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Author: PublicInvest   |   Latest post: Thu, 12 Dec 2019, 9:19 AM

 

PublicInvest Research Headlines - 31 May 2019

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Economy

US: Pending home sales unexpectedly drop, adding to market woes. Contract signings to purchase previously owned US homes unexpectedly fell in April, adding to signs the housing market is struggling to regain momentum. The index of pending home sales declined 1.5% from the prior month, missing all economist estimates, after a 3.9% increase in March, according to data Thursday from the National Association of Realtors in Washington. The measure was up 0.4% from a year earlier on an unadjusted basis, the first positive reading in a year, suggesting some stabilization. The monthly decline adds to signs of a soft housing market amid an economy that may be losing some steam. (Bloomberg)

US: GDP climbs slightly less than initially estimated in 1Q. US economic growth in the 1Q accelerated by slightly less than initially estimated, according to revised data released by the Commerce Department on Thursday. The Commerce Department said real GDP surged up by 3.1% in the 1Q, reflecting a slight downward from revision from the previously reported 3.2% jump. The downwardly revised increase in GDP, which matched economist estimates, still represented a notable acceleration from the 2.2% growth seen in the 4Q of 2018. The slightly slower than previously estimated GDP growth reflected downward revisions to non-residential fixed investment and private inventory investment and an upward revision to imports, which are a subtraction in the calculation of GDP. Meanwhile, the report showed upward revisions to exports and consumer spending, although the pace of consumer spending growth still slowed to 1.3% in the 1Q from 2.5% in the 4Q. (RTT)

US: Growth revised lower by less than expected to 3.1%. US economic growth last quarter was revised down by less than expected amid stronger consumption and exports than initially reported, suggesting the expansion was on relatively firm footing before President Donald Trump’s escalation of the trade war with China. Inflation adjusted gross domestic product increased at a 3.1% annualized rate in the Jan-March period, compared with an initially reported 3.2% and analyst estimates for a revision to 3%, Commerce Department data showed Thursday. Consumer spending, which accounts for the majority of the economy, grew 1.3%, topping projections for an unrevised 1.2% though still the slowest in a year. (Bloomberg)

EU: ECB seen offering generous loans to banks to boost feeble growth. The ECB will offer euro-area banks generous terms on its upcoming long-term loans when it meets next week but won’t do anything to soften the impact of negative rates, economists predict. Respondents in a Bloomberg survey said the interest rate on the two year loans will be below the ECB’s benchmark rate, currently zero, if banks hit lending targets to help the currency bloc overcome its economic weakness. A majority see the rate at -0.25% or lower. Respondents cited trade tensions as the biggest risk to the outlook, though said a cyclical downturn may also be underway. (Bloomberg)

UK: Brexit uncertainty taking a toll on business confidence in Europe. Uncertainty surrounding the UK leaving the European Union has significantly hurt the business morale in Europe since Nov, and a clear divide between the East and the West has emerged in terms of global business confidence, results of a survey showed on Thursday. The proportion of surveyed businesses in Europe who were confident of growth in the next six months fell to 50%, marking a fall of nearly a third from Nov, the 2019 Global Risk & Confidence Survey by the commercial insurance provider CNA Hardy showed. Weak growth, poor productivity, high unemployment, civil unrest due to immigration, tax inequality and Brexit delays are the other factors hurting confidence in Europe, the report said. (RTT)

UK: Poorly paid workers lowest since 1980. UK's proportion of low paid workers declined to its lowest level since 1980 and low pay could be eliminated altogether by the middle of the 2020s, the latest annual report from the Resolution Foundation revealed Thursday. According to the annual Low Pay Britain report, the number of low-paid workers across Britain fell by around 200,000 last year with the biggest declines seen in administrative and support services, and retail. The think tank said the introduction of the National Living Wage, or NLW, in April 2016 helped to reduce low pay, to 17.1% of the workforce last year from 20.7% in 2015. The NLW also raised the number of workers earning the legal minimum wages to a record 2m without causing any significant negative impacts on jobs. (RTT)

China: PBOC officials downplay concerns on financial risks and Yuan. Chinese central bank officials on Thursday downplayed emerging stress in the financial system following the state takeover of a regional bank, and said depreciation in the currency is under control. PBOC Governor Yi Gang said policy makers are “fully capable” of managing risks at small and medium-sized lenders, and the Chinese currency will “remain very stable” when asked if the yuan will sink below 7 per dollar. The currency is down about 2.5% in May, headed for its worst drop since July and the biggest loss in Asia. (Bloomberg)

Japan: Jobless rate falls to 2.4% in April. The unemployment rate in Japan came in at a seasonally adjusted 2.4% in April, the Ministry of Internal Affairs and Communications said on Friday. That was in line with expectations and down from 2.5% in March. The job-to-applicant ratio was 1.63, matching forecasts and unchanged from the previous month. The number of employed persons in April was 67.08 million, an increase of 370,000 or 0.6% on year. The number of unemployed persons in April was 1.76m, a decrease of 40,000 or 2.2% on year. (RTT)

Markets

ARB: Secures RM60.43m residential development IoT job. ARB said it has secured a RM60.43m contract to carry out Internet of Things (IoT) systems, engineering, procurement, commissioning and management works for a proposed residential development at Shah Alam, Selangor. The group said ithad accepted a LoA from Prinsiptek Corp to carry out the works. ARB estimated a financial commitment of approximately RM20m for the project, which will be funded via bank borrowings. (The Edge)

Kerjaya Prospek: Targets to secure RM1.2bn orderbook in FY19. Kerjaya Prospek Group is targeting to secure an orderbook of RM1.2bn worth of jobs for the FY19. Its executive chairman Datuk Tee Eng Ho explained that the outlook of the construction industry should be better than last year. Noting that he is "quite confident that this year will be a better year" in terms of prospects, Tee said he is expecting a double-digit growth in sales on the back of more job wins. So far, the group's contract wins as of end-April amounted to RM873m, said Tee. Currently, Tee said Kerjaya Prospek is tendering for some RM1.5bn jobs. (The Edge)

Hap Seng: Remains positive on plantation business. Hap Seng remains positive on its plantation business despite lower crude palm oil (CPO) price expectations of between RM2,000 and RM2,300 per tonne this year. Group MD Datuk Edward Lee Ming Foo said the company felt the impact of declining CPO prices since last year. "(But) the CPO future is still good, if you look at the world’s population growth and demand for (edible) oils, palm oil is one of the most competitive oils.”And it is the matter of riding through the down cycle,” he said. However, Lee said for every RM100 increase in the CPO price, the company would gain about RM15m in earnings. (StarBiz)

MRCB: Records pre-tax profit of RM8.4m in Q1, upbeat on LRT 3. MRCB posted pre-tax profit of RM8.4m in 1QFY19 but expects the pace of recognition from the third light rail transit (LRT3) project JV to pick up. MRCB's 50%-owned LRT3 project JV contributed profit after tax of only RM500,000 compared with RM9m a year ago, it said. However, as work on this project has restarted, the pace of profit recognition from the project will increase. As at March 2019, the engineering, construction and environment division’s external client order book stood at RM22.6bn. MRCB said in 1QFY19, the group revenue was RM234.10m due to newer property development projects still being at the early stage of construction, when revenue and profit recognition is minimal, as well as the completion of several large property projects in 2018. Pre-tax profit was further impacted by income from the LRT3 Project being deferred. (StarBiz)

Aeon: 1Q net profit rises 17% on higher retail revenue, margin. Aeon Co’s net profit grew 17% YoY to RM32.64m for 1QFY19, from RM27.94m, amid higher retail revenue and margin. Revenue for the quarter increased 8% to RM1.21bn from RM1.1bn, as contribution from its retail segment improved, buoyed by new stores which were opened in April 2018 and Jan 2019, as well as newly-renovated ones. The Group said its operating profit saw significant growth of 52% YoY to RM92.2m, mainly due to impact of the MFRS 16 accounting changes. Consequently, its pre-tax profit increased 12% to RM55.7m. However, after adjusting for the accounting changes and the inclusion of a share of operating loss from an associate, its pre-tax profit was still up 10% YoY, it said. (The Edge)

Market Update

The FBM KLCI might open with a positive bias today after US and European equities rebounded on Thursday but were still heading for their biggest monthly decline of the year as concerns have mounted over a global slowdown in the face of an intensifying US China dispute over trade. The S&P 500 finished 0.2% higher, bouncing from its lowest close since early March, but having swung from gains of as much as 0.6% to a decline of as much as 0.2%. Europe’s benchmark Stoxx 600 climbed 0.4% on the penultimate day of the month from its lowest close since March 25. London’s FTSE 100 was down 0.5%, easing off its lowest level since May 13. Conflicts over trade and technology between the US and China have shown no signs of abating while expectations of slowing growth in the world’s biggest economies have mounted. Brazil’s economy meanwhile contracted for the first time in more than two years. Volumes were thin on Thursday in many European markets as some countries, such as France and Germany, observed a public holiday for Ascension Day. German and French markets were open though, with the Dax and CAC40 indices up 0.5% apiece

Back home, the FBM KLCI index gained 12.83 points or 0.79% to 1,636.50 points on Thursday. Trading volume decreased to 2.47bn worth RM2.67bn. Market breadth was positive with 513 gainers as compared to 366 losers. Meanwhile, most major indices in the rgion retreated, with the Topix in Japan closing down 0.3% and the S&P/ASX 200 in Australia dipping 0.8%. Among China-focused bourses, the CSI 300 fell 0.6% while Hong Kong’s Hang Seng dropped 0.4%. The Kospi in South Korea was the sole bright spot, rising 0.8%.

Source: PublicInvest Research - 31 May 2019

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