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Author: PublicInvest   |   Latest post: Mon, 9 Dec 2019, 9:31 AM

 

PublicInvest Research Headlines - 14 Nov 2019

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Economy

US: Fed chief Powell pushes back on negative interest rates. US Federal Reserve Chair Jerome Powell on Wednesday pushed back against a favorite talking point of President Donald Trump’s, telling Congress that the negative interest rates sought by Trump aren’t appropriate for a US economy with ongoing growth, a strong labor market and steady inflation. “Negative interest rates would certainly not be appropriate in the current environment,” Powell said. (Reuters)

US: Consumer prices increase more than expected in Oct. US consumer prices rebounded more than expected in Oct and underlying inflation picked up, which together with abating trade tensions and fears of a recession, support the Federal Reserve’s signal for no further interest rate cuts in the near term. The Labor Department said on Wednesday its consumer price index increased 0.4% last month as households paid more for energy products, healthcare, food and a range of other goods. That was the largest gain in the CPI since March and followed an unchanged reading in Sept. In the 12 months through Oct, the CPI increased 1.8% after climbing 1.7% in Sept. (Reuters)

US: Falling rents in New York, Boston hold back core inflation. The unexpected slowdown last month in a critical measure of US inflation was partly driven by cooling housing rents in the once-hot markets of New York and Boston. The greater New York area saw prices paid for rents of primary residence fall 0.1% from the prior month, according to details of the Labor Department’s inflation data released Wednesday. That matches the biggest decline in the New York-Newark-Jersey City area in five years. In the Boston region, rents declined 0.2% from the prior month. (Bloomberg)

US, China: Trump threat of more China tariffs could hit consumer goods before Christmas. US President Donald Trump’s threat to jack up US tariffs on Chinese goods if the world’s two largest economies fail to reach a trade deal could raise the price of cellphones, laptops, and toys less than two weeks before Christmas. Trump on Tuesday said a trade deal with China was “close,” but offered no details and warned that he would raise tariffs “substantially” on Chinese goods without a deal. White House advisers said last week the Dec 15 tariffs would likely be averted if a “phase one” trade deal was reached. (Reuters)

EU: Eurozone industrial production falls less than expected in Sept. Eurozone's industrial production decreased at the slowest pace in four months in Sept, which was also less severe than the fall economists had predicted. Industrial production decreased 1.7% YoY following a 2.8% slump in Aug. Economists had forecast a 2.3% decline. The latest drop in industrial production was the slowest since May, when output fell 0.8%. Production decreased across all categories of goods except non-durable consumer goods which logged an increase. The biggest fall of 3.9% was logged in the production of intermediate goods and the pace of decline was faster than the previous month. (RTT)

UK: Consumer price inflation at 3-year low. UK consumer price inflation eased more-than-expected in Oct to its lowest level in three years, due to lower utility costs, thanks to the lowering of the energy price cap. The consumer price index rose 1.5% YoY following a 1.7% increase in Sept, figures from the Office for National Statistics showed on Wednesday. Economists had expected the inflation rate to drop to 1.6%. The latest inflation rate was the lowest since Nov 2016, when it was 1.2%. "A fall in utility prices due to a lowering of the energy price cap helped ease inflation in October," ONS spokesperson said. "However, this was partially offset by rising clothing prices." Gas and electricity prices for households decreased 8.7% and 2.2%, due to the lowering of the six-month energy cap by the Office of Gas and Electricity Markets, or Ofgem. (RTT)

India: Headline inflation breaches central bank’s threshold. India’s retail inflation quickened for the third straight month in Oct, breaching the central bank’s 4% medium-term target and possibly slowing the pace of monetary policy easing. Consumer prices rose 4.6% last month from a year earlier, the Statistics Ministry said. That is higher than the 4.35% median estimate in a Bloomberg survey of 34 economists. Food and beverage inflation rate accelerated to 6.9%, fuelled by a more than 26% surge in prices of vegetables, including onion that forms the base of the Indian gravy. Pulses and products gained 11.7%, while fuel and light prices fell 2.02%. (Bloomberg)

Japan: Economy decelerates further amid export slump. Japan’s economy slowed again in the 3Q as the global trade slump hit exports. Consumer spending before last month’s sales tax hike and stronger business investment prevented a sharper deceleration. GDP grew at an annualized 0.2% in the three months through Sept from the previous quarter, the Cabinet Office said Thursday. Economists had forecast a 0.9% expansion. Growth has slowed two quarters running. Prime Minister Shinzo Abe called last week for a stimulus package to help recovery efforts from recent natural disasters and to support the economy against downside risks. The size and timing of the measures have yet to be announced, but government spending is likely to be a key prop for the economy over the coming quarters. (Bloomberg)

Markets

Dialog (Outperform, TP: RM4.10): Looking for upstream assets. Dialog believes that the time is right to expand its upstream operations through new asset acquisitions. Its co-founder and executive chairman Tan Sri Ngau Boon Keat has said that the company is scouting for asset-buying opportunities in the market at a good price tag. Dialog aims to increase its earnings contribution from the upstream segment to one third of its net profit. Currently, the upstream business contributes about 20% of Dialog’s net profit. (StarBiz)

Sime Darby Property (Outperform, TP: RM1.30): Partnering with Mitsui Malaysia and Mitsubishi Estate to develop Bandar Bukit Raja Industrial Gateway. Sime Darby Property has partnered Mitsui & Co Ltd and Mitsubishi Estate Co Ltd to develop Bandar Bukit Raja Industrial Gateway (BBRIG), which will offer land lease and Built-to Suit (BTS) services to business owners. Sime Darby Property said the BBRIG development will offer 10 plots of land choices for lease while the construction of the factory or warehouse service will be offered by a JV company of Sime Darby Property and Mitsui Malaysia. (The Edge)

KNM: Receives additional RM21.5m contract for Thai refinery project. KNM Group has accepted an additional purchase order from PSS Netherlands B V Sharjah Branch worth USD5.18m (c.RM21.52m) for the supply of shell and tube heat exchangers for the Clean Fuels Project in Thailand. To date, KNM has received a total sum of RM95.15m in contract awards from PSS Netherlands for the project in Sriracha. (StarBiz)

NetX, PUC: Explore collaboration to invest in micro-financing credit industry. NetX Holdings and PUC have signed a MoU to explore the manner in which the two companies can collaborate to jointly expand, promote and strengthen their presence in the e commerce and financial technology (e-payment) industry. "Through the collaboration, the company intends to invest in a micro-financing credit industry that possesses the platform and technology to potentially disrupt current conventional micro-financing credit service providers that will place the company in a pioneer position in the future," said NetX. (The Edge)

Petronas Chemicals: 3Q net profit more than halves on lower EBITDA. Petronas Chemicals’ (PetChem) 3QFY19 net profit fell 54% YoY to RM553m. On prospects, PetChem said the results of the group’s operations are expected to be primarily influenced by global economic conditions, forex movements, utilisation rate of its production facilities and petrochemical products prices, which have a high correlation to crude oil price, particularly for the olefins and derivatives segment. (The Edge)

Malayan Flour Mills: Positive on prospect as it returns to the black in 3Q. Malayan Flour Mills (MFM) returned to the black with a net profit of RM20.7m in 3QFY19, from a net loss of RM5.19m in the 3QFY18, thanks to higher sales in its flour and grains trading segment, as well as its poultry integration segment. MFM said the poultry integration segment’s return to profit was due to higher margins because of improved live bird prices and lower production costs, while broiler production volume was slightly higher as day-old chicks (DOC) production volume rose. (The Edge)

Market Update

The FBM KLCI might rebound at opening today after the Dow Jones Industrial Average and benchmark S&P500 index both closed at new records Wednesday, helped by a jump in Disney’s stock price, as a five week rally rolled on. Factors supporting the rally include the prospect of a US - China trade deal, the move by the Federal Reserve to cut interest rates three times this year and resume buying short dated debt to add liquidity to money markets, and a surge in government spending as the federal budget deficit rises toward $1 trillion. The Dow Jones Industrial Average rose 92.10 points, or 0.33%, at 27,783.59. The S&P 500 edged up 2.20 points or 0.07%, to 3,094.04, but the Nasdaq slipped 3.99 points or 0.05%, to 8,482.10. In US economic data, the US federal government’s budget deficit in October rose 34% from a year earlier to $134.5 billion, putting the US on course to top the $1 trillion mark in fiscal 2020 for the first time in eight years, or nearly 5% of gross domestic product. In other data, US inflation was slightly higher than expected in October. The consumer price index was up 0.4% during the month, as Americans paid higher prices for gasoline, medical treatment and recreation in October, but overall, inflation remained stable. For the year the cost of living rose 1.8%. In Europe, the Stoxx Europe 600 fell 0.3%.

Back home, the FBM KLCI index lost 12.51 points or 0.78% to 1,597.22 points on Wednesday. Trading volume decreased to 2.14bn worth RM1.74bn. Market breadth was negative with 287 gainers as compared to 589 losers.

In the region, the China CSI slipped 0.1% and Hong Kong’s Hang Seng Index fell 1.8%, while Japan’s Nikkei 225 Index gave away 0.9%.

Source: PublicInvest Research - 14 Nov 2019

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