Highlights

PublicInvest Research Headlines - 23 Jul 2019

Date: 23/07/2019

Source  :  PUBLIC BANK
Stock  :  TOPGLOV       Price Target  :  4.15      |      Price Call  :  SELL
        Last Price  :  4.55      |      Upside/Downside  :  -0.40 (8.79%)
 


Economy

EU: Redoubles threat to retaliate if US raises auto tariffs. The European Union is keen to work with Washington to reform the World Trade Organization and cooperate on common challenges to global trade, but will retaliate if Washington makes good on its threat to raise car tariffs, a top EU official said on Monday. “We will not negotiate under WTO illegal action. Nor will we go down the road of managed trade,” Sabine Weyand, the European Commission’s director general of trade and former deputy Brexit negotiatior said. If Washington pushed ahead with its threat to raise auto tariffs to 25%, Brussels would respond with tariffs of its own, resulting in a “lose-lose” situation for all involved, she said. (RTT)

EU: German finance ministry warns of prolonged industrial weakness. Germany's finance ministry warned on Monday that the weakness in the industrial sector and exports is set to last longer, mainly due to global risks such as the trade tensions. "Leading indicators and falling orders indicate a persistently weakened industrial economy," the ministry said. Meanwhile, the positive development in the labor market has continued, but slowed recently, and job creation is set to slow in the coming months, mainly in the manufacturing and trade sectors, the ministry added. The German manufacturing sector has not yet recovered entirely from the slump seen over the last year, that was mainly due to the sluggishness in the automobile sector. (RTT)

UK: Brexit likely pushed economy into recession, NIESR says. The UK economy may have already entered a recession and the outlook beyond Oct is very murky with the possibility of a severe downturn in the event of a disorderly no-deal Brexit, the National Institute of Economic and Social Research, or NIESR, said in a report on Monday. The think tank said there is one-in-four chance that the economy has already entered a technical recession. On the assumption that a no-deal Brexit is avoided, the economy is forecast to grow 1.2% this year, but this was revised down from 1.4% projected previously. Likewise, the outlook for 2020 was lowered to 1.1% from 1.6% as the Brexit uncertainty continues to weigh on investment and productivity growth remains weak. Inflation is seen at 2% target this year, before rising slightly to 2.1% in 2020. (RTT)

UK: Households remain upbeat about future finances. British households' expectations towards future finances remained positive in July, survey data from IHS Markit showed Monday. The headline household finance index rose for the second straight month in July, to 44.3 from 43.9 in June. The score signaled the weakest level of pessimism among households towards their finances since Jan. The resilient labor market condition was the key driving force behind financial optimism. Households reported strong growth in workplace activity in July but concerns regarding job security remained. Incomes from employment grew at a strong pace in July. Further, perceptions towards living costs increased to the highest in ten months and the perceived inflation rate was in line with the long-run average. (RTT)

China: To see 6.1% growth this year - Westpac. China is likely to log economic growth of 6.1% this year and 6% in 2020, Elliot Clarke, an economist at Westpac Institutional Bank said Monday. Official data released earlier in the day showed that the economy grew at the slowest pace in 27 years in the second quarter. GDP expanded 6.2% in the 2Q and by 6.3% in the 1H of the year. GDP data puts the economy on track to achieve full-year growth at the bottom end of authorities' 6- 6.5% target range, the economist noted. As contribution of net exports to growth is set to diminish further on higher US tariffs, growth in consumption and investment became important, Clarke observed. (RTT)

India: RBI easing is more than rate cuts suggest, Das says. India’s central bank Governor Shaktikanta Das said policy makers have effectively delivered more easing than the three interest-rate cuts this year suggest, signaling a more cautious stance on future action. Das said he sees signs of a recovery in economic growth and further monetary policy steps will depend on incoming data. The central bank’s switch to an accommodative stance in June in itself amounts to a 25 basis-point cut, he said, on top of the 75 basis points of cuts since Feb. “Effectively, the rate cut has been 100 basis points if you take into account the change in stance,” Das said. (Bloomberg)

Malaysia: 2020 fiscal deficit target, a ‘challenge’. Malaysia will find it challenging to meet its 3% fiscal deficit target for next year due to uncertainties around the US-China trade war, the finance minister said. Finance Minister Lim Guan Eng said while Malaysia could meet this year’s fiscal deficit target of 3.4%, next year’s target of 3% would be harder to meet. “There’s a time lag effect. The full brunt of it, everyone expects it to hit next year.” Lim said he was “cautiously confident” about meeting the government’s full year growth forecast of 4.3% to 4.8%. (Reuters)

Malaysia: Bank Negara foreign reserves up USD600m at July 15. Bank Negara Malaysia's international reserves rose by USD600m to USD103.3bn as at July 15, 2019 from two weeks prior. The central bank said on Monday the reserves position was sufficient to finance 7.3 months of retained imports and it was 1.2x total short-term external debt. At June 28, Bank Negara's international reserves amounted to USD102.7bn as at June 28. The reserves level on June 28 took into account the quarterly adjustment for foreign exchange revaluation changes. (StarBiz) 

Markets

Top Glove (Underperform, TP: RM4.15): Expects dent to bottom line from gas tariff hike. Top Glove, the world largest glovemaker, expects the surprise natural gas tariff hike earlier this month to put a dent on its bottom line. This is because of the lag time needed by the company to pass down the higher cost of production to its customers. MD Datuk Lee Kim Meow targeted the company’s profitability would be impacted between 1% and 2% following the price adjustment. “As such we and MARGMA had made an appeal to Gas Malaysia to let us know in advance on the changes of gas prices.” Meanwhile, Top Gloves Lim said that the changes in the gas price are estimated to an increase in the glove production cost of between USD0.40 and USD0.80 per 1,000 pieces of gloves. (StarBiz)

MyEG: Unit acquires 40% stake in Indonesian company for USD10m. Indonesian unit of MyEG Services is purchasing a 40% stake in PT Cartenz Inti Utama (PT CIU) for USS10 (c. RM41.1m), to further expand its business outside of Malaysia. With business environment in Malaysia becoming increasingly competitive, MyEG said the acquisition would allow the group to expand its Indonesian presence, in particular to roll-out its tax monitoring system regionally, as a well as to redeploy some of its local systems in other regional markets. “With the Investment taking place, the Company and PT CIU Group will jointly implement real-time monitoring of business transactions for tax computation purposes across Indonesia,” the group said. (The Edge)

LTKM: Gets takeover offer at RM1.35 a share. LTKM’s MD Datuk Tan Kok and his family have offered RM1.35 a share for the remaining shares of the chicken egg producer not owned by them, under an unconditional voluntary takeover offer. LTKM said the offer price represents a 21.62% premium over its last transacted price of RM1.11 on July 18. The offer for the shares shall remain open until 5pm for at least 21 days from the posting date. LTKM said the jointofferor holds a total stake of 68.26% of the issued shares. The joint offerors do not intend to maintain the company’s listing status on the Main Market of Bursa Malaysia, upon completion of the takeover. (The Edge)

MAHB: To complete act of aggression exercise by 2022. Malaysia Airports Holdings (MAHB) aims to complete the act of aggression exercise at all local airports under its management by 2022, says CEO Raja Azmi Raja Nazuddin. He said the objective of the exercise is to test and assess the readiness of various airport agencies in responding to any emergency and act of aggression based on their standard operating procedures (SOP) as well as emergency and contingency plan. "So far we have covered airports in Kota Kinabalu, Sandakan and klia2, while this year we are looking at Subang and Langkawi. "This is an ongoing initiative where we will do rotation on a yearly basis. Hopefully as we rotate often enough, we will eventually cover all, if not most, airports," he said. (The Edge)

IPO: The Body Shop retailer InNature to launch IPO. To further expand its operations, InNature, the retailer and distributor of The Body Shop products, is offering up to 177.27m shares in an IPO set for the Main Market. The 177.27m shares, representing 25.1% of the enlarged issued share capital, will comprise 74.07m new shares and an offer for sale of 103.2m existing shares. InNature is principally involved in the retailing and distribution of The Body Shop products in Malaysia, and Vietnam, and plans to commence operations in Cambodia in the coming months. It plans to use the proceeds of the IPO for capital expenditure, working capital as well as new business development. (The Edge) 

Market Update

The FBM KLCI might open stronger today after U.S. stock-market indices closed higher Monday, as investors adjusted expectations around a widely anticipated rate cut by the Federal Reserve at the end of the month and began wading through a sea of corporate results after a strong start to earnings season. The Dow Jones Industrial Average rose 17.7 points, or 0.1%, at 27,171.9, while the S&P 500 index advanced 8.42 points, or 0.3%, to 2,985.03, supported largely by gains in the information-technology sector (up 1.2%). The Nasdaq Composite Index gained 57.65 points, or 0.7%, to trade at 8,204.14. European stocks also edged higher, with the Stoxx Europe 600 ending the day up 0.1%.

Back home, the FBM KLCI index lost 2.79 points or 0.17% to 1,655.40 points on Monday. Trading volume increased to 2.65bn worth RM1.54bn. Market breadth was negative with 297 gainers as compared to 508 losers. Stock markets in region closed mostly lower Monday, with China’s Shanghai Composite falling 1.3%, Japan’s Nikkei 225 losing 0.2% and Hong Kong’s Hang Seng retreating 1.4%.

Source: PublicInvest Research - 23 Jul 2019

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