PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 14 Nov 2019, 9:44 AM


PublicInvest Research Headlines - 18 Oct 2019

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US: Homebuilding retreats, manufacturing still struggling. US homebuilding tumbled from more than a 12-year high in Sept, but single-family home construction rose for a fourth straight month, suggesting the housing market remains supported by lower mortgage rates even as the economy is slowing. The moderation in economic growth was underscored by other data on Thursday showing manufacturing output falling last month and factory activity in the mid Atlantic region decelerating in Oct. (Reuters)

US: Industrial production drops more than expected amid GM strike . With the strike at General Motors (GM) contributing to a drop in manufacturing output, the Federal Reserve released a report on Thursday showing a bigger than expected drop in industrial production in the month of Sept. The Fed said industrial production fell by 0.4% in Sept after climbing by an upwardly revised 0.8% in August. Economists had expected production to edge down by 0.1% compared to the 0.6% increase originally reported for the previous month. Manufacturing output dropped by 0.5% in Sept after rising by 0.6% in August, with the production of motor vehicles and parts plunging by 4.2%. (RTT)

US: Weekly jobless claims show modest increase . First-time claims for US unemployment benefits saw a modest increase in the week ended Oct 12th, according to a report released by the Labor Department on Thursday. The report said initial jobless claims edged up to 214,000, an increase of 4,000 from the previous week's unrevised level of 210,000. Economists had expected jobless claims to inch up to 215,000. The Labor Department said the less volatile four-week moving average also crept up to 214,750, an increase of 1,000 from the previous week's unrevised average of 213,750. Meanwhile, the report said continuing claims, a reading on the number of people receiving ongoing unemployment assistance, fell by 10,000 to 1.7m in the week ended Oct 5th. (RTT)

US, China: China says it hopes to reach phased trade pact with US as soon as possible. China hopes to reach a phased agreement in a protracted trade dispute with the United States and cancel tariffs as soon as possible, the Commerce Ministry said on Thursday, adding that trade wars had no winners. A phased agreement would help restore market confidence and reduce uncertainty, ministry spokesman Gao Feng said, adding that both sides were maintaining close communication. “The final goal of both sides’ negotiations is to end the trade war and cancel all additional tariffs,” Gao said. “This would benefit  China, the US and the whole world. We hope that both sides will continue to work together, advance negotiations, and reach a phased agreement as soon as possible.” Chinese premier Li Keqiang said both China and the United States need to resolve the issues through dialogue. (Reuters)

EU: ECB must be careful about further interest rate cuts - Visco . The ECB must be careful in lowering interest rates further given the rising risk of unintended side-effects, Italian central bank chief Ignazio Visco said on Thursday. The ECB cut its key rate to a record low of minus 0.5% last month, and markets priced further cuts for the coming year in the face of exceptionally weak inflation pressures. But Visco, considered a dove on the ECB’s rate-setting Governing Council, noted that negative rates hurt banks, which ultimately transmit monetary policy to the real economy, so lower rates could prove counterproductive. (Reuters)

EU: Eurozone construction output declines for second month. Eurozone construction output declined for the second straight month in Aug, data from Eurostat showed Thursday. Construction output decreased 0.5% MoM, following a 0.2% drop in July. Building and civil engineering work decreased 0.2% and 1.3%, respectively. On a yearly basis, construction output grew 1.2% but slower than the 1.8% increase seen in July. In the EU28, construction output dropped 0.2% on month in August and increased 1.9% from the previous year. (RTT)

UK: Retail sales stagnate in Sept. UK retail sales stagnated in Sept as consumers were cautious about spending amid uncertainties surrounding Brexit, data from the Office for National Statistics revealed Thursday. Retail sales volume, including auto fuel, was unchanged from the previous month, following a 0.3% drop in August. Sales were forecast to fall 0.2%. The ONS said slight growth in food and non-food is offset by declines in non-store and fuel. Excluding auto fuel, retail sales volume climbed 0.2%, in contrast to a 0.3% fall a month ago. Economists had expected a 0.1% decrease. Food store sales gained 0.6% and non-food store sales grew 0.4%. Meanwhile, auto fuel sales declined 2%. On a yearly basis, the retail sales volume growth accelerated to 3.1% in Sept, in line with expectations, from 2.6% in August, driven by expansion across all sectors except department stores and household goods. (RTT)

Japan: BOJ's Kuroda says global growth rebound seen delayed, signals easy bias. BOJ Governor Haruhiko Kuroda said any pickup in global economic growth will likely be delayed due to the widening fallout from the US-China trade tensions, signaling the bank’s readiness to ease monetary policy as early as this month. But he added the central bank will scrutinise various data “without any preconception” at its Oct 30-31 rate review, suggesting that additional monetary easing this month was hardly a done deal. “As we have been saying, we will ease policy without hesitation if there are heightened risks the economy will lose momentum for achieving our 2% inflation target,” Kuroda said. (Reuters)

Singapore: Exports continue to fall in Sept. Singapore's non-oil domestic exports continued to decline in Sept albeit at a slower pace, data from Enterprise Singapore showed Thursday. Non-oil domestic exports decreased 8.1% YoY in Sept, following a 9% fall in August. This was also slower than the expected 7.2% drop. Electronic NODX plunged 24.8%, while non-electronic NODX fell moderately by 2.3%. On a monthly basis, NODX decreased 3.3% after the previous month's 6.7% increase. NODX to the majority of the top marketsdecreased in Sept, except China and Taiwan. The largest contributors to the annual decline were the EU 28 and the US. (RTT)


Widad: Buys into company with RM861m concession for UiTM campus. Widad Group is buying Serendah Heights SB ho has a concession with the government and ÜiTM to develop the facilities and maintain the UiTM campus in Jasin, Melaka. According to Widad, Serendah Heights has a remaining concession of 14 years ending 2034, totalling RM861.6m. Widad has signed a heads of agreement with the shareholders of Serendah Heights to acquire their entire 90% stake. The purchase consideration of RM95.9m would be satisfied via cash of RM86.3m, and issuance of new shares in Widad with value of RM9.59m. “The proposed acquisition is in line with Widad’s principal activities of construction and integrated facilities management. (StarBiz)

KIP REIT: NPI rises 36%, declares 1.37sen distribution. KIP REIT’s net property income for 1QFY20 jumped 36% YoY to RM13.5m, helped by unrealised gain on an acquisition. KIP REIT had acquired AEON Mall Kinta City, which resulted in an unrealised fair value gain of RM13.2m that was partially offset by expenses incidental to the acquisition of RM3.5m. The trust’s gross revenue grew 19% YoY to RM18.49m, which was attributed to the new acquisition, on top of the improvement from existing assets. It noted that occupancy rate was almost flat at 86.5% from 86.3% a year earlier. “The investment properties in the Southern region, Central region and Northern region contributed 54.3%, 30.9% and 14.8% of KIP REIT’s total revenue respectively,” it said. The REIT declared distribution 1.37 sen per unit. (The Edge)

Perdana Petroleum: On track for turnaround in FY20. Perdana Petroleum (PPB) is on track to return to the black in FY20, since its shareholders have given their nod for the group’s proposed rights issue exercise, which forms a part of its debt restructuring plan. “Definitely next year, we will be able to turnaround, we will return to the black. We are cautiously confident nevertheless, given that we have gone through very difficult times in the last few years “We see better times ahead, as we have seen better utilisation and charter rates this year, which would go on to next year as well. Vessels are in high demand right now, as there is a shortage of vessels in Malaysian waters,” said Perdana Petroleum ED Bailey Kho. He added that offshore activities were seen to be picking up, noting that Dayang have seen an increase in drilling activities, which translates to better jobs outlook for PPB, given that the drilling companies require the services of the anchor handling tug supply (AHTS) vessels. (The Edge)

Agriculture: Go into vegetable and fruit farming – Dr M. In a bid to address the country's huge food import bill, Tun Dr Mahathir Mohamad said farmers should diversify and venture into vegetable and fruit farming as well using modern technology. The PM said this is why the government has advocated mixed farming to ensure a stable and better income for them. "They shouldn't rely on one particular crop alone for example because when the price drops, the farmer concerned will be affected," he said. Dr Mahathir said many of the vegetables and fruits now being imported can be cultivated in the country, similar to what the Arab nations are doing, with the use of vertical farming technology. This means they can produce the crops on a small piece of land but generate a huge income, he said. “The government hopes that farmers will be able to earn as much as the people working in the cities so that there is little difference in the income gap between the urban and rural communities,” he said. (The Edge)

Market Update

The FBM KLCI might end the week with a positive note after US stocks rose Thursday, stoked by solid earnings reports from Netflix, Morgan Stanley and others, as well as a preliminary Brexit deal that has the potential to remove a major obstacle facing investors. More than a tenth of the companies in the S&P 500 have reported results so far and numbers are mostly coming in ahead of analysts’ expectations. That gave the stock market some support a day after weak retail sales data raised concerns that a major component of the economy, American consumers, were slowing their spending. That combination pushed up two-thirds of the stocks in the S&P 500, which advanced 8.26 points, or 0.3%, to 2997.95 on Thursday. The broad index is now within 1% of its July 26 record. The Nasdaq Composite also rose, adding 32.67 points, or 0.4% to 8156.85. The Dow Jones Industrial Average, meanwhile, hung onto a small gain, rising 23.90 points, or 0.1%, to 27025.88. In Europe, the UK.’s FTSE 250 index, a gauge that includes local companies with significant domestic operations, pared back gains to 0.2%. The broader Stoxx 600 closed down 0.1%.

Back home, the FBM KLCI index lost 0.40 point or 0.03% to 1,574.50 points on Thursday. Trading volume decreased to 2.33bn worth RM1.88bn. Market breadth was negative with 393 gainers as compared to 413 losers. The regional markets finished mixed. The Hang Seng gained 0.69%, while the Nikkei 225 led the Shanghai Composite lower. They fell 0.09% and 0.05% respectively.

Source: PublicInvest Research - 18 Oct 2019

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