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Author: PublicInvest   |   Latest post: Thu, 12 Dec 2019, 9:19 AM

 

PublicInvest Research Headlines - 19 Nov 2019

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Economy

US: Homebuilder confidence shows slight pullback in Nov. After reporting an unexpected improvement in US homebuilder confidence in the previous month, the National Association of Home Builders released a report showing confidence edged slightly lower in the month of Nov. The NAHB/Wells Fargo Housing Market Index slipped to 70 in Nov after climbing to 71 in Oct. Economists had expected the index to come in unchanged. The modest decrease came after the housing market index rose for four straight months to reach its highest level since hitting a matching reading in Feb of 2018. The slight pullback by the headline index came as the index gauging current sales conditions fell to 76 in Nov from 78 in Oct. (RTT)

US: Growth outlook in 2020 improves despite trade risk - Fannie Mae. Fannie Mae upgraded its forecast for 2020 US economic growth to 1.9% from 1.7%, arguing that consumer spending and the housing market will buoy GDP if a “phase one” trade deal between the US and China is signed. The government-sponsored enterprise is betting not only that a deal will be passed, but that it will happen in time for the Dec. 15 tariffs on Chinese goods to be scrapped. Nevertheless, the agency says that a breakdown in negotiations represents a key risk to US growth. And while it expects a short-term easing of trade tensions, a comprehensive deal is unlikely. The trade war has already eaten away at US growth. (Reuters)

EU: German business lobby, labour union jointly calls on Berlin to boost public investment. Germany’s BDI industry association and the DGB trade union called in a rare joint statement for the government to rethink its budget priorities and massively boost public investment to make Europe’s largest economy fit for future growth. The unusual move by Germany’s most influential business lobby group and the country’s largest umbrella union show how much public debate has shifted in a country long obsessed with its “black zero” budget policy of no new debt. With the economy barely growing and Berlin’s borrowing costs at record lows, Chancellor Angela Merkel and Finance Minister Olaf Scholz are facing growing pressure at home and abroad. (Reuters)

EU: Bundesbank says German economy to remain weak in Q4, recession unlikely. Germany's economy is set to remain weak in the final three months of the year, but a recession is unlikely, the Bundesbank said in its monthly report. The bank expects "The current period of weakness in the German economy to continue in the final quarter of 2019". "However, no appreciable tightening is to be expected." "There currently no reason to fear than Germany will slide into a recession," the bank added. Citing these, the Bundesbank said there are signs that the downtrend in the industry may slow down. "The domestic economy should continue to provide a boost," the bank added. Germany's economy expanded a modest 0.1% in the 3Q supported by consumption. (RTT)

UK: Households signal strain on finances. A measure of UK household finance remained unchanged in Nov and continued to signal a negative assessment, data from IHS Markit showed. The household finance index remained unchanged at 44.4 in Nov, same as in Oct, remaining indicative of a negative assessment towards current finances by households. The latest reading was the joint-highest since Jan. A measure reflecting the outlook for financial health over the coming 12 months also remained stuck in downbeat territory in Nov. Those employed in retail and manufacturing sectors reported a negative outlook towards job security. Meanwhile, the growth of both incomes from employment and workplace activity was registered in Nov. (RTT)

China: Cuts short term lending rate for first time since 2015. China's central bank unexpectedly cut its short-term lending rate, which was the first reduction in over four years, in a bid to boost slowing growth. The People's Bank of China lowered the seven-day repurchase rate to 2.50% from 2.55%. That was the first cut since Oct 2015. Earlier this month, the bank had cut its medium term lending rate for the first time since 2016 as the economy grew at the slowest pace in nearly three decades. The one year medium-term lending facility rate was lowered by five basis points to 3.25% from 3.30%. Capital Economics expects further cuts in the coming months that shall pave the way for lower interbank rates and prompt banks to cut lending rates. (RTT)

Hong Kong: Jobless rate rises in Oct. Hong Kong's jobless rate rose during the Aug to Oct period, data from the Census and Statistics Department showed. The unemployment rate increased to 3.1% during the Aug to Oct period from 2.9% during the three-month ended in Sept. The number of unemployed persons increased by 5,100 persons to 125,400 in the three months ended in Oct from 120,300 in the previous three months. The number of employed persons decreased by 11,600 persons to 8.438bn during the Aug to Oct period. The labor market eased further as economic conditions continued to worsen. The unemployment rate of the consumption- and tourism-related segment, increased to 5.0% the highest since the beginning of 2017. (RTT)

Thailand: Growth slows, Govt cuts forecast. Thailand's economy grew at a slower-than-expected pace in the 3Q and the government cut its growth forecast for this year. GDP grew 2.4% YoY, data from the National Economic and Social Development Council showed, which was slower than the 2.6% economists had forecast. In the 2Q, the economy grew 2.3%. Following the data, the government slashed its growth forecast for this year to 2.6% from 2.7% - 3.2% predicted in Aug. 3Q growth was supported by increases in private and government final consumption expenditure and investment, however exports and imports of goods continuously contracted. Private consumption growth slowed to 4.2%, while state spending rose at a faster pace of 1.8%. (RTT)

Singapore: Exports fall further in Oct. Singapore's non-oil domestic exports continued to decline in Oct, data from Enterprise Singapore showed. Non-oil domestic exports decreased 12.3% YoY in Oct, following a 8.1% fall in Sept. Economists had expected a 10.0% drop. Electronic NODX declined 16.4%, while non-electronic NODX fell by 11.0%. On a monthly basis, NODX decreased 2.9% in Oct, following a 3.3% fall in the previous month. NODX to the majority of the top market decreased in Oct, except Taiwan. The largest contributors to the annual decline were from Japan, EU 28 and the US. (RTT)

Markets

Serba Dinamik (Outperform, TP: RM5.38): Upbeat on FY20 prospects. Serba Dinamik Holdings MD and CEO Datuk Dr Mohd Abdul Karim Abdullah is feeling upbeat about the prospects of the company next year, thanks to better-than-expected order book performance as well as favourable growth catalysts from improved trade war sentiments. He said that the company remains on a strong footing and expects to continue doing well for FY19. For FY20, he said the company is also maintaining its annual growth target of about 15% to 20% in top line and bottom line. The group is targeting an order book of about RM15bn. (The Edge)

Pharmaniaga: Confirms interim 25-month Health Ministry contract Pharmaniaga confirmed that it has bagged a contract from the Ministry of Health (MoH) for an interim period of 25 months from Dec 1, 2019 to Dec 31, 2021. The group said that its wholly owned subsidiary Pharmaniaga Logistics SB (PLSB) had received a letter from the MoH, extending its services for the provision of medicines and medical supplies to MoH facilities for the period. “In addition, PLSB secured a five-year contract to continue providing logistics and distribution services for MoH for a period of five years ending Dec 31, 2024.” (SunBiz)

Yinson: Refinances vessel, raises USD800m. Yinson Holdings is raising USD800m through the refinancing of its floating production, storage and offloading (FPSO) vessel John Agyekum Kufuor, which is currently operating offshore Ghana. “The refinancing allows Yinson to enjoy lower interest rates whilst freeing up capital to be invested in future projects,” it said. Yinson said the vessel is chartered to Eni Ghana Exploration & Production Ltd, a wholly-owned subsidiary of Eni S.p.A., an Italian multinational energy company that has a long term credit rating of A- by Fitch. (The Edge)

WZ Satu: To raise up to RM72m via rights issue with free warrants. WZ Satu is planning to raise up to RM72.3m from a renounceable rights issue of irredeemable convertible preference shares (ICPS) that comes with free detachable warrants. The ICPS will be issued to shareholders at an entitlement date to be fixed on the basis of 3 ICPS for every 4 shares held and one free detachable warrant (Warrant B) for every 4 ICPS subscribed for. Barring any unforeseen circumstances and subject to relevant approvals being obtained, the proposals are expected to be completed in the 2Q of 2020. (The Edge)

Reach Energy: Obtains ‘positive results’ from K-16 exploration well test. Reach Energy obtains “positive results” from testing the exploration well K-16 in its Emir Oil Concession Block onshore Kazakhstan. It said that K-16 is currently in extended well testing to further ascertain its commercial viability. “As part of Emir-Oil exploration commitment, the K-16 vertical exploration well spudded on Oct 9 2018 and reached Target Depth at 3983 m on Feb 6, 2019. (SunBiz)

Widad: Subsidiary sued by KNM units over solid waste station contract. Widad Group’s wholly-owned unit which has been appointed as a subcontractor by Bumi Segar Indah SB (BSI) to undertake a RM120m solid waste transfer station in Taman Beringin, Jinjang Utara, are both being sued by the project’s owners. “No cost has been incurred, as work has not commenced for the said project. The potential impact to Widad and its group of companies would be the loss of earnings to be generated from the said project,” it added. (The Edge)

Market Update

The FBM KLCI might open higher today as US stock benchmarks eked out fresh all-time highs on Monday, notching slight gains as progress toward a so-called phase-one U.S.-China trade agreement remained elusive. The Dow Jones Industrial Average closed 31.33 points, 0.1%, higher at 28,036.22, while the S&P 500 index edged up 1.57 points to 3,122.03, a gain of 0.05%. The Nasdaq Composite Index added 9.11 points, or about 0.1%, to end at 8,549.94. U.S.-China trade talks remain a key driver for U.S. equities, with last week’s records supported by rising optimism that a limited, phase-one trade deal will soon be struck. There was little on the economic calendar Monday. The National Association of Home Builders said its index of builder confidence edged one point lower in November, but remained near the highest level for 2019. In Europe, stocks ended mixed; the Stoxx Europe 600 fell marginally by 0.01% to end at 405.99.

Back home, the FBM KLCI index gained 9.61 points or 0.60% to 1,604.36 points on Monday. Trading volume decreased to 2.34bn worth RM1.42bn. Market breadth was negative with 392 gainers as compared to 414 losers. In the region, stocks traded higher, with the China CSI 300 gaining 0.8%, Japan’s Nikkei 225 advancing 0.5% and Hong Kong’s Hang Seng climbing 1.4%.

Source: PublicInvest Research - 19 Nov 2019

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