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Author: PublicInvest   |   Latest post: Wed, 11 Dec 2019, 9:46 AM

 

PublicInvest Research Headlines - 18 Nov 2019

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Economy

US: Retail sales rise modestly, factory output tumbles. US retail sales rebounded moderately in Oct although consumers did cut back on purchases of big-ticket household items like furniture and discretionary spending, which could temper expectations for a strong holiday shopping season. Signs from the Commerce Department report that consumer spending was slowing faster than economists had expected, and news that production at factories tumbled again in Oct. (Reuters)

US: Business inventories unexpectedly unchanged in Sept. A report released by the Commerce Department showed business inventories in the US were virtually unchanged in the month of Sept. The business inventories came in unchanged in Sept after edging down by 0.1% in Aug. Economist had expected inventories to inch up by 0.1%. Business inventories came in unchanged as wholesale inventories fell by 0.4%, offsetting increases in retail and manufacturing inventories, which rose by 0.2% and 0.3%, respectively. (RTT)

US: Industrial production slumps due to strike at GM. Industrial production in the US fell by much more than expected in the month of Oct, according to a report released by the Federal Reserve, with manufacturing production showing a notable decrease due to the since resolved strike at General Motors (GM). The industrial production tumbled by 0.8% in Oct after falling by a revised 0.3% in Sept. The steep drop reflected the biggest decrease in production since May of 2018. (RTT)

US: Import prices fall 0.5% in Oct amid steep drop in fuel prices. Import prices in the US fell by much more than expected in the month of Oct, according to a report released by the Labor Department. The import prices slid by 0.5% in Oct after inching up by a revised 0.1% in Sept. Economists had expected import prices to dip by 0.2% compared to the 0.2% uptick originally reported for the previous month. The bigger than expected decrease in import prices was driven by lower petroleum prices which plummeted by 3.7%. (RTT)

EU: ECB’s Muller says more assets could join stimulus list in slump. European Central Bank policy maker Madis Muller said the central bank could broaden its asset-purchase program, if the economic situation in the euro area deteriorates significantly. Muller cited the Japanese and Swiss central banks as examples of policy makers pursuing wider stimulus efforts than in the eurozone. The comments come as the ECB struggles to revive inflation through stimulus measures. (Bloomberg)

China: Major cities drag on new home prices in Oct. China’s new home prices maintained steady growth in Oct but soft patches emerged in the country’s larger cities where momentum slowed, suggesting local authorities could relax some anti-speculative measures to prop up faltering demand. Average new home prices in China’s 70 major cities rose 0.5% in Oct from the previous month, in line with Sept’s growth and marking the 54th straight month of gains, based on National Bureau of Statistics (NBS) data. Most of the 70 cities surveyed by the NBS still reported monthly price increases for new homes. (Reuters)

Hong Kong: Confirms economy fell into recession amid protests, trade war. Hong Kong sank into recession for the first time in a decade in the 3Q, government data confirmed, weighed down by increasingly violent anti-government protests and the escalating US-China trade war. The economy shrank by 3.2% in July-Sept from the previous quarter on a seasonally adjusted basis, revised government data showed, in line with a preliminary reading. GDP contracted for the second consecutive quarter, meeting the technical definition of a recession. (Reuters)

Singapore: Home sales fall in October. Singapore private home sales decreased sharply in October, the Urban Redevelopment Authority reportedly said on Friday. Home sales totaled 928 units in October compared to 1,270 units in September. However, this was around 85% higher than in the same period of last year. Developers launched 892 units for sale, which was below 1,714 units launched in September. Including executive condominiums, developers moved 955 units in October versus 1,298 units a month ago. (RTT)

Markets

IHH (Outperform, TP: RM7.00): Fortis takeover faces fresh legal hurdle after court order. India’s Supreme Court refused to remove a barrier to the takeover of embattled hospital chain Fortis Healthcare Ltd by Malaysian operator IHH Healthcare. (The Edge)

Comments: To recap, after acquiring 31.1% controlling stake in Fortis, IHH aims to obtain another 26% stake in Fortis through an open offer. However, the Supreme Court of India has halted the open offer due to legal proceedings between Daiichi Sankyo and Fortis’ previous promoters, the Singh brothers. We do not expect this to impact IHH nor Fortis significantly as IHH has already gained board control over Fortis. However, we expect a further delay in IHH obtaining the remaining 26% stake in Fortis. Maintain Outperform , with a TP of RM7.00.

Dayang (Neutral, TP: RM1.80): Issues RM682.5m sukuk murabahah. Dayang Enterprise Holdings (DEHB) has completed its issuance of RM682.5m in nominal value of Sukuk Murabahah in two tranches. “Tranche 1 Sukuk Murabahah of RM455m is secured by a list of specified securities while Tranche 2 Sukuk Murabahah of RM227.5m is unsecured but is guaranteed by Danajamin Nasional,” it said. DEHB said the proceeds shall be utilised to part finance the settlement sum, including the principal and profit/interest amounts due for certain specified financing facilities of DEHB and its group of companies. (SunBiz)

Press Metal: Acquires 25% stake in Indonesian alumina firm for RM333m. Press Metal Aluminium Holdings inked an agreement to take up a 25% stake in PT Bintan Alumina Indonesia (PT BAI) for USD80.2m (RM333.36m). PT BAI is building a million-tonne alumina refinery plant in Indonesia’s Bintan island, with plans for a second phase. It said the USD66.2m of purchase consideration will be secured through bank borrowings, and the remaining USD14m via internally-generated funds. (The Edge)

GDB: Secures RM67.9m Autohaus contract. GDB Holdings has secured a RM67.9m construction contract as it has been appointed as the main contractor for Hap Seng Star Mercedes-Benz Autohaus in Setia Alam, Selangor. The contract entails the construction of a 3S (sales, service and spare parts) Autohaus, comprising a seven-story block, which consists of a ground floor and six storeys with two mezzanine floors and a rooftop. The contract will be for a duration of 15 months, to Feb 27, 2021. (SunBiz)

SunCon: Sued by property developer over LRT3 project. Sunway Construction Group’s (SunCon) wholly-owned subsidiary Sunway Construction SB (SCSB) and Prasarana Malaysia have been served a writ of summon and a statement of claim by property developer PNSB Acmar SB for over RM711.4m in damages due to the LRT3 project. “SunCon is currently seeking the professional advice of its solicitors on the matter and will make further announcement on the developments in due course,” the group said. (The Edge)

Coastal Contracts: To sell two low-end vessels and charter two offshore support vessels. Coastal Contracts said its wholly-owned subsidiaries Coastal Marine Pte Ltd and Coastal International Marine Inc have secured contracts for the sale of two units of low-end vessels. Coastal Marine and another subsidiary, Coastal Dynamic Pte Ltd, have also been awarded with charter contracts for two units of offshore support vessels, the group said. The tenure for the charter contract is less than one year, Coastal Contracts said. (The Edge)

Market Update

The FBM KLCI might open higher today as the Dow Jones Industrial Average marked history last Friday Friday by finishing at a round-number milestone at 28,000, but the blue-chip benchmark couldn’t have scaled the thousand-point milestone without a rally in Apple and shares of Home Depot. The Dow closed up 222.93 points, or 0.8%, to help it finish at a record 28,004.89, representing the blue-chip index’s 11th record close of 2019 and its first 1,000- point milestone since July 11. The moves for the Dow on Friday came as the S&P 500 index added 0.8% and the Nasdaq Composite ros e0.7%, which also finished at all-time closing highs. For the full year so far, the Dow is up about 20%, the S&P 500 has gained 24.5%, while the Nasdaq has climbed nearly 29% in the year to date. European markets finished higher with the CAC 40 added 0.65% while Germany's DAX rose 0.47% and London's FTSE 100 tacked on 0.14%.

Back home, the FBM KLCI index gained 1.20 points or 0.08% on Friday. Trading volume increased to 2.69bn worth RM1.69bn. Market breadth was negative with 382 gainers as compared to 423 losers. The regional markets finished mixed with the Hang Seng gained 0.01%, while China's Shanghai Composite was off 0.64%. Shares in Japan were unchanged with the Nikkei 225 at 23,303.30.

Source: PublicInvest Research - 18 Nov 2019

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