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PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 6 Dec 2019, 9:18 AM

 

PublicInvest Research Headlines - 29 Aug 2019

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Economy

US: Mortgage activity falls as loan costs rise - MBA. US mortgage applications recorded their biggest weekly drop in over four months as home borrowing costs posted their first broad increase in six weeks, the Mortgage Bankers Association said. Mortgage rates rose last week prompted by volatility in the Treasuries markets as investors fretted over the trade conflict between China and the US and its impact on an already softening global economy. This uncertain outlook will likely curb interest in home buying and potential borrowers from seeking a mortgage. The Washington-based industry group’s seasonally adjusted index on loan requests to buy a home and to refinance one fell 6.2% to 576.2 in the week ended Aug. 23. This was the steepest decline since a 7.3% fall in the week of April 19.. (Reuters)

US: The Fed’s efforts to stay out of politics just got a lot tougher this week. If there had been any doubt that the Federal Reserve is under unprecedented political pressure, this week’s incendiary commentary from former New York Fed President William Dudley cemented the notion. Where once the heat had been coming primarily from President Donald Trump and his demand for rate cuts, the latest round emanated from the other side — a prominent one-time central banker who urged defiance and even tried to nudge the central bank into a political fray that its members have been trying assiduously to avoid. What results is that the Fed and its long-held independence crucial to its decision-making are facing a test perhaps like never before. Earlier this month, Yellen and former Chairmen Alan Greenspan Ben Bernanke and Paul Volcker penned a remarkable op-ed for The Wall Street Journal stressing the need for an independent Fed free of political pressure. (CNBC) 

EU: Hitting EU's debt target will be harder this year. Germany has not abandoned its goal of keeping public debt below the European Union’s ceiling of 60% of economic output, but recent economic developments mean that this target will be harder to hit, a finance ministry spokesman said on Wednesday. “We are not giving this goal up, but given the economic developments we are seeing this year it will be harder to reach this goal,” the spokesman said. Germany’s statistics office revised gross domestic product data for the past 20 years which also affected its debt to GDP ratio. (Reuters)

EU: German consumer sentiment to remain unchanged. German consumer confidence is set to remain unchanged in September as the downturn in economic confidence was largely offset by the propensity to buy, survey data from market research group GfK showed. The forward looking consumer sentiment index held steady at 9.7 in Sept. Economists had forecast the indicator to drop to 9.6. The survey showed that the propensity to buy improved in Aug and income expectations dropped slightly. Meanwhile, the economic outlook suffered a considerable decline as consumers see a risk of recession in Germany due to the global downturn, trade conflicts with the US, and prospects of no-deal Brexit. The economic expectations index fell 8.3 points to -12 in August, the lowest since Jan 2013. The income expectations indicator dropped by 0.7 points to 50.1. However, the level provides evidence of stability. Income expectations largely depend on labor market conditions. (RTT)

EU: Italy consumer confidence falls in August. Italy's consumer confidence fell in August after rising in the previous month, survey data from the statistical office Istat showed on Wednesday. The consumer confidence fell to 111.9 in August from 113.3 in July. Economists had expected a reading of 112.7. In June, the confidence index was at 109.8. The households' expectation on the economy and their assessment of the current situation weakened in August. The business confidence index declined to 98.9 in August from 101.2 in the previous month. Confidence in the manufacturing industry, construction sector and services sector deteriorated in August. (RTT)

China: The yuan hit an 11-year low this week. China’s yuan is being closely watched as its economy slows and as Beijing remains locked in a trade war with the US that has roiled global markets. The onshore yuan fell to levels not seen since Feb 2008, and the offshore yuan dropped to its weakest since it began trading in the international market around 2010. The recent escalation in trade tensions left analysts and investors wondering how much further Beijing would allow the currency to weaken. Unlike other major currencies such as the US dollar or the Japanese yen, which have a free floating exchange rate, China maintains strict control of the yuan’s rate on the mainland. The PBOC sets the daily midpoint to provide direction to the market and guide the currency. (CNBC)

India: Central bank handed over billions to the government. The Indian government is set to receive a windfall gain from the central bank amid the economy struggling to accelerate growth. The Reserve Bank of India said the central bank will transfer INR1.76trn (about USD24.6bn) as dividend to New Delhi for the year that ended on June 30, 2019. That was higher than what the market had been expecting. The RBI follows a 12-month period that runs from July to June and pays an annual dividend to the government based on its profits. Dividend is a sum of money paid annually by a company or a bank to its shareholders out of its profits. Last year, the RBI board formed a committee to look into how much the central bank should hold in its reserves amid a push from the government to access the surplus for stimulus packages. (CNBC)

Markets

Muhibbah: Bags RM150m EPCI job from Petrofac. Muhibbah Engineering (M) has bagged a RM150m contract from Petrofac (Malaysia-PM304) Ltd to undertake engineering, procurement, construction and installation (EPCI) works for the East Cendor Field Development (Phase 1) project located offshore Peninsular Malaysia. Muhibbah said it has received an award for the execution of the EPCI works on the wellhead platform for the project. The contract is scheduled to commence in the 3Q of this year, with completion expected within 11 months. Muhibbah said the contract is expected to contribute positively to the group's earnings and net assets for the current and future financial years. (The Edge)

Fajarbaru: Bags two more SPE highway jobs for RM42m. Fajarbaru Builder Group has bagged two contracts worth a combined total of RM42.3m from Knusford in relation to the Setiawangsa– Pantai Expressway (SPE) project. The two projects are also known as Duta-Ulu Kelang Expressway (DUKE) Phase-3. The Salak Interchange project, which is worth RM41.25m, is to be completed in 14 months. It is expected to contribute positively to the group’s earnings and net assets for the two FYE June 30, 2020 (FY20) and FY21. The other project, with a contract period of 12 weeks, is worth RM1.07m. This contract is also expected to contribute positively to the group’s earnings and net assets for FY20. (The Edge)

BIMB: Bank Islam to disburse RM1bn loans to SMEs this year. Bank Islam Malaysia, the wholly-owned banking entity of BIMB Holdings (BIMB), aims to disburse RM1bn worth of loans to small and medium enterprises (SMEs) within the FYE Dec 31, 2019 compared with more than RM500m last year. BIMB CEO Mohd Muazzam Mohamed said the increase in loan disbursement for SMEs would increase the group’s SME portfolio by between 10% and 12%. “In terms of product offerings, the board has already approved two new products. One (of them) is targeted at business enterprise, which we plan to launch soon,” he said. (Bernama)

Paramount Corp: Aims higher recurring income from 'secret weapon' project. Paramount Corporation aims a higher contribution to the revenue of between 10-15% from its recurring income, from less than 5% currently, with most of it coming from ‘secret weapon’ project, the co-working space, said group CEO and director Jeffrey Chew Tun Seong. He said the project is one of the company's strategic investment strategies to further boost its recurring income, on top of malls lease rental/ divestment and KDU campuses lease income. (Bernama)

Datasonic: Forms JV with three Filipinos to bid for Philippine ID projects. Datasonic Group has teamed up with three Filipinos to bid for the Philippines National Identity System and Philippines Security Surveillance and Monitoring Solutions projects. The group said it will hold 39.99% of the joint-venture company’s 25,000 shares, with Virginia Pinto Hilario having a 30% stake and Rey Pedro Depra Viernesto and Arnold Lazarito Vegafria, 15% each. It added that the JV is not expected to have any material effect on the group’s EPS, net assets per share and gearing for the FYE March 31, 2020. (The Edge) 

Market Update

The FBM KLCI might open stronger today after Wall Street swung higher on Wednesday as energy shares advanced, while US government debt maturing decades from now rallied anew in a fresh sign of deepening investor angst over the global economy. Wednesday’s fall in yields signals investors are shifting into longer term US government debt — generally seen as an indication of expectations for weaker inflation and slower growth in the years ahead. Treasuries at the shorter end of the curve saw a slimmer fall in yield. The shift caused a further inversion of key portions of the US yield curve in a sign that may sharpen market worries about a looming recession. Wall Street shed early losses to close near session highs, with the S&P 500 up 0.7% as a decline in US crude stockpiles drove oil prices and energy shares higher. The tech-heavy Nasdaq Composite rose 0.4%. The Russell 2000, an index of small-cap companies, jumped 1.2%. The continent-wide Stoxx 600 index slipped 0.2%, with bourses in Germany and France down around 0.3%.

Back home, the FBM KLCI closed 1.02 points or 0.06% lower to 1,589.82 points today after US recession fears led to apparent broad-based selling across Bursa Malaysia amid persistent US China trade war concerns. Across Bursa Malaysia, turnover stood at 1.94bn shares worth RM1.54bn. In the region, the Topix in Japan ended the day roughly flat while Hong Kong’s Hang Seng edged down 0.2% while Australia’s S&P/ASX rose 0.4% as miners gained. Over in mainland China, the CSI 300 was down 0.4%.

Source: PublicInvest Research - 29 Aug 2019

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