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Author: PublicInvest   |   Latest post: Fri, 13 Dec 2019, 10:07 AM

 

PublicInvest Research Headlines - 13 Nov 2019

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Economy

US: Fed's Harker says he opposed last rate cut, thinks rates should stay put. Philadelphia Federal Reserve Bank President Patrick Harker said on Tuesday he did not support the Fed’s last rate cut in Oct and that the central bank should keep policy steady. “I’m of the mind that we stay put for now and see how things work out,” Harker said. The policymaker said he thinks rates are currently neutral or “slightly accommodative” and that he doesn’t think lower rates will be enough to encourage spending by businesses being held back by trade uncertainty. He said he expects the economy to grow slightly above trend and inflation to increase slowly to reach the Fed’s 2% target. (Reuters)

US, China: Trump says China trade deal 'close' but dashes hopes for signing details. President Donald Trump on Tuesday dangled the prospect of completing an initial trade deal with China “soon,” but offered no new details on negotiations in a campaign-style speech touting his administration’s economic record. Trump said US and Chinese negotiators were “close” to a “phase one” trade deal, but largely repeated well-worn rhetoric about China’s “cheating” on trade. “They are dying to make a deal. We’re the ones that are deciding whether or not we want to make a deal,” Trump said. “We’re close,” he said. “A significant phase one trade deal with China could happen. Could happen soon. But we will only accept a deal if it’s good for the US and our workers and our great companies.” (Reuters)

EU: German ZEW economic confidence strengthens sharply. German economic confidence strengthened sharply to a six-month high in Nov on rising hopes of an improvement in the global economic environment, survey data from the ZEW - Leibniz Centre for European Economic Research in Mannheim showed on Tuesday. The ZEW Indicator of Economic Sentiment rose more-than-expected to -2.1 in Nov from -22.8 in the previous month. A similar higher reading was last seen in May. The expected reading was -13.0. The indicator measuring the current situation, rose slightly to -24.7 in Nov from -25.3 in the previous month. "There is growing hope that the international economic policy environment will improve in the near future, which explains the sharp rise in the economic sentiment," ZEW President Achim Wambach said. "Punitive tariffs on car imports from the EU to the US are also less likely than the projections a few weeks ago," Wambach added. (RTT)

EU: France GDP growth to slow in 4Q - BoF. France economic growth is expected to slow slightly in the fourth quarter, survey data from the Bank of France showed Tuesday. GDP is forecast to grow 0.2% in the 4Q, which is slower than the 0.3% expansion seen in the 3Q. The confidence index in manufacturing rose to 98 in Oct from 96 in Sept. The reading was expected to rise marginally to 97. Business leaders forecast industrial production to slow down in Nov, particularly  in the automotive sector. Meanwhile, the services confidence index fell to 98 from 99 in the previous month. Services activity expanded moderately in Oct. Business leaders expect the same pace of growth in Nov. The confidence index in construction held steady at 105 in Oct. Although activity remained strong in Oct, business leaders expect growth to be weaker in Nov. (RTT)

UK: Grocery sales down 1% over past 12 weeks - Kantar. UK supermarket sales grew 1% YoY in the past 12 weeks, data from market research group Kantar showed on Tuesday. The results are based on Kantar Worldpanel FMCG data for the 12 weeks to Nov 3. "The increase is slightly behind the equivalent rate last month, against a backdrop of political uncertainty and a persistently wet autumn," the firm said. Grocery inflation was 0.8% for the 12-week period ending Nov 3. Preparations for Halloween translated into a 6% increase in pumpkin sales in Oct this year. Over the past decade pumpkin sales have increased 62%. In the run up to Christmas, an average UK household is expected to spend more than GBP380 on groceries during Dec, Kantar said. (RTT)

UK: Employment falls in 3Q. The UK labor market remained weak in the 3Q as employment and vacancies declined notably ahead of general election. The employment rate fell by 0.1%age point to 76% in the 3Q, the Office for National Statistics reported Tuesday. Employment declined by 58,000 to 32.7m in the 3Q. The number of vacancies declined by 53,000 annually, which was the strongest fall since late 2009. The ILO unemployment rate dropped to 3.8% in the 3Q from 3.9% in the preceding period. Unemployment decreased by 23,000 to 1.3m. Average earnings including as well as excluding bonus, increased 3.6% each in the 3Q. This was slower than the expected 3.8%. In Oct, the claimant count rose to 3.4% in Oct from 3.3% in Sept. A similar higher rate was last seen in Feb 2014. At the same time, the number of people claiming unemployment benefits increased by 33,000 in Oct from the previous month, which was above than the expected level of 24,200. (RTT)

Japan: GDP growth likely slowed on net export drag. Japan’s GDP growth probably slowed further in 3Q, as stronger domestic demand drove up imports, leading to a heavy drag from net exports. Spending and investment likely picked up across the board ahead of a sales-tax hike, setting the economy up for a slump in 4Q. Bloomberg Economics estimates GDP expanded 1.0% QoQ (seasonally adjusted, annualized), slowing from growth of 1.3% in 2Q and 2.2% in 1Q. Private consumption, business investment, housing investment, and public investment likely all boosted GDP. Pushing the other way, net exports were probably a drag on growth. (Bloomberg)

Australia: Business confidence rises in Oct. Australia's business confidence as well as conditions improved slightly in Oct but remained below average, survey data from National Australia Bank showed Tuesday. The business confidence index rose two points to +2 in Oct. Likewise, the business conditions index edged up one point to +3. The improvement in conditions was driven by an uptick in trading and profitability with the employment index flat. "Overall, our assessment is that while the forward-looking indicators were slightly more positive in the month, we expect more of the same regarding the run of below average reads for conditions," Alan Oster, NAB group chief economist, said. "We will be closely watching the forward-looking indicators for a sustained pick-up which could translate to a more material improvement in conditions," Oster added. (RTT).

Markets

Sime Darby (Outperform, TP: RM2.54): Not in a hurry to divest non-core assets, says group CEO. Sime Darby is looking at trimming its non-core assets as part of its five-year plan to create value for the group two years after its demerger exercise. Its group CEO Datuk Jeffri Salim Davidson said the group had seen good progress in its non-core asset rationalisation plan, with some divestment exercises completed FY19. These include the disposal of Weifang Sime Darby Water Management Co Ltd and Sime Darby Global Service Centre, as well as exiting Fiat and Alfa Romeo in Australia. (The Edge)

TNB (Neutral, TP: RM14.12): Liable to pay damages for floods in Bertam Valley. TNB has failed in its final bid to appeal a court decision that found the company liable for causing flash floods in Bertam Valley in the Cameron Highlands six years ago. The utility giant is therefore required to pay damages to the 100 residents who had filed a negligence suit over the loss of four lives and the destruction of property due to the floods. The apex court also ordered TNB to pay RM20,000 costs to the residents for the failed appeal. (The Edge)

MUI Properties: To own 40.73% of Australian gold exploration firm after exercising share conversion. MUI Properties said it will be converting an AUD1.5m secured convertible note in an Australian gold exploration company into ordinary shares. It will convert the notes into 132.47m ordinary shares of Nex Metals Explorations Ltd, representing 40.73% of the enlarged share capital of Nex Metals at an issue price of AUD0.01338 per ordinary share. (The Edge)

Prestariang: Independent auditors raise concerns. Prestariang’s independent auditors Messrs. Crowe Malaysia PLT has included a statement of material uncertainty related to going concern in its independent auditors' report. Prestariang said the opinion was based on the termination of Sistem Kawalan Imigresen Nasional (SKIN) project by the government. The group filed a legal suit against the government to recover the sums due under the SKIN project. (StarBiz)

London Biscuits: Defaults rise to RM111.7m as it fails to pay RHB Bank. London Biscuits has again defaulted — this time on principal payments to RHB Bank that amounted to RM22.52m. It said the default was due to “cash flow constraint”. The group previously announced that it had defaulted on payments amounting to RM89.19m to seven banks between June 19 and Sept 20 this year. (The Edge)

Nestle: 3Q net profit up 8.2% to RM149m. Nestle (Malaysia) posted stronger net profit in the 3QFY19 as it focused on driving sustainable efficiencies and savings and it declared an interim dividend of 70 sen per share. Its net profit rose by 8.2% YoY to RM148.99m. Its CEO Juan Aranols said the strong growth in profit margins was driven by robust domestic sales and its steady focus on driving efficiencies and savings to build bottom line resiliency in the face of external cost pressures. (StarBiz)

Damansara Realty: 3Q net profit doubles to RM3.85m. Damansara Realty’s net profit rose by 106% YoY to RM3.85m in 3QFY19, boosted by other income and share of profit of an associate company. It said its integrated facilities management (IFM) recorded a decline in revenue at RM201.31m, mainly due to lower occupancy at the Rapid Temporary Executive Villa, Pengerang, Johor and expiration of its maintenance contract in KLIA. (StarBiz)

Market Update

The FBM KLCI might open with a positive bias as US stocks mostly finished higher on Tuesday after President Donald Trump suggested a trade deal with China could happen soon but did not offer clarity on a rollback of import tariffs. In a largely political speech in New York, Trump claimed credit for economic growth, low unemployment, and a stock market at record highs, but again attacked Federal Reserve monetary policy before claiming that a US - China trade deal was “close”. The Dow Jones Industrial Average finished unchanged at around 27,691.49, the first completely flat close since April, 24, 2014. The S&P 500 index advanced around 5 points, a gain of less than 0.2%, to finish near 3,091.84, near to its previous all-time closing high of 3093.08 set on Nov. 8. The Nasdaq Composite Index added 22 points, or 0.3%, to end at 8,486.09, surpassing its previous all-time close. News reports also suggested Trump may put off for another six months a decision on whether to place tariffs of up to 25% on European auto imports, ahead of the Wednesday deadline. In Europe, the Stoxx Europe 600 gained 0.4%.

Back home, the FBM KLCI index gained 1.58 points or 0.10% to 1,609.73 points on Tuesday. Trading volume increased to 2.49bn worth RM1.82bn. Market breadth was positive with 416 gainers as compared to 397 losers. In Asia overnight, the China CSI 300 gained less than 0.1%, and the Shanghai Composite rose 0.2%. Hong Kong’s Hang Seng Index added 0.5% despite fresh protests flare-ups, while Japan’s Nikkei 225 Index advanced 0.8%.

Source: PublicInvest Research - 13 Nov 2019

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