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PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 20 Nov 2019, 9:59 AM

 

PublicInvest Research Headlines - 19 Aug 2019

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Economy

US: Consumer sentiment shows substantial deterioration in Aug. Consumer sentiment in the US has seen a significant deterioration in the month of Aug, according to a preliminary report released by the University of Michigan on Friday. The report said the consumer sentiment index tumbled to 92.1 in Aug after inching up to 98.4 in July. Economists had expected the index to dip to 97.2. With the much steeper than expected drop, the consumer sentiment index slumped to its lowest level since hitting 91.2 in Jan. The sharp pullback by the headline index came as the current economic conditions index slid to 107.4 in Aug from 110.7 in July, hitting its lowest level since late 2016. The index of consumer expectations showed an even more substantial decrease, plunging to 82.3 in Aug from 90.5 in July. The deterioration in consumer sentiment came amid concerns about the proposed increase in tariffs on Chinese imports as well as the reasoning behind the Federal Reserve's interest rate cut. (RTT)

US: Housing starts unexpectedly slump but building permits soar. While the Commerce Department released a report on Friday showing an unexpected slump in housing starts in the month of July, the report also showed a much bigger than expected increase in building permits. The report said housing starts tumbled by 4.0% to an annual rate of 1.19m from the revised June estimate of 1.24m. The drop surprised economists, who had expected housing starts to edge up by 0.3% to a rate of 1.26m from the 1.25m originally reported for the previous month. The unexpected decrease in housing starts came as multi-family starts plunged by 16.2% to a rate of 315,000, more than offsetting a 1.3% increase in single-family starts to a rate of 876,000. Meanwhile, the Commerce Department said building permits spiked by 8.4% to a rate of 1.33m in July from a revised 1.23m in June. (RTT)

US: Powell likely to use Jackson Hole to suggest Fed ready to cut. Federal Reserve Chairman Jerome Powell will have no lack of material to choose from when he kicks off the central bank’s annual Jackson Hole symposium Friday with a speech on the challenges for monetary policy. A deglobalization shock touched off by Donald Trump’s trade policy; super low interest rates, including USD16.7trn in negative yielding bonds; a never-ending presidential assault on the Fed; and a rising risk of a US and worldwide recession. “There are all sorts of hazards out there,’’ said former IMF chief economist Maury Obstfeld, now a senior fellow at the Peterson Institute for International Economics. And some of them, including the risk of a hard Brexit and political protests in Hong Kong, lie outside of the US and aren’t susceptible to the Fed’s influence. Fed watchers expect Powell to do nothing on Friday to disabuse investors of the widespread perception that the central bank will reduce interest rates next month. But whether he’ll open the door to a half-percentage-point cut, which some traders are looking for, is unclear. (Bloomberg) 

US, China: Trump 'not ready' for China trade deal, dismisses recession fears. US President Donald Trump and top White House officials dismissed concerns that economic growth may be faltering, saying on Sunday they saw little risk of recession despite a volatile week on global bond markets, and insisting their trade war with China was doing no damage to the US. “We’re doing tremendously well, our consumers are rich, I gave a tremendous tax cut, and they’re loaded up with money,” Trump said. But he was less optimistic than his aides on striking a trade deal with China, saying that while he believed China was ready to come to an agreement, “I’m not ready to make a deal yet.” (Reuters)

EU: Eurozone trade surplus declines on weak exports. The euro area trade surplus declined in June as exports logged a monthly decline amid an increase in imports, data from Eurostat showed Friday. The trade surplus fell to a seasonally adjusted EUR17.9bn in June from EUR19.6bn in May. In the same period last year, the surplus totaled EUR12.5bn. On a monthly basis, exports decreased 0.6% on month, while imports grew 0.3%. Data showed that the surplus totaled EUR20.6bn on an unadjusted basis compared to a EUR22.6bn surplus in June 2018. Both exports and imports decreased 4.7% and 4.1%, respectively. (RTT)

UK: House sales stronger than normal in Aug. August, normally a quiet month for Britain’s property market, has seen a surge in sales, possibly due to buyers seeking to conclude transactions before the country leaves the European Union on Oct 31, property website Rightmove said on Monday. Rightmove said sales in the Aug period, which cover the four weeks to Aug 10, were 6.1% higher than a year earlier and their strongest for the month since 2015, bucking a generally sluggish trend since June 2016’s referendum on leaving the European Union. “While the end of Oct Brexit outcome remains uncertain, more buyers are now going for the certainty of doing a deal, with some having perhaps hesitated earlier in the year,” Rightmove director Miles Shipside said. (Reuters)

Malaysia: Bank Negara eases foreign exchange administration rules. Bank Negara Malaysia (BNM) has announced further liberalisation of the foreign exchange administration (FEA) policy with new measures effective Aug 30, 2019 aimed at providing greater flexibility and efficiency for businesses to manage their foreign exchange risk and conduct their daily operations. On another note, governor Datuk Nor Shamsiah Mohd Yunus said BNM has had “positive engagements” with global index provider FTSE Russell. “They (FTSE Russell) were appreciative of the measures we’ve put in place to deepen the onshore market,” she said. She said the new measures seek to deepen the onshore foreign exchange market to provide investors the flexibility to undertake hedging. (SunBiz)

Indonesia: Facing internal doubts as global risks rattle outlook. Indonesian President Joko Widodo is facing an uphill battle to make good on an ambitious reform plan with a rapidly deteriorating global outlook prompting doubts, including from within his own government, over growth projections for Southeast Asia’s biggest economy. Despite acknowledging mounting risks, Widodo will head into his second term having handed down a budget at the heart of which is a forecast for growth next year of 5.3%. If realized, it would be the fastest pace of expansion in seven years. The 2020 outlay ramps up spending to an all time high of IDR2,528.8trn (USD178bn), while also projecting a narrower fiscal deficit. (Bloomberg) 

Markets

Yong Tai (Neutral, TP: RM0.38): Difficulties in completing fund raising. Previously in May 2019, Yong Tai had entered into Subscription Agreements with two investors to place out 100m shares to each investor respectively. However, the agreement has now been lapsed, as the investors fail to complete the transaction. (Bursa)

Comment : The 3 identified shareholders which had committed to acquiring a cumulative 300m shares have now failed to complete their transactions, though not a surprise considering the subscription price of 36sen versus the current market price of 24sen. While a remaining 100m shares (placees yet to be identified) will now be transacted at 23sen, the significant shortfall in planned proceeds will throw an obvious spanner in the works. Though we still see value in its long-term proposition, near term confidence will depend largely on the speed in which it manages to turn around its Encore Melaka theatre. Our Neutral call on the stock is retained.

I-Bhd (Outperform, TP: RM0.75): RCULs extension. I-Bhd had previously proposed to extend the maturity date of its RCULS by 3 years. The extension proposal has been granted by its shareholders and the maturity date for its RCULS will be extended to 26 August 2022.

Comment: The 3-year extension granted by shareholders is a welcome development as it will defer a redemption which may have otherwise seen an RM201m outflow from the company. Pursuant to a corporate exercise undertaken in 2014, general market conditions have not been encouraging, hence this slight predicament but which has now been given a 3-year reprieve. We continue to like I-Berhad's value proposition and retain our long-term Outperform call with an unchanged RM0.75 TP.

Air Asia (Neutral, TP: RM2.33): Reorganises leadership as part of its tech transformation. In support of its transformation into a travel and financial platform company, AirAsia Group said it has reorganised its leadership team to spearhead the changes. Group CEO Tony Fernandes will double up as CEO of airasia.com, AirAsia's travel and lifestyle e-commerce platform. AirAsia said it will appoint a new CEO who will report to Fernandes in due course. (The Edge)

Pintaras Jaya: Gets additional piling project in Singapore for RM91m. Pintaras Jaya has secured a piling contract in Singapore worth RM91m (SGD30m). The group had earlier announced that it had secured nine piling contracts collectively worth RM156m since April. “This brings the total cumulative contracts newly secured to 10, collectively worth RM247m,” it said. (The Edge)

Vizione: To raise up to RM59m via private placement. Vizione Holdings has proposed to raise up to RM59.08m via a private placement of up to 10% of its total issued shares to third party investor(s) to be identified later. Vizione said proceeds from the proposed private placement will be used to part finance the group’s existing construction projects, as well as for payment of tender/contract deposits and/or performance bonds for new projects. It said the proposed private placement entails the issuance of up to 62.19m new shares, representing not more than 10% of its total issued shares. (The Edge)

Market Update

The FBM KLCI might open higher today as Wall Street recovered some of its lost ground last Friday, but the gains were not enough to prevent US equities from posting their third consecutive weekly decline, underlining investor fears about the precariousness of the global economy. The S&P 500 advanced 1.4% in a broad based rally with industrials, financials and tech leading the way with gains of about 1.9% each. The Nasdaq Composite rose 1.7%. Despite Friday’s rise, a volatile week of trading — driven by a cocktail of mounting and connected risks centred on the impact of the US China trade dispute on global growth — meant the S&P 500 and Nasdaq were down 1% and 0.8% respectively over the past five trading days. Both indices were down for the third straight week. European markets finished broadly higher on Friday with shares in Germany leading the region. The DAX added 1.31% while France's CAC 40 rose 1.22% and London's FTSE 100 tacked on 0.71%.

Back home, the FBM KLCI index lost 1.07 points or 0.07% to 1,599.22 points on Friday. Trading volume decreased to 1.79bn worth RM1.44bn. Market breadth was positive with 390 gainers as compared to 325 losers. In the region, the Hang Seng was up 0.94% while China's Shanghai Composite added 0.29% and Japan's Nikkei 225 rose 0.06%.

Source: PublicInvest Research - 19 Aug 2019

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