PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 11 Nov 2019, 9:47 AM


PublicInvest Research Headlines - 20 Aug 2019

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US: Fed's Rosengren wants evidence of slowdown to justify rate cut. Federal Reserve Bank of Boston President Eric Rosengren continued to push back against further interest-rate cuts by the central bank, arguing he’s not convinced that slowing trade and global growth will significantly dent the US economy. “We’re likely to have a 2H of the year that’s much closer to 2% growth,” Rosengren said Monday. “I’m not saying there are not circumstances in which I’d be willing to ease. I just want to see evidence we are going into something that is more a slowdown.’’ (Bloomberg)

US: Trump urges Fed cut of 100 basis points, cites world economy. President Donald Trump stepped up his assault on the Federal Reserve, urging it to cut interest rates by a full percentage point to aid global growth while complaining the “dollar is so strong that it is sadly hurting other parts of the world.” “The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well,” the president said in a tweet Monday. “If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced—good for everyone!” (Bloomberg)

EU: Weaker euro-area inflation raises stimulus pressure on ECB. Euro-area inflation was weaker than initially reported in July, raising pressure on ECB policy makers to consider more stimulus in Sept. Eurostat revised its July estimate for consumer price growth to 1%, down from a reading of 1.1% reported on July 31. It’s the second consecutive revision to inflation data. The report adds to negative data over the past weeks that may convince officials that bold steps are needed to revive momentum in the euro area. The ECB is already expected to announce fresh measures to jump-start the euro-zone economy when policy makers meet on Sept 12, with most economists predicting at least a cut in the deposit rate from the current minus 0.4%. (Bloomberg)

EU: Eurozone current account surplus decreases in June. Eurozone's current account surplus decreased in June to its lowest level in nearly two- and-a-half years, figures from the ECB showed. The current account surplus fell to EUR18.3bn from EUR30.3bn in May. The surplus was the lowest since Jan 2017, when it was EUR18bn. In the 12-month period to June, the current account surplus was EUR318bn or 2.7% of euro area GDP, down from EUR391bn or 3.4% of euro area GDP in the same period of last year. (RTT)

EU: German readying stimulus plan as contingency for deep recession. The German government is getting ready to act to shore up Europe’s largest economy, preparing fiscal stimulus measures that could be triggered by a deep recession, according to two people with direct knowledge of the matter. The program would be designed to bolster the domestic economy and consumer spending to prevent large scale unemployment, said the people who asked not to be identified because the discussions are private. Similar to bonuses granted in the 2009 crisis to prod Germans to buy new cars, the government is studying incentives to improve energy efficiency of homes, promote short-term hiring and boost income through social welfare, the people said. (Bloomberg)

UK: Households' financial well-being falls. UK households' assessment of their financial well-being fell in Aug, survey data from the IHS Markit showed on Monday. The IHS Markit Household Finance Index, or HFI, fell to 43.7 in Aug from 44.3 in July. Any reading below 50 indicates negative perceptions regarding financial well-being. Job security remained negative since March and income from employment rose in Aug. The living cost inflation eased to the lowest in five months and expectations weakened for the first time since May. A shift in the household interest rate expectations was recorded on the likelihood that the next move will be a cut. (RTT)

Japan: Exports slip for eighth month, sales to China drop as recession fears grow. Japan’s exports slipped for an eighth month in July, while manufacturers’ confidence turned negative for the first time in over six years as China-bound sales slumped again in a fresh sign the Sino-US trade war could tip the economy into recession. The gloomy data underscored the challenge for Japanese policymakers worried that prolonged weakness in external demand will drive a sharp economic downturn at home. Exports in July fell 1.6% from a year earlier, Ministry of Finance data showed on Monday, dragged down by China-bound shipments of car parts and semiconductor production equipment. (Reuters)

Thailand: GDP grows at slowest pace in 5 years. Thailand's economic growth decelerated to a five-year low in the 2Q, the National Economic and Social Development Council said Monday. GDP expanded 2.3% YoY in the 2Q, slower than the 2.8% increase seen in the 1Q. This was the weakest growth since the 3Q of 2014. The slowdown was driven by domestic demand and foreign trade. Private spending rose 4.4% and government final consumption moved up 1.1%. At the same time, domestic investment gained 2.0%. (RTT)


Axiata (Neutral, TP: RM3.95): Takeover interest for Axiata’s tower company, edotco. It was reported that Axiata has received preliminary expressions of interest in recent months about a potential takeover of edotco (63%-owned by Axiata), valuing the business as much as USD3bn. (The Edge)

Comment: Based on annualized 1QFY19 earnings of edotco, this equates to 13.7x EV/EBITDA, which is about 10% higher than the valuation of private placement done in 2016/2017. There has always been a plan by Axiata to monetize its investment in the tower company which also includes initial public offering. We are not surprised that Axiata has received takeover offers for edotco but more importantly is whether Axiata is willing to sell. We believe Axiata would prefer to retain a controlling stake in edotco considering the growth potential for the tower company in emerging markets. Maintain Neutral on Axiata

Progressive Impact: Bags RM12.8m contract from Syabas. Progressive Impact Corp has bagged a contract worth RM12.8m from Syabas to supply and install water quality online analysers within Selangor, Kuala Lumpur and Putrajaya’s distribution system. “The contract sum is based on the quality and quantity of the works, as set out in the bills of quantities as provided in the tender document,” Progressive Impact said. (The Edge)

Seacera: SME Bank files RM36.5m claim against Seacera. SME Bank has filed a RM36.46m claim against PN17 company Seacera Group in a dispute arising from loan facilities granted to Seacera’s 20%-owned associate SPAZ SB. Seacera said the claim is in relation to facilities of RM5.16m and RM31.3m provided under the Commodity Murabahah Revolving Financing-i scheme, for which Seacera is reportedly the corporate guarantor. (The Edge)

Icon Offshore: Makes cash call and converts debt into equity. Icon Offshore is making a cash call to raise up to RM250m fresh capital and to restructure RM370.66m of debt, partly by issue of new shares. Its single largest shareholder Ekuinas Nasional, which holds its 42.3% stake, is committed to subscribe up to RM183m of the proposed rights issue that is sweetened by free warrants, Icon Offshore said. To pave way for the rights issue, Icon Offshore will also undertake a share consolidation exercise. Additionally, Icon said it is also restructuring its debt by executing supplemental agreements with its various lenders. (The Edge)

IPO: MTAG Group to raise RM72.3m from IPO. MTAG Group plans to raise RM72.3m from its listing exercise where it is issuing 136.32m new shares at 53 sen each. MTAG group MD said the company would build a factory to increase its annual production capacity for labels and stickers progressively over the next few years. (StarBiz)

Auto (Neutral): Malaysia’s car sales drop 26% YoY in July – MAA. Malaysia's car sales dropped 26% YoY in July due to the absence of a three-month tax holiday period. The government had zero-rated the GST from June to August last year ahead of the transition to the SST regime, which had benefited consumers. The Malaysian Automotive Association (MAA) said a total of 50,853 vehicles were sold in July compared with 68,466 units a year ago. However, overall sales of new vehicles increased by 20% MoM or 8,327 units compared with June due to the longer working month. (The Edge)

Market Update

The FBM KLCI might open with a positive bias today as Wall Street advanced for the third day on Monday while government debt prices pulled back after last week’s rally, with investors squarely focused on monetary policy ahead of the Federal Reserve’s annual economic conference later this week and amid optimism on trade. The S&P 500 finished 1.2% higher at 2,923.65 in a broad-based rally led by energy and tech stocks that were up 2.1% and 1.6%, respectively. The Nasdaq Composite rose 1.4%. The moves on Monday were supported by the US Commerce Secretary’s extension of a temporary reprieve to Chinese telecoms equipment maker Huawei under certain circumstances, amid ongoing tensions between the US and China on trade. Equities across Europe posted solid price increases, with the broad Stoxx 600 gauge rising 1.1%. Market barometers in Germany, the UK and France all rose by at least that margin.

Back home, the FBM KLCI index lost 2.77 points or 0.17% to 1,596.45 points on Monday. Trading volume increased to 2.21bn worth RM1.60bn. Market breadth was positive with 429 gainers as compared to 349 losers. In the region, MSCI’s measure of stocks outside of Japan jumped 1.2%. Hong Kong’s Hang Seng led the way higher, climbing 2% for its best day in two months, after an estimated 1.7m-strong anti-government protest over the weekend ended peacefully. Mainland China’s CSI 300 rose 2.2% after the country’s central bank said it would replace its key lending rate with a more-market driven benchmark.

Source: PublicInvest Research - 20 Aug 2019

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