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PublicInvest Research

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

 

PublicInvest Research Headlines - 13 Sept 2019

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Economy

US: Core consumer price growth accelerates to 11-year high in August. With higher prices for shelter and medical care partly offset by a steep drop in energy prices, the Labor Department released a report showing just a modest increase in US consumer prices in August. The Labor Department said its CPI inched up by 0.1% in August after rising by 0.3% in July. Energy prices showed a substantial pullback during the month, plunging by 1.9% in August after jumping by 1.3% in July, while food prices were unchanged for the third straight month. Core consumer prices rose by 0.3% in August. (RTT)

US: Weekly jobless claims drop much more than expected to 204,000. The initial jobless claims fell to 204,000, a decrease of 15,000 from the previous week's revised level of 219,000. Economists had expected jobless claims to edge down to 215,000 from the 217,000 originally reported for the previous week. With the much bigger than expected decrease, jobless claims fell to their lowest level since hitting a nearly 50-year low of 193,000 in April. The Labor Department said the less volatile four-week moving average also dipped to 212,500, a decrease of 4,250 from the previous week's revised average of 216,750. Continuing claims also edged down by 4,000 to 1.67m in the week ended August 31st. (RTT)

US: Posts USD1trn budget gap, full-year may be lower. The US budget deficit surpassed USD1trn in the first 11 months of the fiscal year through August, according to the Treasury Department, though the year-end deficit may narrow from a tax revenue bump. September typically produces a surplus because quarterly tax payments are due, which could lower the overall figure. The Congressional Budget Office has estimated that the 2019 budget deficit will be USD960bn. Since Oct. 1, the budget gap rose by about 19% to USD1.07trn, according to the Treasury Department’s monthly budget report. The comparable deficit a year earlier was USD898.1bn. (Bloomberg)

EU: Eurozone industrial production decline slows slightly in July. Eurozone’s industrial production continued to decline in July, albeit at a slower pace compared to the previous month, preliminary figures from Eurostat showed. Industrial production dropped 2% YoY following a 2.4% slump in June, which was revised from 2.6%. The latest fall was led mainly by the declines in the production of intermediate goods and capital goods. Intermediate goods output fell 3% YoY after a 3.5% drop in June. Capital goods production shrank 3.4% following a 4% decline in the previous month. Energy output decreased 1.4% after a 0.6% decline. (RTT)

EU: Germany inflation eases as estimated in August. Germany’s inflation eased as estimated in August, data from Destatis showed. Consumer prices climbed 1.4% YoY in August, slower than the 1.7% increase in July. On a MoM basis, consumer prices dropped 0.2% as previously estimated in August largely reflecting weak energy prices. Inflation based on the harmonized index of consumer prices, which is meant for EU comparison, slowed to 1% from 1.1% in July. (RTT)

India: Industrial output growth exceeds expectations. India's industrial production grew more than expected in July, data from statistics ministry showed. Industrial output advanced 4.3% YoY in July, following a 1.17% MoM rise. Output was forecast to grow 2.3%. The annual growth was largely driven by a 6.6% rise in electricity output. Mining output grew 3.4% and manufacturing rose 2.8%. During April to July, industrial production increased 3.3% from the same period of last year, data revealed. (RTT)

Indonesia: To consider expediting export ban on bauxite, others. Indonesia will consider expediting an export ban on minerals such as bauxite, tin, and alumina, among others, subject to the scale of investment, a senior minister said. This comes after the country last week announced a surprise nickel ore exports ban, two years earlier than planned. Under the current rules, exports of bauxite are allowed till Jan 11, 2022. (Reuters) 

Markets

Maxis (Underperform, TP: RM4.96): Partners with Cisco over joint offerings . Maxis has entered into a strategic partnership with Cisco to jointly deliver a wide range of market-leading technologies for businesses in Malaysia. (The Edge)

Comment: This is part of Maxis’ 5-year plan to transform the group from a mobile-focused to a converged communications and digital service player. Enterprise business expansion has been identified as a key growth driver and Maxis is expected to scale up its enterprise staffing and offerings over time. Given Cisco’s global leadership as a communication technology provider, we are positive on this collaboration. Nevertheless, we do not expect this to generate any meaningful earnings contribution to the group in the near term. Maintain Underperform on Maxis due to its unattractive valuation.

Malakoff (Trading Buy, TP: RM1.02): Teams up with J-Power in power and water projects . Malakoff Corporation Bhd has signed a MoU with Japan’s Electric Power Development Co Ltd (J-Power) to develop potential greenfield and brownfield power generation and water projects globally, including in Malaysia. “Through this MoU, both parties have agreed to jointly evaluate potential development of greenfield and brownfield power and water projects by leveraging on J-Power’s operational and technical expertise in the thermal, hydro and renewable power markets, and Malakoff’s experience in the power and water desalination projects, as well as other collaboration frameworks including operational excellence and technical knowledge sharing,” Malakoff said in a statement. (The Edge)

Straits Inter Logistics: To buy oil tanker at RM20.45m . Straits Inter Logistics has signed a Memorandum of Agreement to acquire a 13-year-old oil tanker named Poseidon for a total of USD4.84m or RM20.45m cash from Hibiscus Fuels Ltd. The proposed acquisition is in line with the group’s strategy to enlarge its asset base, in view of the higher business volume and the expansion phase it currently experiences, Straits said. (The Edge)

Destini: Proposes private placement exercise to repay borrowings . Destini has proposed a private placement to raise approximately RM49.67m in funds for the repayment of bank borrowings and working capital purposes. The engineering group intends to issue up to 231.05m shares for the placement exercise, representing up to 20% of the total number of issued shares in Destini. Based on an indicative issue price of 21.5 sen per placement share, the exercise is expected to raise RM49.67m in proceeds, of which RM21m will be used to repay bank borrowings. Meanwhile, RM22m will go towards funding its existing projects, RM5m for new projects, while RM1.39m has been earmarked for general requirements. (The Edge)

Sunway: Wins bid to build condos in Tianjin, China. Sunway said a JV firm in China has won a tender to acquire land in Tianjin for development of seven blocks of condominiums. The group said Tianjin Eco-City Sunway Property Development Co Ltd will acquire the 27,712.5 square meters of land from Sino-Singapore Tianjin EcoCity Investment and Development Co Ltd for RM257.78m."Tianjin Eco-City Sunway will undertake a residential development known as Sunway Garden Phase 3 which consists of seven blocks of condominiums on the land," said Sunway. "The proposed development is expected to commerce in May 2020 and targeted to be completed by May 2023," Sunway Bhd said. (The Star) 3 Important disclaimer is provided at the end of this report. | PUBLIC INVESTMENT BANK Page 3 of 8 PUBLIC INVESTMENT BANK BERHAD

Market Update

The FBM KLCI might end the week with positive note after US stocks found themselves close to a record high and Treasuries sold off as investors endured a choppy session brought about by the state of trade discussions and the European Central Bank’s decision to cut interest rates and restart its bond-buying programme. Media reports the Trump administration had discussed plans for an interim trade deal with Beijing had given US stocks an early boost, but these gains were quickly trimmed after other media said a senior White House official denied it was considering such a plan. Mr Trump said on Wednesday night, though, he would push back the starting date for higher tariffs on USD250bn of Chinese goods to October 15 from October 1 following a request from China’s vice-premier. His announcement came after China suspended tariffs on some US goods. The S&P 500 finished 0.3% higher, with a fade into the close now leaving it 0.5% away from the peak it reached in late July. The equities benchmark had been up as much as 0.6% during the session, but reports denying the interim trade deal saw it take a quick dip into negative territory. The Nasdaq Composite gained 0.3%. In Europe, the benchmark Stoxx 600 advanced 0.2% and Frankfurt’s Dax added 0.4%. London’s FTSE 100 was up 0.1%.

Back home, the FBM KLCI finished 1.3 points or 0.08% lower today at 1,601 after volatile trade in the final trading hour in an apparent reaction to Bank Negara Malaysia's (BNM) decision to maintain the overnight policy rate (OPR) at 3%. Across Bursa Malaysia, turnover settled at 1.89bn shares worth RM1.74bn. Chinese stocks rose with the CSI 300 of Shanghai- and Shenzhen listed stocks up 1.1%. The Topix was up 0.7% to hover around a four-month high while the S&P/ASX 200 in Australia gained 0.1%. Hong Kong’s Hang Seng, however, slipped 0.3% as banks and insurers dipped.

Source: PublicInvest Research - 13 Sept 2019

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