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PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 22 Oct 2019, 9:06 AM

 

PublicInvest Research Headlines - 12 Jul 2019

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Economy

US: Powell says Fed has room to cut, may have kept policy too tight . Federal Reserve Chairman Jerome Powell suggested that the central bank has room to ease monetary policy as the tie between the inflation and jobless rates has broken down. “The relationship between unemployment and inflation became weak” about 20 years ago, Powell told the Senate Banking Committee Thursday. “It’s become weaker and weaker and weaker.” The Fed chief stressed at his second day of congressional testimony that the US economy is “in a very good place.” He said the central bank wants “to use our tools to keep it there.” Powell told Senators that the so-called “neutral rate,” or policy rate that keeps the economy on an even keel, is lower than past estimates have put it -- meaning monetary policy has been too restrictive. Fed officials in fact marked down their estimate of the longer-run policy rate to 2.5% in June, from 2.8% in March. (Bloomberg) 

US: Consumer prices unexpectedly inch up 0.1% in June . With a steep drop in gas prices offset by an increase in the cost of shelter, the Labor Department released a report on Thursday showing an unexpected uptick in US consumer prices in the month of June. The Labor Department said its consumer price index inched up by 0.1% in June, matching the slight increase seen in May. Economists had expected consumer prices to come in unchanged. The unexpected uptick in consumer prices came even though energy prices tumbled by 2.3% in June after falling by 0.6% in May. Gas prices plunged by 3.6%. Despite the unexpected monthly increase, the Labor Department said the annual rate of consumer price growth slowed to 1.6% in June from 1.8% in May. Meanwhile, the report said the annual rate of core consumer price growth crept up to 2.1% in June from 2.0% in the previous month. (RTT)

US: Weekly jobless claims fall to 3-month low . The number of Americans filing applications for unemployment benefits dropped to a three-month low last week, suggesting sustained labor market strength that could help support a slowing economy. Initial claims for state unemployment benefits declined 13,000 to a seasonally adjusted 209,000 for the week ended July 6, the lowest level since April. The claims data is entering a period of volatility as auto manufacturers temporarily shut down assembly plants for summer retooling. Companies carry out the plant closures at different times, which can throw off the model the government uses to strip out seasonal fluctuations from the data. There is still no sign of an increase in layoffs related to a trade war between the United States and China, which has helped to dim the economy’s outlook and raise expectations for an interest rate cut this month, the first in a decade. (CNBC)

US: Government posts USD8bn deficit in June . The US government posted an USD8bn budget deficit in June, according to data released on Thursday by the Treasury Department. The Treasury said federal spending in June was USD342bn, down 12% YoY, while receipts were USD334bn, up 6% YoY. The deficit for the fiscal year to date was USD747bn, compared with USD607bn in the comparable period the year earlier. When adjusted for calendar effects, the deficit for June was USD55bn compared with an adjusted deficit of USD30bn in June 2018. (Reuters)

EU: ECB policy makers agreed on need to prepare to ease policy. European Central Bank policy makers were united in June on the plan to stand ready to provide more stimulus to the euro-area economy, a move that could be followed by interest-rate cuts as soon as this month. A number of reports on the economy have deteriorated since that meeting, which may increase the chance of stimulus sooner rather than later. ECB President Mario Draghi has also toughened his language, saying that if the outlook didn’t improve, that would be enough to warrant action. The Governing Council will next meet to set policy on July 24-25 and update their economic projections. (Bloomberg)

UK: Buyer interest in house market grows for first time since 2016 . The UK housing market has largely shrugged off Brexit uncertainty to record an increase in new buyers for the first time in almost three years. The Royal Institution of Chartered Surveyors (RICS) said Thursday that June witnessed a 10% increase in buyer enquiries across the country. The last time RICS recorded a month-on-month rise in buyer interest was November 2016. The body said its indicator of new instructions from sellers also edged into positive territory for the first time in a year. All parts of the UK indicated a modest house price growth during June except for London and the South East, and east of England. (CNBC) 

Markets

BToto (Neutral, TP: RM2.30): Results of the opening of the bids. Berjaya Sports Toto’s (BST) Philippines subsidiary submitted bid for the Philippines Charity Sweepstakes Office (PCSO) Lottery System.

Comments: BST’s 88.3%-owned subsidiary, Berjaya Philippines Inc (BPI), was one of the two bidders who submitted bids for the 5-year lease of the PCSO Lottery System. It was declared the only eligible bidder subject to evaluation and approval by the PCSO. BPI’s current leasing contract is expiring in Aug 2019 with 1-year extension up to Aug 2020. The Philippines’ lottery business contributes about 10% of the group’s profit. Although this 5-year lease covers Luzon, Visayas and Mindanao (while current lease only covers Luzon region), we believe the new rental rates are likely to be lower. At this juncture, our earnings forecasts remain unchanged. Maintain Neutral on BST.

FGV: To dispose of its unit in China for RM100m. FGV Holdings inked an equity transfer agreement with Grand Industrial Holdings Co Ltd (GIH) to divest its 100% equity interest in FGV China Oils Ltd (FGVCO) for CNY165m (RM100m) in cash. “Barring any unforeseen circumstances and subject to all the approvals and/or consents being obtained, the proposed disposal is expected to be completed between the end of 2019 and 1Q 2020,” it added. (The Edge)

Boustead: Aborts plan to buy land in Bukit Jalil for RM172.7m. Boustead Holdings has aborted its plan to buy multiple pieces of leasehold commercial land totalling 10.74 acres in Bukit Jalil here for RM172.8m. No reason was given for the termination of the sale and purchase agreement (SPA) signed with its largest shareholder Lembaga Tabung Angkatan Tentera (LTAT) back in Dec 2016. (The Edge)

Daibochi: Shareholders say yes to acquisition of Mega Printing & Packaging for RM125m. Daibochi has secured shareholders’ approval to acquire the entire equity of flexible plastic packaging player Mega Printing & Packaging SB (MPP) for RM125m cash. The acquisition of MPP is expected to be completed in the 3Q of 2019, and begin contributing to Daibochi’s financial performance from FY20 onwards. (SunBiz)

Mudajaya: Plans private placement to raise up to RM16.6m. Mudajaya Group plans to embark on a private placement exercise to raise up to RM16.6m for repayment of borrowings and working capital. The group said that the third party investors to be identified later. (SunBiz)

Bintai Kinden: Wins RM2.1m TNB contract. Bintai Kinden Corp has been awarded a RM2.1m contract from Tenaga Nasional (TNB). The group expects the contract to contribute positively to its revenue and earnings for the FYE March 31, 2020. (SunBiz)

Kejuruteraan Asastera: Gets Bukit Raja land as debt settlement. Kejuruteraan Asastera (KAB) will be transferred a piece of leasehold residential land measuring 6,015 sq m in Bukit Raja, Selangor as a form of debt settlement for unpaid subcontract works it completed for a mixed development project in Nilai, Seremban. The land comes with a price tag of RM3.5m. On top of that, KAB will be paid RM1.54m cash in 12 instalments, it said. (The Edge)

Magna Prima: Partners PowerChina Construction to bid for EPC project. Magna Prima is partnering PowerChina Construction Group Ltd to bid for an engineering, procurement and construction (EPC) contract for the third phase of a local project, involving Permodalan Nasional (PNB). (The Edge) 

Market Update

The FBM KLCI might end the week with a positive note after Wall Street stocks ended mostly higher overnight. US Stock market investors rotated out of stocks in the utilities and real estate sectors, which are typically seen as defensive in nature, in favor of more cyclical sectors like information technology and financials. The S&P 500 index ended 0.2% higher while the Dow Jones Industrial Average tacked on 0.9%. The Nasdaq was 0.1% weaker. Across the Atlantic, European markets finished lower with shares in Germany leading the region. The DAX was down 0.33% while France's CAC 40 was off 0.28% and London's FTSE 100 was lower by 0.28%.

Back home, the FBM KLCI index gained 0.29 of a point or 0.02% to 1,679.26 points on Thursday. Trading volume increased to 3.18bn worth RM2.21bn. Market breadth was positive with 501 gainers as compared to 329 losers. The regional markets finished mostly higher with shares in Hong Kong leading the region. The Hang Seng was up 0.81% while Japan's Nikkei 225 was up 0.51% and China's Shanghai Composite was up 0.08%.

Source: PublicInvest Research - 12 Jul 2019

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