Highlights

PublicInvest Research Headlines - 7 Oct 2019

Date: 07/10/2019

Source  :  PUBLIC BANK
Stock  :  AIRASIA       Price Target  :  1.89      |      Price Call  :  HOLD
        Last Price  :  1.78      |      Upside/Downside  :  +0.11 (6.18%)
 
Source  :  PUBLIC BANK
Stock  :  TOPGLOV       Price Target  :  4.15      |      Price Call  :  SELL
        Last Price  :  4.60      |      Upside/Downside  :  -0.45 (9.78%)
 


Economy

US: Trade deficit widens more than expected to USD54.9bn in August. With the value of imports rising by more than the value of exports, the Commerce Department released a report showing the US trade deficit widened by more than anticipated in the month of August. The report said the trade deficit widened to USD54.9bn in August from USD54.0bn in July, while economists had expected the trade deficit to widen to USD54.5bn. The wider trade deficit came as the value of imports climbed by 0.5% to USD262.8bn in August after edging down to USD261.4bn in July. Significant increases in imports of cell phones and other household goods, semiconductors, and other industrial machines were partly offset by a steep drop in imports of industrial supplies and materials. Meanwhile, the report said the value of exports rose by 0.2% to USD207.9bn in August after climbing to USD207.4bn in July. (RTT)

US: Unemployment rate falls to 3.5%; job growth steady. US job growth increased moderately in Sept, with the unemployment rate dropping to near a 50-year low of 3.5%, assuaging financial market concerns that the slowing economy was on the brink of a recession amid lingering trade tensions. The employment report, however, showed wage growth stagnating and manufacturing payrolls declining for the first time in six months. The retail sector also continued to shed jobs. Nonfarm payrolls increased by 136,000 jobs last month, the government said. August data was revised to show 168,000 jobs created, instead of the previously-reported 130,000 positions. The initial August job count was probably held back by a seasonal quirk related to students leaving their summer jobs and returning to school. (Reuters)

EU: Retail sales recover in August. Eurozone retail sales recovered in August largely driven by non-food product sales, data from Eurostat showed. Retail sales grew 0.3% MoM in August, reversing a 0.5% drop in July. The rate of growth matched economists' expectations. Food sales remained flat, while non-food product sales gained 0.4%. Automotive fuel in specialized stores edged up 0.1%. YoY, retail sales growth eased marginally to 2.1% from 2.2% in July. Nonetheless, this was slightly faster than the expected 2%. Another report from Eurostat showed that producer prices declined in August mainly due to a notable fall in energy prices. Producer prices decreased by 0.8% annually, following a 0.1% rise in July. Economists had forecast a 0.5% fall. The annual decline reflected a 4.9% drop in energy prices and a 0.4% decrease in intermediate goods prices. (RTT)

EU: Germany construction activity improves in September. Germany's construction sector expanded modestly in Sept, led by a growth in housing activity that offset slower declines in commercial and civil engineering, survey data from IHS Markit showed. The construction PMI rose to 50.1 in Sept from August's 62-month low of 46.3. Among sub-sectors, both commercial and civil engineering activity contracted in Sept. Commercial activity declined at the slowest pace in three months. New orders declined for the fifth straight month in Sept, but at a softer rate, mainly due to a lack of tender opportunities from the public sector. Job creation increased in the construction sector as outstanding works were high. Suppliers' delivery times deteriorated in Sept with a rise in purchasing. The cost of building material and products increased, but eased to the weakest since Feb 2016. (RTT)

HK: Private sector continues to shrink. Hong Kong’s private sector economy continued to contract in Sept as trade tensions and local protests continue to hurt demand, survey results from IHS Markit showed. The IHS Markit Hong Kong SAR PMI edged up to 41.5 in September from 40.8 in August. The score signaled the second steepest deterioration in the private sector activity since Feb 2009. Inflows of new work dropped at the second-steepest rate since Feb 2009, dragged down by another sharp decline in orders from mainland China. Although slower than in August, the fall in output in Sept was the second-fastest since early-2009. At the same time, employment decreased for the second month in a row. Further, a greater proportion of firms expressed pessimism about the year-ahead business outlook. (RTT)

Indonesia: Consumer confidence falls in September. Indonesia's consumer confidence fell in Sept, data from the Bank Indonesia showed. The consumer confidence index decreased to 121.8 in Sept from 123.1 in August. Consumers have remained upbeat based on their perception of current economic dynamics and due to growing expectations on future economic situation. Current economic conditions remained positive due to confidence in incomes, the bank said. Consumer perceptions regarding expectations on future income and job availability in the next 6 months increased in Sept. Households expect inflationary pressures to remain stable over the next 6 months. (RTT) 

Markets

AirAsia (Neutral, TP: RM1.89), AAX (Underperform, TP: RM0.14): File RM480m suit against MAHB for alleged negligence at klia2. AirAsia Group and its long-haul affiliate AirAsia X (AAX) have filed yet another lawsuit against Malaysia Airports Holdings (MAHB) for loss and damage allegedly caused by negligence at Kuala Lumpur International Airports's second terminal (klia2). The lawsuit, naming MAHB's wholly-owned unit Malaysia Airports (Sepang) SB (MASSB) as defendant, was filed at the High Court on Wednesday (Oct 2), this time claiming RM479.8m, the two carriers said. (The Edge)

Top Glove (Underperform, TP: RM4.15): To allocate RM600m capex for FY20. Top Glove Corporation will allocate about RM600m as capital expediture (capex) for the FYE Aug 31, 2020 (FY20) compared with RM632.2m capex set for FY19. Its chairman, Tan Sri Dr Lim Wee Chai said the capex would mainly be used for factory automation and digitalisation, nitrile glove production line expansion, construction of new factories and machinery, as well as possible merger and acquisition activities. On the company’s production line expansion, Lim said 80% of the capex would be for nitrile gloves capacity expansion, while the rest for vinyl and latex gloves. (SunBiz)

Anzo: Malacca construction contract of RM153m terminated. Anzo Holdings’ RM153m construction contract in Melaka has been terminated, citing “financial challenges” as reason. Anzo said it has entered into a mutual termination agreement with Tinta Anggun Engineering SB for the termination. (The Edge)

Icon Offshore: Wins RM36m contract from Petronas Carigali. Icon Offshore has secured a RM36m contract from Petronas Carigali SB to provide an offshore support vessel for petroleum arrangement contractors’ production operation. It said the contract has a firm period of 695 days, expiring on Aug 1, 2021, with extension option of “one year plus one year”. Icon Offshore managing director Datuk Seri Hadian Hashim said as the industry recovers, the group hopes to secure more contracts through delivering value-added services to clients. (The Edge)

Sentoria: To raise up to RM17m via private placement. Sentoria Group, property developer and operator of Bukit Gambang Resort City in Pahang, has proposed to raise up to RM16.6m via a private placement of up to 10% of its total issued shares to third party investor(s) to be identified later. Sentoria said proceeds from the proposed private placement will be used for working capital. It said the proposed private placement entails the issuance of up to 77.3m new shares, representing not more than 10% of its total issued shares at an issue price to be determined later. (The Edge)

Construction (Neutral): Sector growth momentum to pick up - CIDB. The construction industry is expected to grow by about 5% by end-2019, compared with last year’s growth of 4.2%, said Construction Industry Development Board (CIDB) CEO Datuk Ir Ahmad Asri Abdul Hamid. He said the trend would continue until the 1H of next year, given the current wait and see approach adopted by both local and foreign investors. “However, the momentum is expected to pick up by the 2H of 2020 as the government has already approved certain projects. So, I am positive on its outlook,“ he said. (SunBiz) 

Market Update

The FBM KLCI might open higher today after an afternoon rally last Friday handed the S&P 500 its biggest one-day gain in nearly two months as the latest US jobs figures helped allay concerns about a domestic and global slowdown that have been brewing for most of the week. The S&P 500 finished 1.4% higher on Friday in a broad-based rally that lifted all sectors. It was the benchmark’s largest one-day rise since mid-August. The Nasdaq Composite and Dow Jones Industrial Average each closed 1.4% higher. That trimmed the S&P 500’s weekly decline to 0.3%, recovering some of the ground conceded earlier in the week when soft economic data triggered a sell-off across global stock markets. It was still the index’s third consecutive weekly drop. The gains in equities came in the wake of non-farm payroll data this morning that showed 136,000 jobs were added in September, from an upwardly-revised 168,000 in August, and the unemployment rate fell to 3.5% — its lowest in 50 years. The annual pace of wage growth cooled, though. Elsewhere in markets, European stocks finished higher, with the composite Stoxx 600 up 0.7%, Germany’s Dax up 0.7% and the Cac 40 in Paris up 0.9%. In London the FTSE 100 finished 1.1% higher, but still chalked up its biggest weekly fall in a year.

Back home, the FBM KLCI index lost 6.45 points or 0.41% on Friday. Trading volume decreased to 2.05bn worth RM1.60bn. Market breadth was negative with 404 gainers as compared to 409 losers. Hong Kong-listed equities fell as the city’s political crisis deepened, with chief executive Carrie Lam invoking emergency powers to ban protesters from wearing face masks. The territory’s Hang Seng index was down 1.1%, with new data showing business confidence in Hong Kong had slumped to a seven-and-a half year low following months of political unrest. Meanwhile, Japan’s Topix added 0.3%, while China’s onshore stock market remained closed for a holiday.

Source: PublicInvest Research - 7 Oct 2019

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