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Author: PublicInvest   |   Latest post: Thu, 18 Jul 2019, 9:35 AM

 

PublicInvest Research Headlines - 20 Jun 2019

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Economy

US: Fed sees case building for interest rate cuts this year. The US Federal Reserve on Wednesday said it was ready to battle growing global and domestic economic risks with interest rate cuts beginning as early as next month, as it took stock of rising trade tensions and growing concerns about weak inflation. Even as the US central bank left its benchmark interest rate unchanged for now, the shift in sentiment since its last policy meeting was marked. The bulk of Fed policymakers slashed their rate outlook for the rest of the year by roughly half a percentage point, and Fed Chairman Jerome Powell said others agree the case for lower rates is building; the Fed dropped its pledge to be “patient” before rate moves in a sign it was poised to act; and Powell stopped referring to weak inflation as “transient.” (Reuters)

US, China: Senior trade negotiators to confer before Trump-Xi G20 meeting. Aiming to jumpstart dormant talks, the top US trade negotiator said on Wednesday he will confer with his Chinese counterpart before next week’s meeting between President Donald Trump and Chinese President Xi Jinping in Japan as the two countries take another shot at resolving their damaging trade dispute. Trade talks between the world’s two largest economies broke down more than six weeks ago after US officials accused China of backing away from commitments, prolonging a costly trade dispute that has harmed the global economy and disrupted supply chains. US Trade Representative Robert Lighthizer said he will speak by telephone with Liu He, China’s vice premier and chief negotiator in the trade talks, “in the next day and a half” and then expects to meet with Liu in Osaka, site of the June 28-19 G20 summit, along with US Treasury Secretary Steven Mnuchin before Trump’s meeting there with Xi. (Reuters)

EU: Eurozone construction output falls most in 3 months. Eurozone construction output fell at the fastest pace in three months in April, amid a fall in civil engineering and building activity, data from the statistical office Eurostat showed on Wednesday. Construction output declined a seasonally adjusted 0.8% MoM in April, following a 0.4% fall in March. The latest decline was the weakest since Jan, when the output fell 1.1%. Civil engineering output dropped to 2.5% and building construction declined 0.5%. On a annual basis, construction production slowed a calendar adjusted growth of 3.9% in April, after a 5.8% increase in the previous month. In the EU28, construction output fell 0.6% on month in April, following a 0.7% decline in the prior month. On a YoY basis, output rose 4.5% in April, slower than 6.2% increase in the preceding month. (RTT)

EU: ECB's de Guindos says bank will act if inflation expectations de-anchor. ECB Vice President Luis de Guindos said that the central bank will react with a combination of measures if it perceives that inflation is set to deviate from its target, and further asset purchases remain a possibility. de Guindos said ECB has an ample range of instruments at its disposal and QE, is "one of them". "It could a combination of actions that could send, you know, the signal, not just the signal but the determination of the Governing Council that we are open to react," de Guindos said. "For us price stability is key, is our mandate and if we see that inflation expectations start to de-anchor, we will act." (RTT)

UK: BOE to plow lone furrow with rate hike message. The BOE looks set to plow on alone among major central banks on Thursday by sticking with its message that it plans to raise interest rates, just as trade wars and a global slowdown have forced others to turn more cautious. The BOE is expected to repeat its intention of raising borrowing costs, Brexit permitting, in a week in which ECB President Mario Draghi broached another round of stimulus and the US Federal Reserve signaled it could cut interest rates later this year. The BOE is due to announce its June policy decision at 1100 GMT. (Reuters)

UK: Manufacturing output growth weakest since 2016 - CBI. The UK manufacturing output eased to halt in the three months to June on sharp contraction in automobile production, the Industrial Trends survey data from the Confederation of British Industry showed Wednesday. The manufacturing output balance fell to +2% in June, which was the weakest outturn since April 2016. The balance was +14% in three months to May. Respondents forecast the output balance to rise marginally to +3% in three months to July. Weaker growth was driven by the biggest contraction in auto production since the 2009 financial crisis, reflecting the bringing forward of planned seasonal plant closures to align with previous Brexit deadlines. (RTT)

Japan: May trade deficit JPY967.1bn. Japan posted a merchandise trade deficit of JPY967.1bn in May, the Ministry of Finance said on Wednesday, up 67.5% on year. That exceeded expectations for a shortfall of JPY1,207.0bn following the JPY110.9bn deficit in April. Exports were down 7.8% on year to JPY5.8trn, also beating forecasts for a drop of 8.4% following the 2.4% decline in the previous month. Exports to Asia were down 12.1% on year to JPY3.1trn, while exports to China alone fell 9.7% to JPY1.1trn. Exports to the US rose an annual 3.3%, while exports to the European Union sank 7.1% to JPY647.5bn. Imports sank an annual 1.5% to JPY6.8trn versus expectations for an increase of 1% after soaring 6.5% a month earlier. Imports from Asia fell 3.3% on year to JPY3.1trn, while imports from China alone eased 0.9% to JPY1.5trn. Imports from the US dipped an annual 1.6% to JPY792.8bn, while imports from the European Union climbed 8.7% to JPY899bn. (RTT)

Markets

GENM (Underperform, TP: RM2.70): Chairman voluntarily takes 20% pay cut . Genting Malaysia chairman and chief executive Tan Sri Lim Kok Thay has reportedly announced that he would take a 20% pay cut to offset the effect of heavy gaming taxes which have weighed on the group’s financial performance. (The Edge)

Star Media (Neutral, TP: RM0.74): Scores another win in legal battle against property development firm JIC. Star Media Group has scored another win in its legal battle against property development firm JAKS Island Circle SB (JIC). The High Court has allowed an application by Star Media Group to enforce the undertaking issued by JIC when they filed in early 2018 to stop the media group and the banks from accepting and releasing bank guarantees of RM50m. High Court judge Justice Lee Swee Seng on Wed (June 19) ordered JIC to pay interest totalling RM1,515,068.49 to the media group plus RM10,000 in costs. (The Star)

Apex Equity: Board garners 54.8% votes for unit's merger with Mercury Securities . Shareholders of Apex Equity Holdings have given the green light for the proposed merger between JF Apex Securities and Mercury Securities SB. Nonetheless, shareholders seem to be divided in their views on the proposed merger deal. The proposed merger resolution was passed with only 54.8% majority, not unanimously. Apex director Datuk Azizan Abd Rahman said the company will now proceed to get the vesting order from the High Court within the next two months. (The Edge)

DNeX: In talks to sell stake in Ping Petroleum, confident to fetch 'better than book' valuation. Dagang NeXchange (DNeX) has confirmed that it is in talks to sell its 30% stake in its upstream oil and gas (O&G) associate Ping Petroleum Ltd. The group is confident that it could fetch attractive valuations for the investment given current stronger crude oil prices compared with the time when it acquired the equity stake. Besides that, its executive director Zainal Abidin Abd Jalil Zainal highlighted that Ping's reserves and volume are high currently, especially for its brownfield asset, the Anasuria Cluster, which is expected to augur well for the valuation of its stake in the associate company. (The Edge)

TH Heavy: Hopes to return to profit in FY19 . TH Heavy Engineering (THHE), which is in the midst of formulating a plan to regularise its financial conditions, hopes to keep up the momentum of last week's contract win through to the rest of its financial year ending Dec 31, 2019. Its CEO Suhaimi Badrul Jamil also said the group is expecting to turn a profit this year, following the positive momentum seen in the second half of last year and the first quarter of this year. (The Edge)

MSM: Warns of drastic measures if govt does not manage sugar import. Refined sugar producer MSM Malaysia Holdings has warned that it will resort to taking commercial approaches that may not be beneficial to Malaysia as a whole should the group's financial performance continue to be impacted by sugar import permit holders that are approved by the Government. Group chairman Datuk Wira Azhar Abdul Hamid said the two local industry players have constantly engaged with the Government to express concerns and for their views on Approved Permits (APs) to be taken into consideration. (The Edge)

Market Update

The FBM KLCI might open stronger today as U.S. stocks ended modestly higher overnight after the Federal Reserve left their benchmark interest rate unchanged at a range between 2.25% and 2.50%, but opened the door to rate cuts later this year. The S&P 500 was up 0.3% to end around 2,926. The Dow Jones Industrial Average advanced 29 points, or 0.1%, to finish near 26,504 while the Nasdaq Composite was up 0.4% to finish around 7,987. The U.S. central bank took out the phrase "patience" from its policy statement, and said it stood ready to act appropriately if risks to the economic outlook reared their head. The Fed's interest-rate projections also showed close to half the members of the central bank's policy-making group anticipated two rate cuts this year. European markets finished mixed with the CAC 40 gained 0.16%, while the FTSE 100 led the DAX lower. They fell 0.53% and 0.19% respectively.

Back home, the FBM KLCI index gained 13.78 points or 0.83% to 1,666.54 points on Wednesday. Trading volume increased to 2.42bn worth RM2.34bn. Market breadth was positive with 474 gainers as compared to 330 losers. The regional markets surged, following new hope on the trade front and strong gains on Wall Street. Japan’s Nikkei gained 1.8%, despite data that showed exports in May fell for a sixth straight month, and Hong Kong’s Hang Seng Index surged 2.6%. The Shanghai Composite rose 1.0% while the smaller-cap Shenzhen Composite jumped 1.5%.

Source: PublicInvest Research - 20 Jun 2019

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Labels: MSM, THHEAVY, DNEX, APEX, STAR, GENM

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