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PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 12 Nov 2019, 9:48 AM

 

PublicInvest Research Headlines - 26 Sept 2019

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Economy

US: New home sales rebound more than expected, extending recent volatility. Reflecting an extension of the volatility seen in recent months, the Commerce Department released a report showing US new home sales rebounded strongly in the month of Aug following a sharp pullback in the previous month. The new home sales surged up by 7.1% to an annual rate of 713,000 in Aug after plunging by 8.6 percent to a revised rate of 666,000 in July. Economists had expected new home sales to jump by 3.9% to a rate of 660,000 from the 635,000 originally reported for the previous month. The bigger than expected rebound came as new home sales in the West bounced back, spiking by 16.5% to a rate of 191,000 in August after plummeting by 15.9% to 164,000 in July. New home sales in the South also shot up by 6.0% to a rate of 426,000. (RTT)

US: Two rate cuts have Fed 'well-positioned' at this point, says Evans. Chicago Federal Reserve president Charles Evans said he backed the Fed’s two recent rate cuts but feels the central bank is now “well-positioned” to see how economic data evolves. “A couple of rate cuts seemed useful,” to further the Fed’s 2% inflation goal and guard against risks of a slowdown, Evans said. Markets are betting the Fed will cut rates more this year, but after cutting rates twice this year officials have been reluctant to commit to further reductions. In comments to a suburban Rotary Club here, Evans delivered an optimistic view of the US economy, with growth still slightly above trend, and a strong outlook for consumers who are benefiting from low unemployment and wage gains that are solid but not “outrageously” so. That could go on “indefinitely,” Evans said, adding that while the Fed needs to be “on guard” it did not need to take any more action against risks that have not materialized. (Reuters)

UK: Mortgage approvals increase in August - UK Finance. UK mortgage approvals increased in August despite uncertainty surrounding Brexit, figures from UK Finance showed Wednesday. Mortgages approved in August grew to 85,931. Approvals for home purchases rose 3.2% and remortgages increased slightly by 0.1%. Meanwhile, other secured lending dropped 0.4%. Net mortgage approvals for house purchases totaled seasonally adjusted 42,576 versus 43,303 in July. Meanwhile, gross mortgage lending declined 3.2% from last year to GBP24bn. According to Bank of England data, the number of mortgages approved in July rose to 67,306, the highest since July 2017. (RTT)

UK: Retailers see sales to fall at slower pace - CBI. British retailers expect sales to fall at a slower pace in October and orders to remain broadly flat, according to Distributive Trades survey from the Confederation of British Industry. About 16% of retailers reported a decline in sales volume in September but much smaller than the net 49% reported in August. This was the fifth consecutive decrease. Likewise, a net 9% said orders contracted in September versus -57% in August. Only 5% of retailers forecast retail sales volume to fall and a net 3% expect orders to increase in the year to October. Five successive months of falling volumes tells its own story about the tough conditions’ retailers are having to operate in.. (RTT)

China: Economy may be headed for another low. China’s economic numbers in the last few months have disappointed expectations, but the worst is not over, analysts are expecting 3Q data to come in even weaker than than before. A quarterly survey by China Beige Book released showed that growth slowed in the 3Q while debt levels soared. Nationally, revenue, profits, output, sales volumes, and job growth all slowed from a quarter ago, as did both domestic and export orders, citing China Beige Book’s survey of more than 3,300 Chinese businesses. Critically, the firm found that debt levels remain on the rise, with bond issuance climbing to its highest in the history of the survey. The ratio of the so-called “shadow banking” to overall borrowing was also at the second-highest on record. (CNBC)

China: Aug rare earth magnets exports to US hit highest since at least 2016. China’s exports of rare earth magnets to the US in August rose to the highest level since at least 2016, customs data showed, pointing to further stockpiling as concerns linger that Beijing could restrict supply in the Sino-US trade war. Shipments to the US rose 1.2% from a month earlier to 452,473 kg, or around 452 tonnes, according to data from the General Administration of Customs. Exports to the US were 6.2% more than a year earlier and the highest monthly total in customs database records going back to Jan 2017. They have been high since Chinese President Xi Jinping visited a rare earths magnet plant in May, with Jan-Aug shipments to the US up 23.8% on year at around 2,984 tonnes. (RTT)

India: Economic growth could rebound to above 7% next year, ADB says. India’s economic growth may be slowing down, but the country could stage a turnaround to expand by more than 7% next year, according to the latest forecasts by the Asian Development Bank. In the April-to-June quarter, Asia’s third-largest economy grew 5% year-over year, a six-year low pace. That prompted several economists to warn that the country’s growth rate could fall below 6% this year. ADB also downgraded its growth projections for India. In a report released Wednesday, the Manila-based development bank said India is expected to grow by 6.5% in the current fiscal year — down from its previous forecast of 7.2%. For the next fiscal year, that growth rate could rebound to 7.2%, slightly lower than the earlier forecast of 7.3%, said ADB. (CNBC)

Markets

Widad Group: Bags RM120m sub-contract job. Widad Group has clinched a RM120m subcontract job from Bumi Segar Indah SB to design and build a new solid waste transfer station in Kepong. Its wholly-owned subsidiary Widad Builders SB (WBSB) had accepted the letter of award (LOA) for the contract, which would end on April 19, 2025. "Funding for the project will be via internally generated funds and external borrowings," it said. (Bernama)

Perdana Petroleum: Bags jobs worth up to RM48m from Petronas Carigali. Perdana Petroleum has bagged work orders worth up to RM48m from Petronas Carigali SB to provide two anchor handling tug supply (AHTS) vessels. One of the vessels is for one year starting Aug 30, with an extension option of another year. The estimated value of the contract is between RM20m and RM40m, if the extension option is exercised. Another contract commences in early Aug for a duration of 145 days, with an extension option of 30 days. The estimated value is between RM7m and RM8m. (The Edge)

iDimension: Inks MoU with potential white knight. iDimension Consolidated has inked an agreement with a potential white knight for the injection of new assets and businesses into the Guidance Note 3 (GN3) company. It said it signed a three-month-long MoU with EVDynamic SB (EVD), in what it described as an integral step towards regularisation. (The Edge)

Ikhmas Jaya: Served winding-up petition by Ipmuda for owing RM3m. Ikhmas Jaya Group and its wholly-owned unit Ikhmas Jaya SB (IJSB) have been served with a winding-up petition from Ipmuda for owing RM2.97m. The sum is the amount owed for the goods delivered and services provided by Ipmuda. It is currently in consultation with its solicitors on the appropriate action to be taken on the winding-up petition. (The Edge)

Degem: To take private at RM1.10 a share by Legion Master. Degem’s major shareholder Legion Master SB (LMSB) has initiated a selective capital reduction (SCR) and repayment exercise with an offer price of RM1.10 in a bid to take the company private. The total capital repayment amounts to RM24.3m. Currently LMSB and the persons acting in concert, including chairman Datuk Hasan M. Taib, collectively hold an 83.1% equity stake in Degem. (SunBiz)

Yinson: 2Q earnings down 44%. Yinson Holdings’ net profit fell 44.2% to RM41.1m for the 2QFY19 from RM73.7m in the same quarter of the previous year, due to net unfavorable foreign exchange movement of RM5.6m, impairment loss on property, plant and equipment of RM4.9m and higher finance costs of RM4.96m. However, it was partially set-off by improved profit contribution on lower operating expenditure and lower impairment loss on advances to a joint venture, trade and other receivables of RM2.1m. The group has declared an interim dividend of 4 sen for the quarter under review. (SunBiz)

Daibochi: Tip into net loss due to write-down, M&A costs. Daibochi saw a net loss of RM305,000 for the three-month period ended July 31, 2019 due to writedown in line with ongoing operations streamlining and merger & acquisition (M&A) costs for the purchase of Mega Printing & Packaging. However, it recorded the best quarterly revenue of RM123.3m on the back of increasing flexible packaging sales in Malaysia and regional markets. For the cumulative 19-month period from Jan 1, 2018 to July 31, 2019, Daibochi reported a net profit of RM17.3m. (SunBiz)

Market Update

In typical Donald Trump fashion, his ‘hot and cold’ handling of the US-China trade situation moved markets again. This time round, he said a trade deal could happen sooner rather than later. Separately, he also said an initial trade agreement with Japan has been reached. Investors also pored through a rough transcript of his conservation with the Ukrainian President, one where he is alleged to have abused his power which reportedly led to the commencement of impeachment proceedings against him. Stronger-than-expected new homes data also mitigated some of the negativity coming out of Washington. Both the Dow Jones Industrial Average and S&P500 rose 0.6% as the Nasdaq Composite climbed 1.1%. European markets were lower on as political events on both sides of the Atlantic weighed on investor sentiment. On one end, President Trump told the United Nations General Assembly on Tuesday that he would not accept a "bad deal" in trade negotiations, while China's top diplomat said Beijing would not be threatened or allow interference in its affairs. On the other end, Prime Minister Boris Johnson disagreed with the UK Supreme Court’s verdict that his suspension of Parliament is illegal and said he would still take the UK out of the EU by an October 31 deadline. Germany’s DAX and France’s CAC 40 fell 0.6% and 0.8% though UK’s FTSE 100 remained largely unchanged. Earlier in the day, Asian markets slipped as investors watched for developments in the US after lawmakers launched an impeachment inquiry into President Trump while tensions were raised on the US-China trade front. All three key North Asian indices slipped, with the Shanghai Composite, Hang Seng and Nikkei 225 indices down 1.0%, 1.3% and 0.3% respectively.

Major shareholders of jewelry manufacturer and retailer Degem who, together with their parties acting in concert, currently have an 83.1% stake are offering RM1.10 per share to take the company private. Widad Group has secured an RM120.0m contract to design and build a new solid waste transfer station in Kepong while Perdana Petroleum has clinched work orders worth up to RM48m from Petronas Carigali.

Source: PublicInvest Research - 26 Sept 2019

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