PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 22 Oct 2019, 9:06 AM


PublicInvest Research Headlines - 19 Sept 2019

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US: Fed cuts interest rates, signals holding pattern for now. The US Federal Reserve cut interest rates again to help sustain a record long economic expansion but signaled a higher bar to further reductions in borrowing costs, eliciting a fast and sharp rebuke from President Donald Trump. Describing the US economic outlook as “favorable,” Fed Chair Jerome Powell said the rate cut was designed to provide insurance against ongoing risks including weak global growth and resurgent trade tensions. “If the economy does turn down, then a more extensive sequence of rate cuts could be appropriate,” Powell said in a news conference after the Fed announced it had lowered its benchmark overnight lending rate by a quarter of a percentage point to a range of 1.75% to 2.00%. It was the second Fed rate cut this year. (Reuters)

US: Housing starts spike to 12-year high in August. New residential construction in the US showed a substantial rebound in the month of August, according to a report released by the Commerce Department. The housing starts soared by 12.3% to an annual rate of 1.364m in Aug after slumping by 1.5% to a revised rate of 1.215m in July. Economists had expected housing starts to surge up by 5% to a rate of 1.250m from the 1.191m originally reported for the previous month. With the much bigger than expected increase, housing starts reached their highest level since hitting 1.448m in June of 2007. Multi-family starts led the way higher, skyrocketing by 32.8% to a rate of 445,000, while single family starts jumped by 4.4% to a rate of 919,000. The building permits also spiked by 7.7% to an annual rate of 1.419m in August. (RTT)

EU: Italy trade surplus rises in July. Italy's trade surplus rose in July, as exports and imports increased, data from the statistical office Istat showed on Wednesday. The trade surplus rose to EUR7.63bn in July from EUR5.65bn in the same period last year. In June, surplus was EUR5.70bn. Exports grew 6.2% year-on-year in July, after a 3.5% fall in June. Imports rose 1.8% in July, after a 5.4% decline in the prior month. On a seasonally adjusted basis, trade surplus was EUR4.43bn in July. Exports and imports fell by 2.3% and 0.5%, respectively. Separate data from the statistical office showed that the industrial orders declined 2.9% month-on-month in July, following a 1.0% fall in June. On an annual basis, industrial orders fell 1.0% in July, following a 4.9% decline in the previous month. (RTT)

UK: Bank of England set to stand pat on rates. The Bank of England is set to hold its key interest rate steady, at the final policy session ahead of the Brexit scheduled on October 31. Policymakers are likely to retain the interest rate at 0.75% and quantitative easing at GBP435bn. According to the British Chambers of Commerce's economic forecast, official interest rates are expected to remain at 0.75% throughout 2019 and 2020, before rising to 1.0% in 2021. Earlier this month, Bank of England Governor Mark Carney said sterling volatility is at emerging market levels. The pound has decoupled from other advanced economy pairs for obvious reasons. At the Council on Foreign Relations in New York, Carney cautioned that depending on the outcome of Brexit, the financial markets will move substantially. (Reuters)

Japan: Japan has Y136.3bn deficit in August. Japan posted a merchandise trade deficit of Y136.329bn in August, the Ministry of Finance said on Wednesday. That beat forecasts for a shortfall of Y365.4bn following the Y250.7bn deficit in July. Exports were down 8.2% on year to Y6.140trn, also topping expectations for a decline of 10.9% following the 1.5% annual drop in the previous month. Imports sank an annual 12.0% versus forecasts for a decline of 11.0% after easing 1.2% a month earlier. (RTT)

Indonesia: Expected to deliver third rate cut. Indonesia’s central bank is under pressure to cut interest rates for a third straight month as a deteriorating global economy threatens domestic growth. Most economists see the need for another shot of stimulus when Bank Indonesia policy makers meet. With a deepening slowdown in China and trade tensions weighing on Southeast Asia’s largest economy, concerns over oil supplies and higher crude prices further complicate the bank’s decision. In addition, another rate cut overnight from the Federal Reserve adds to the pressure on Bank Indonesia Governor Perry Warjiyo and his board to keep pace with US policy makers. (Bloomberg) 


Ambank (Trading Buy, TP: RM4.90), Seacera: To sell Seacera property to recoup RM18.3m loan. Ambank Islamic is seeking a public auction of a property in Penang belonging to Seacera Group over a sum of RM18.31m owed to the bank under an Islamic loan facility taken. Seacera Group received a legal summon and that the date of the auction had yet to be fixed but shall not be less than one month from the date of the court order. Seacera said the financial impact is dependent on the final sale value of the auction against the book value of the said land. It is seeking professional legal advice. (The Edge)

Perak Transit (Outperform, TP: RM0.43): To raise RM500m via sukuk. Perak Transit plans to raise up to RM500m by establishing a sukuk murabahah programme to refinance the group’s bank borrowings. The money will also be used to finance its capex and working capital requirements, the group said. The programme will have a tenure of 15 years from the date of the first issuance of the sukuk. (The Edge)

GENM (Neutral, TP: RM3.30): Appears to be still keen on Greece gaming license. Genting Malaysia appears to be still in the running to bring a casino to the former Hellenikon International Airport site near the Greek capital of Athens. Casino.org reported that GENM is believed to be still interested in the 30-year gaming licence, which grants the winning operator a near-monopoly status in the Athens area. It was reported GENM’s rivals for the Greece gaming licence are Hard Rock International, Mohegan Gaming and Entertainment besides Caesars Entertainment. (The Edge)

Atrium REIT: To raise RM999m via MTN programme for Penang properties. Atrium REIT plans to raise up to RM999m by establishing a medium-term note (MTNs) programme to part-finance the purchase of properties in Penang. The MTN programme will have a tenure of 30 years from the date of first issuance, the group said. Atrium REIT has lodged the programme with the Securities Commission Malaysia, and that Public Investment Bank is the principal adviser, lead arranger, security agent and facility agent for the programme. (The Edge)

Supermax: Proposes one-for-65 share dividend. Supermax Corp announced a share dividend to reward shareholders on the basis of one treasury unit for every 65 existing shares in the glove manufacturer. Supermax said the proposed final dividend for FY19 requires shareholders' approval at the company's annual general meeting. "The proposed entitlement and payment dates for the share dividend shall be determined at a later date and announced accordingly," Supermax said. (The Edge)

Automotive: Lower vehicle sales in August. Total vehicle sales in Aug dropped 22% YoY to 51,148 units, due to the higher base last year as vehicles received a boost in sales from the one-off tax holiday. The Malaysian Automotive Association (MAA) said YoY passenger car sales dropped 16% to 46,802 units, while the number of commercial vehicles plunged more than 50% to 4,346 units last month. YTD August vehicles stood at 398,335 units compared with 423,615 units in the previous corresponding period. On the outlook for September, the MAA expects vehicle sales to be at the same level as August. (StarBiz) 

Market Update

The FBM KLCI might open higher today after US stocks fought their way back into positive territory following the Federal Reserve’s decision to cut interest rates, as investors digested remarks from Jay Powell and a more hawkish outlook than anticipated. Wall Street’s S&P 500 added to losses immediately after the announcement but clawed back to be less than 0.1% higher at the close of trading in New York. the index had been nearly 1% lower in the early parts of Mr Powell’s press conference. The Nasdaq Composite finished down 0.1%, and the Dow Jones Industrial Average ended 0.1% higher. European stocks were broadly flat, meanwhile, with the composite Stoxx 600 registering barely any change, while London’s FTSE 100 shed 0.1% and the Dax 30 in Frankfurt added 0.1%. The US central bank’s Federal Open Market Committee reduced its benchmark interest rate by 25 basis points, the second cut this year, in a bid to stimulate the economy amid growing global headwinds. Projections show Fed officials are divided on the path for rates but do not expect additional cuts this year or next, disappointing a market that had been looking for further easing.

Back home, the FBM KLCI settled down 4.81 points or 0.3% to 1,599.49. Stock markets in region were mixed earlier in the day with Japan’s Topix down 0.5 percent as the energy segment fell back, while in Australia the S&P/ASX 200 dipped 0.2%. The Hang Seng in Hong Kong was down 0.1% and the CSI 300 of Shanghai and Shenzhen-listed companies rose 0.5 percent.

Source: PublicInvest Research - 19 Sept 2019

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