PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 5 Dec 2019, 9:14 AM


PublicInvest Research Headlines - 4 Nov 2019

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US: Construction spending climbs more than expected in September. Partly reflecting a jump in spending on public construction, the Commerce Department released a report showing a bigger than expected increase in US construction spending in September. The Commerce Department said construction spending climbed by 0.5% to an annual rate of USD1.294trn in September after falling by 0.3% to a revised rate of USD1.287trn in August. Economists had expected construction spending to edge up by 0.2% compared to the 0.1% uptick originally reported for the previous month. The bigger than expected increase in construction spending came as spending on public construction surged up by 1.5% to an annual rate of USD331.9bn in September from the revised August estimate of USD327.2bn. Spending on educational construction spiked by 3.1% to a rate of USD78.9bn, while spending on highway construction shot up by 2.6% to a rate of USD98.0bn. (RTT)

US: Manufacturing activity contracts at a slightly slower pace in October. Manufacturing activity in the US continued to contract in October but at a slightly slower pace, according to the Institute for Supply Management. The ISM said its PMI crept up 48.3 in October from 47.8 in September. Economists had expected the index to rise to 48.9. In the previous month, the index fell to its lowest level since hitting 46.3 in June of 2009, the last month of the Great Recession. The uptick by the headline index came as the new orders index climbed to 49.1 in October from 47.3 in September but still indicates a contraction. The employment index also rose to 47.7 in October from 46.3 in September, indicating employment in the manufacturing sector contracted at a slower rate. The Labor Department's monthly jobs report said the manufacturing sector lost 36,000 jobs in October, partly reflecting the strike at General Motors. (RTT)

US: October job growth beats expectations despite GM strike. US job growth slowed less than expected in October as the drag from a strike at General Motors was offset by gains elsewhere and hiring in the prior two months was stronger than previously estimated, offering some assurance that consumers would continue to support the slowing economy. While the monthly employment report showed the unemployment rate rising from a near 50-year low of 3.5% last month, that was due to an influx into the labor force, a sign of confidence in the jobs markets. The report supported the Federal Reserve’s decision to cut interest rates for the third time this year and signal a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008. The longest economic expansion on record, now in its 11th year, is being largely restrained by an almost 16-month trade war between the US and China, which has led to a contraction in business investment and manufacturing. (Reuters)

UK: Factory activity decline slowest in 6 months. UK manufacturing activity decreased at the slowest pace in six months in October, but remained constrained by ongoing political and economic uncertainties as output, new orders and employment continued to fall, survey data from IHS Markit showed. The seasonally adjusted IHS Markit/CIPS PMI rose to a six-month high of 49.6 in October from 48.3 in September. Economists had forecast a modest improvement to 48.1. The survey was conducted between October 11 and 28 ahead of the confirmation of the latest Brexit extension to January 31 and the government's decision to hold an early general election on December 12. In October, factory output fell at a slower pace and the decline was largely driven by  weaker demand from the domestic market. The weakness was partly offset by manufacturers who boosted production to build-up stocks ahead of the October-end Brexit deadline. (RTT)

China: Manufacturing sector expands most since early 2017. China's manufacturing sector logged its fastest expansion since early 2017 in October, data from IHS Markit showed. The Caixin manufacturing PMI rose unexpectedly to 51.7 from 51.4 in September. The reading was forecast to drop to 51.0. The index has now signaled an improvement in operating conditions for the third straight month, with the latest improvement the strongest since February 2017. "If the improvement in demand, including that generated by infrastructure projects and exports, is able to continue, the manufacturing sector can gradually build a foundation for stability." However, the manufacturing sector contracted the most since last February. The PMI dropped to 49.3 in October from 49.8 a month ago. (RTT)

HK: Retail sales decline slows in September. Hong Kong's retail sales decline slowed in September, figures from the Census and Statistics Department showed. The volume of retail sales fell 20.4% YoY in September, following a 25.2% decline in August. The value of retail sales decreased 18.3% annually in September, following a 22.9% fall in the previous month. Economists had expected a 25.6% decline. Sales of jewelry, watches and clocks, and valuable gifts declined 45.1% yearly in September and those of department stores, and clothing, footwear and allied products decreased by 25.5% and 23.2%, respectively. "Retail sales saw another month of significant YoY decline in September, as the local social incidents continued to take a heavy toll on inbound tourism and consumption-related activities," a government spokesman said. The volume of retail sales shrunk 19.5% YoY in 3Q, which was roughly similar to the record decline in the 3Q1998. (RTT)

Japan: Factory PMI falls to 40-month low. Japan's manufacturing sector moved deeper into contraction in October largely due to a sharp fall in new orders, survey data from IHS Markit showed. The Jibun Bank PMI dropped to 48.4 in October from 48.9 in September. The flash reading was 48.5. The reading reached its lowest level in nearly three and-a-half years. The fall in sales was partly reflective of the end of last minute purchases before the sales tax hike, which took effect in October. Total new orders fell the most since May 2016. With decrease in new work, manufacturers reduced their production. Nonetheless, employment levels increased at the fastest pace in six months. On the price front, input price inflation remained close to the level seen in September, which was the weakest for almost three years. Firms took advantage of the low cost inflation environment and discounted charges so as to boost sales. (RTT)

India: Manufacturing growth at 2 year low. India's manufacturing activity grew at the slowest pace in two years in October driven by weak orders and production, survey data from IHS Markit showed. The headline IHS Markit manufacturing PMI, decreased to 50.6 in October from 51.4 in September. Sales increased for the twenty-fourth month in a row in October but the upturn was the slowest over this period. Similarly, output expanded at the slowest rate in two years. New export orders at a quicker pace than seen in September signaling that the domestic market was the source of weakness. The overall cost burden declined with lower demand for raw materials and semi-finished items. At the same time, selling prices rose at the fastest pace in seven months. (RTT)


Genting Malaysia (Neutral, TP: RM3.30): UK unit buys Sweden listed LeoVegas subsidiary. Genting Malaysia's wholly-owned subsidiary Genting UK PLC has entered into an agreement to buy LeoVegas Mobile Gaming Group's subsidiary Authentic Gaming for EUR15m (about RM70m). (The Edge)

Comments: According to a market filing issued by Stockholm-listed LeoVegas AB, Genting is proposing to acquire its live gaming business (Authentic Gaming) for EUR15m, more than 100% return on its investment. With this acquisition, Genting plans to offer round-the clock gaming experience to its customers through devices without actual land-based casino. No further details were provided but we think the acquisition cost is steep, though it is only a small sum of investment for GENM considering its large cash pile of about RM7bn. Earnings impact is not likely to be material in near term. We maintain our Neutral call on GENM.

Media Prima (Underperform, TP: RM0.38): Assures fair compensation for affected employees. Media Prima, which is reportedly planning a retrenchment, will ensure that all affected employees of its “restructuring” receive a fair and equitable compensation package governed by the law and respective union requirements. The group said the compensation will be paid in full upon the fulfilment of all legal requirements. “The group will also provide support to staff which includes job outplacement services and career counselling,“ Media Prima said. (SunBiz)

Petron, Hengyuan: Port Dickson refineries resume normal operations. Petron Malaysia Refining & Marketing and Hengyuan Refining Company said that crude oil intake at their respective refineries in Port Dickson had returned to normal. Hengyuan said repair works to the underwater valve were completed on Oct 31, 2019 and the crude intake to its refinery had returned to normal operational levels. “The company is still in the process of investigating the causes of damage and assessing its financial impacts,” it said. (SunBiz)

Green Packet: Inks MOU with China Mobile to explore opportunities. Green Packet has entered into a MOU with China Mobile Group Device Co Ltd to develop and explore a range of opportunities in promoting, selling and distributing each party’s products and services. The MOU will be valid for a year and will be renewable by agreement between the parties. (SunBiz)

Ivory Prop: Disposes of its 45% stake in Penang property development firm for RM56m. Ivory Properties Group is disposing of its 45% interest in a Penang-based property development company for RM56.1m. The buyer is Hemat Tuah SB, which currently owns the other 55% stake in the company, Tropicana Ivory SB (TISB). Ivory said the disposal of the stake will enable it to realise gains from its investment in TISB and focus on other project developments. (The Edge)

Cycle & Carriage: Sinks into fourth straight quarter of losses on lower volume and margins. Cycle & Carriage Bintang (C&C) has sunk into its fourth straight quarter of losses, posting a net loss of RM12.24m in its 3QFY19, against a net profit of RM3.5m in the previous corresponding quarter, due to lower sales and weaker margins. This has resulted in its recorded loss per share of 12.15 sen for 3QFY19 versus EPS of 3.48 sen for 3QFY18. (SunBiz)

Market Update

  • The FBM KLCI might open stronger today after US stocks ended sharply higher Friday, with the S&P 500 and Nasdaq Composite indexes surging to fresh records, and the Dow eyeing one of its own, after the Labor Department estimated the US economy added 128,000 new jobs in October and upwardly revised its estimate of employment growth in September and August. The stock market rally came despite indications the US manufacturing sector was still contracting in October, though slightly less fast than in the previous month. The Dow Jones Industrial Average rose 301.13 points, or 1.1%, to 27,347.36. The S&P 500 index touched a fresh high after gaining 29.35 points, or 1%, to 3,066.91. The Nasdaq Composite index jumped 94.04 points, or 1.1%, at 8,386.40. The US economy created 128,000 new jobs in October, above economist’s estimates of a 75,000 gain, while the unemployment rate ticked higher to 3.6%, in line with expectations. Furthermore, the government revised up the number of jobs created in August and September by a total of 95,000. Wage growth rose by 0.2% in October and 3% from a year ago at a slightly lower pace than earlier in the year, but still faster than overall consumer prices. In Europe, stocks were trading mostly higher, as evidenced by the Stoxx Europe 600’s 0.7% gain.
  • Back home, the FBM KLCI index lost 4.64 points or 0.29% to 1,593.34 points on Friday. Trading volume decreased to 2.79bn worth RM1.64bn. Market breadth was negative with 353 gainers as compared to 451 losers. In the region, stocks closed mostly higher; the China CSI 300 added 1.7%, Hong Kong’s Hang Seng index advanced 0.7%, while Japan’s Nikkei fell 0.3%.

Source: PublicInvest Research - 4 Nov 2019

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