS for every existing ordinary share in D'nonce. The rights issue comes with free detachable warrants on the basis of one free warrant-B for every two rights shares and two ICPS subscribed. The final issue price is yet to be fixed, but the minimum issue price is five sen per rights share. (The Edge)

PetChem: Lower revenue pulls down PetChem Q1 profit. PetChem’s net profit fell by 24.7% in the 1Q2019 due to lower revenue and higher operating expenditure. Its net profit fell to RM802m from RM1.065bn. Its revenue declined by 16.5% to RM4.13bn from RM4.95bil largely due to lower product prices and sales volumes, partially offset by the weakening of the MYR against the USD. EPS were lower at 10sen compared with 13sen a year ago. It recorded lower plant utilisation of 95% as compared to 100% a year ago, mainly due to higher level of maintenance and statutory turnaround activities at its methanol and aromatics plants respectively. Sales volumes were lower in line with lower production. (StarBiz)

Plantation: Kazakhstan keen to increase import of Malaysia's palm oil. Kazakhstan is keen to increase the import volume of Malaysia's palm oil into the Republic, said Counsellor of Kazakhstan Embassy in Kuala Lumpur, Dr Serik Amirov. He said the current amount of palm oil that is being shipped into the country, as well as other countries in the Central Asian region, is insufficient. "We are considering the increase of import of Malaysia's palm oil for two reasons; namely, Kazakhstan is considered as the hub for Malaysian products, including palm oil, in Central Asia and also the Eurasian Economic Union (EEU). "And also, the volume that we are importing now is not enough for the market. We see the potential for it (palm oil) to be distributed through Kazakhstan to other countries in the region,” he said. (The Edge)

Market Update

The FBM KLCI might open with a positive bias today after Wall Street closed higher Friday ahead of the long weekend as trade war fears receded somewhat following reports President Donald Trump may ease restrictions against Huawei Technologies Inc. as part of a bigger trade deal with China. The Dow Jones Industrial Average, however, fell for a fifth week straight, logging the longest weekly losing streak since June. The Dow gained 95.22 points, or 0.4%, to 25,585.69, while the S&P 500 index climbed 3.82 points, or 0.1%, to 2,826.06. The Nasdaq Composite Index advanced 8.72 points, or 0.1%, to 7,637.01. For the week, all indices ended lower with the Dow off 0.7%, the S&P 500 down 1.2% and the Nasdaq 2.3% lower. European markets also finished higher on Friday with shares in France leading the region. The CAC 40 was up 0.67% while London's FTSE 100 added 0.65% and Germany's DAX rose 0.49%.

Back home, the FBM KLCI index lost 3.55 points or 0.22% to 1,598.32 points on Friday. Trading volume decreased to 1.89bn worth RM1.55bn. Market breadth was negative with 342 gainers as compared to 449 losers. Stock markets in region ended mostly higher, with the Shanghai Composite added 0.02% while Hong Kong’s Hang Seng rose 0.3%.

Source: PublicInvest Research - 27 May 2019

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