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Author: PublicInvest   |   Latest post: Fri, 15 Nov 2019, 9:19 AM

 

PublicInvest Research Headlines - 4 Jul 2019

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Economy

Global: Economy heading for trouble as manufacturing and construction shrink. Global manufacturing and construction sectors have already entered a downturn; the service sector is all that now stands between the economy and a full-blown recession. Global manufacturers reported new export orders fell for a 10th month running in June, with the most widespread decline for six years. Even in the US, which has escaped relatively mildly so far from the downturn hitting Europe and Asia, there are now clear signs growth has stalled across the manufacturing and construction industries. (Reuters)

US: Factory orders drop more than expected in May. New orders for US manufactured goods fell by more than anticipated in the month of May, according to a report released by the Commerce Department. The factory orders slid 0.7% in May after plunging by a revised 1.2% in April. Economists had expected factory orders to drop by 0.5% compared to the 0.8% decrease originally reported for the previous month. The report said orders for durable goods slumped by 1.3% in May after tumbling by 2.8% in April, unrevised from the preliminary data published last week. Orders for transportation equipment led the way lower once again, plummeting 4.6% in May following a 7.6% nosedive in April. The orders for non-durable goods also edged down by 0.2%. (RTT)

US: Trade deficit widens as imports jump more than exports. A report released by the Commerce Department showed the US trade deficit widened by more than anticipated in the month of May, as the value of imports jumped by much more than the value of exports. The trade deficit widened to USD55.5bn in May from a revised USD51.2bn in April. Economists had expected the trade deficit to widen to USD54.0bn from the USD50.8bn originally reported for the previous month. (RTT)

US: Service Sector growth slows to nearly two-year low in June. With President Donald Trump's global trade war creating uncertainty, the Institute for Supply Management released a report showing US service sector growth slowed to a nearly two-year low in the month of June. The ISM said its non-manufacturing index dropped to 55.1 in June from 56.9 in May, hitting its lowest level since a matching reading in July of 2017. While a reading above 50 still indicates growth in service sector activity, economists had expected the index to decrease to 55.9. The drop in the headline index came as the business activity index tumbled to 58.2 in June from 61.2 in May and the new orders index slumped to 55.8 from 58.6. (RTT)

US: Weekly jobless claims dip more than expected To 221,000. A day earlier than usual due to the Independence Day holiday, the Labor Department released a report showing a modest decrease in first-time claims for US unemployment benefits in the week ended June 29th. The initial jobless claims dipped to 221,000, a decrease of 8,000 from the previous week's revised level of 229,000. Economists had expected jobless claims to edge down to 223,000 from the 227,000 originally reported for the previous week. Meanwhile, the less volatile four-week moving average crept up to 222,250, an increase of 500 from the previous week's revised average of 221,750. (RTT)

EU: Eurozone June business growth slows as factories still faltering. Euro zone business activity picked up slightly last month but remained weak as a modest but broad-based upturn in the services industry offset a continued deep downturn in factory output. Worryingly for policymakers at the European Central Bank, forward-looking indicators did not point to a bounce back and business expectations for the year ahead dropped. By the end of Sept, the ECB will either cut its deposit rate or ease its forward guidance further by pledging to keep interest rates lower for longer. (Reuters)

UK: Service sector moves closer to stagnation. UK service sector activity moved closer to stagnation in June on subdued client demand and a further reduction in work-in-hand, data from IHS Markit showed. The IHS Markit/Chartered Institute of Procurement & Supply services PMI fell to 50.2 in June from 51.0 in May. This was the lowest reading for three months. Economists had forecast the score to remain unchanged at 51.0. The reading was only fractionally above the 50.0 and therefore signaled that business activity was close to stagnation in June. (RTT)

Markets

AirAsia (Neutral, TP: RM2.33), AAX (Neutral, TP: RM0.21): Files appeal against court’s decision. AirAsia and AAX have filed a notice of appeal against the Kuala Lumpur High Court’s dismissal of the airline group’s judicial review leave application against the Malaysian Aviation Commission (Mavcom). AirAsia Group said its wholly owned subsidiary AirAsia and affiliate AAX filed the notice of appeal on Tuesday and will make further updates on any material development on the matter. (SunBiz)

Yee Lee (Neutral, TP: RM2.28): Privatisation falls through. The privatisation of Yee Lee is not materialising at this juncture as the joint offerors, one of whom is the company's controlling shareholder, have not been able to garner enough acceptance for their voluntary takeover offer of RM2.29 per share (excluding four sen dividend). It announced that the joint offerors have only managed to secure 89.85% shareholding in the company, which is a whisker away from the 90% threshold needed to suspend trading of Yee Lee's securities. (The Edge)

Yong Tai (Neutral, TP: RM0.38): Terminates agreement to jointly develop land in Malacca. Yong Tai announced that its wholly-owned subsidiary YTB Impression SB has terminated a joint development agreement with JM Bestari Land SB to develop a piece of land in Malacca. It said the agreement was terminated due to non-fulfilment of the condition precedent as stated in clause 3.1(c) of the joint development agreement. (The Edge)

Litrak: Accepts MoF Inc’s offer. Lingkaran Trans Kota Holdings (Litrak Holdings) will accept the Minister of Finance (Incorporated)’s (MoF Inc) offer to acquire toll highway concessionaires Lingkaran Trans Kota SB (Litrak) and Sistem Penyuraian Trafik KL Barat SB (Sprint). It said that it has deliberated on the proposed offers and unanimously found them to be fair and reasonable, and has resolved to accept the offer for Litrak and to vote in favour of accepting the offer for Sprint. (SunBiz)

Ekovest: Takes Samling to arbitration. Ekovest has commenced arbitration proceedings against Samling Resources SB (SRSB) via its wholly owned subsidiary Ekovest Construction SB (ECSB). It said the arbitration proceedings relate to the wrongful termination of JV and shareholders agreement dated Jan 6, 2017 entered by both parties to undertake the development and upgrading of the Pan Borneo Highway Phase 1 WPC-02 work package contract in Sarawak. (SunBiz)

Benalec: Unit sells sand carrier vessels. Benalec Holdings' unit, Ocean Pacific Ltd has disposed of two sand carrier vessels, Oceanline 5001 and GT298, to Regiontrade SB for USD3.82m. It said proceeds from the disposal would be utilised for the group’s working capital and the timeframe of the full utilisation was expected to be within twelve months. (StarBiz)

MMC Corp: Gets RM20m tax refund from IRB. MMC Corp announced that it has been refunded by the Inland Revenue Board of Malaysia (IRB), the amount of RM20.3m, and that its additional income tax issues have been resolved. It said following the full receipt of the refund, no penalties have been imposed by the IRB upon the company. (The Edge)

Market Update

The FBM KLCI might open higher today after U.S. stocks finished on a strong note in a holiday-shortened session, pushing all three key equity benchmarks to new heights, amid increased expectations for more dovish policy. The S&P 500 was up 0.8% to finish around 2,996. The Dow Jones Industrial Average advanced 176 points, or 0.7%, to end near 26,962. The Nasdaq Composite climbed 0.8% to close around 8,170. European leaders nominated International Monetary Fund managing director Christine Lagarde to replace Mario Draghi as European Central Bank president. Investors say they expect Lagarde to follow through with Draghi's pledge to unroll further stimulus measures if economic conditions worsened. In addition, President Donald Trump nominated Christopher Waller and Judy Shelton, both of whom are seen as advocates of lower interest rates. The CAC 40 was up 0.75% while Germany's DAX added 0.71% and London's FTSE 100 rose 0.66%.

Back home, the FBM KLCI closed 0.95 point or 0.06% lower to 1,690.05 points. Across Bursa Malaysia today, the exchange saw 3.01bn shares worth RM1.82bn traded. In the region, Japan’s Nikkei 225 closed down 0.53%, South Korea's Kospi fell 1.23% while Hong Kong’s Hang Seng was down 0.07%.

Source: PublicInvest Research - 4 Jul 2019

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