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Author: PublicInvest   |   Latest post: Fri, 13 Dec 2019, 10:07 AM

 

PublicInvest Research Headlines - 8 Aug 2019

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Economy

Global: World economy edges closer to a recession as trade dread deepens. The escalating trade war between the US and China is nudging the world economy toward its first recession in a decade with investors demanding politicians and central bankers act fast to change course. While tight labor markets globally and the recent shift by central banks should provide a cushion, economists are starting to war game for how a recession could happen. Their fears are mainly centered on the damaging effects of tariffs. (Bloomberg)

US: Consumer credit climbs less than expected in June . With a slight drop in revolving credit partly offsetting a notable increase in non revolving credit, the Federal Reserve released a report showing US consumer credit rose by less than expected in June. The Fed said consumer credit rose by USD14.6bn in June after climbing by an upwardly revised USD17.8bn in May. Non-revolving credit, such as student loans and car loans, shot up by USD14.7bn in June after rising by USD10.3bn in May. Meanwhile, the report said revolving credit, which largely reflects credit card debt, edged down by USD0.1bn in June after increasing by USD7.5bn in the previous month. Consumer credit in June was up by 4.3% YoY, as non-revolving credit jumped by 5.8% but revolving credit dipped by 0.1%. (RTT)

EU: German industry suffered worst annual drop in a decade in June . German industrial production registered its biggest annual decline in almost a decade, highlighting the severity of the trade-inflicted manufacturing slump in Europe’s largest economy. Output was down 5.2% YoY in June, the most since late 2009, when the country was recovering from the Great Recession that followed the global financial crisis. The numbers are the latest in a series pointing to a quickly deteriorating outlook that’s also starting to affect the labor market. Industrial production dropped 1.5% MoM in June, driven by an even steeper decline in manufacturing. The sector “remains mired in a downturn,” the Economy Ministry said, adding that a disappointing performance in the second quarter was primarily due to weakness in metal, machinery and car production. (Bloomberg)

China: Forex reserves decline in July. China's forex reserves declined in July as the dollar strengthened against major currencies, data from the People's Bank of China showed. Reserves decreased to USD3.104trn at the end of July from USD3.119trn in June. The expected level was USD3.11trn. It seems more likely that the PBoC largely refrained from forex intervention last month, as it has done for most of the past two years, Julian Evans-Pritchard and Martin Lynge Rasmussen, economists at Capital Economics, said. The resumption of PBOC FX sales is a distinct possibility in the coming months since, with no clear anchor for the exchange rate, markets are likely to continue to test the PBOC's tolerance for currency weakness, the economist added. (RTT)

China: Yuan fix is unmissable these days for currency traders . China’s central bank is under pressure to issue its weakest currency fixing in more than a decade, a move that risks spurring more losses in the CNY. The PBOC set its daily reference rate only marginally stronger than 7 a dollar. That leaves it little headroom if it wants to track the spot rate, which fell 0.2% to 7.0414 at the official close. At stake is the risk that markets will see Thursday’s reference rate as a signal on policy, as a string of fixings on the weaker side of 7 could exacerbate concerns around further CNY depreciation and capital flight. (Bloomberg)

India: Reduces key interest rate by 35 bps . India's central bank announced a larger-than-expected interest rate cut and kept the door open for more easing to spur slowing economic growth. The Monetary Policy Committee of the Reserve Bank of India decided to reduce the key rate by 35bps to 5.40%, the lowest since 2010. The central bank had lowered its rates thrice this year after the bi-monthly policy meetings in February, April and June. The reverse repo rate was adjusted to 5.15% from 5.50%. The governor said cutting the policy rate by the standard 25bps might prove to be inadequate and reducing the policy rate by 50bps might be excessive. Reducing the policy repo rate by 35bps was viewed as a balanced level. (RTT)

Thailand: Bank of Thailand sees more room to ease after surprise rate cut . The Bank of Thailand unexpectedly cut its benchmark interest rate for the first time in more than four years to boost the economy, and said it sees more room to ease as global risks surge. The Monetary Policy Committee voted five to two to cut its key rate by a quarter-percentage point to 1.5%, the central bank said. “Sluggish exports and domestic consumption will make it very tough for the Thai economy this year,” said Prapas Tonpibulsak, CIO at Talis Asset Management Co. in Bangkok. “We expect more cuts by the central bank through 2020 because it must keep easing monetary policy to make it more effective.” (Bloomberg) 

Markets

Bina Puri: Makes cash call of up to RM40m. Bina Puri Holdings plans to raise up to RM39.54m through a rights issue, sweetened by one free three-year warrant for every rights share. The proposed rights issue involves up to 439.35m new shares together with up to 439.35m free warrants. The group intends to utilise up to RM27m to fund its existing property development and construction projects, RM5m to repay borrowings, up to RM6.14m for working capital, and RM1.4m for the corporate exercise. (The Edge)

Pestech: Inks MoU with Chinese firm to explore floating solar system solutions. Pestech International is partnering with China’s Huainan Sungrow Floating Module SCI & Tech Co Ltd to explore floating solar system solutions. It has inked a Memorandum of Understanding (MoU) with Sungrow to collaborate on floating solar system solutions, localisation of parts and other possible co-operation in Southeast Asia. It is expected to contribute positively to its future earnings, if the collaboration is successful. (The Edge)

EITA Resources: Accepts reduced contract value for LRT3 job. Eita Resources said its contract value for the supply of lifts and escalators to the LRT3 project has been slashed by almost two-third. This comes following the reduction in total number of lifts and escalators required for the scaled down LRT3 project. EITA has accepted a new contract dated Aug 6 from MRCB George Kent to supply and install of 130 units of escalators and 66 units of lifts at the LRT 3 project. The new contract is worth RM67.45m. (StarBiz)

PRG: Buys loss-making unit from 54%-owned Hong Kong-listed subsidiary for RM16.5m cash. PRG Holdings is spending RM16.5m cash to buy a loss-making retail company that sells luxury fashion apparel, footwear and ancillary products from its 54.19%-owned Hong Kong-listed subsidiary Furniweb Holdings Ltd. It has entered into a shares sale agreement to acquire the entire issued share capital of Premier Management International Ltd (PMIL) from Furniweb. (The Edge)

Bioalpha: Bags contract to manufacture food-based products for sale in China. Bioalpha Holdings has been contracted to manufacture food-based products to be sold in China. Bioalpha has signed an agreement with Jinrui Yandetang Co Ltd to develop a formulation and manufacture eight food-based products for Jinrui. Bioalpha will own the rights of the trade secret for the required raw materials, formulations and manufacturing processes. All products listed in the agreement cannot be manufactured by any other factory. (The Edge)

Metronic Global: Teams up with Chinese firm to develop smart city solutions. Metronic Global has teamed up with China's Zhuhai Singyes New Materials Technology Co Ltd (Singyes) to jointly develop smart city solutions in Malaysia. The JV represents part of its initiative to seek out for value accretive investments while leveraging on its existing engineering capabilities. In this regard, the group has identified smart solutions as a new area that the group could potentially branch out into. (The Edge)

IPO: GPP to raise RM4.37m enroute to LEAP listing. Biomass renewable energy producer GPP Resources is seeking a listing on the LEAP Market of Bursa Malaysia at an issue price of 28sen per share. GPP will raise RM4.37m via the excluded issuance of 15.6m new shares, representing 10.06% of the enlarged share capital to selected sophisticated investors. Based on the enlarged share capital of 155.12m shares, GPP’s market capitalisation would amount to RM43.43m upon listing. (The Edge)

Market Update

The Dow recovered from a sharp decline as bond yields stabilized to temper worries over slowing economic growth. The Dow closed 22.45 points lower at 26,007.07. At its lows of the day, the Dow had fallen more 589.13 points. The Nasdaq Composite advanced 0.4% to 7,862.83, led by Apple, after the tech-heavy index fell as much as 1.7%. The S&P 500 eked out a small gain after dropping nearly 2%. European stocks closed higher despite concerns about a global economic slowdown. The pan-European Stoxx 600 was 0.2% higher with most sectors in positive territory. Travel and leisure stocks led the gains, while oil and gas stocks tumbled after oil prices plummeted. Meanwhile, Asia Pacific stocks traded mixed on Wednesday as investors kept a close watch on the Chinese yuan amid an escalating trade dispute between the US and China. The Shanghai Composite was down 0.32% while the Hang Seng and Straits Times up 0.08% and 0.45% respectively.

Back home, FBM KLCI was lower, shedding 7.09 points to close at 1,604.70. Amcorp Properties’ indirect wholly-owned subsidiary Amcorp Dynamic Ltd will acquire a 40% stake in Daning Partners Ltd for USD22.9m (about RM96.2m). The deal is for Amcorp Properties to undertake the planned purchase of four office blocks in Shanghai's Daning International Commercial Plaza for RMB1.5bn (about RM865m). Eita Resources’ contract to supply lifts and escalators for the Light Rail Transit Line 3 project has been revised, with the contract sum cut by a whopping 65.4% to RM67.5m.

Source: PublicInvest Research - 8 Aug 2019

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