Economy

US: New home sales fall, but economy stays on solid ground. Sales of new US single-family homes fell for a second straight month in July, but a surge in the stock of properties on the market and slower price gains should help stimulate demand in the months ahead. New home sales slipped 2.4% to a seasonally adjusted annual rate of 412,000 units, the lowest level since March. (Reuters)

US: Services sector growth slows for 2nd straight month in Aug. The pace of growth in the US services sector fell for a second straight month in August, dropping to its lowest level since May, a survey showed. Financial data firm Markit said its preliminary services PMI fell to 58.5 in Aug, below both the July reading of 60.8. A reading above 50 signals expansion in economic activity. (Reuters)

EU: About-face for ECB's Draghi as he seeks to jolt euro zone into life. Prodding governments to do more to boost demand and hinting at ECB action to go along with it marks a major shift in ECB chief Mario Draghi's euro zone policy away from a focus on austerity toward reviving growth. The ECB president said it would be "helpful for the overall stance of policy" if fiscal policy could play a greater role alongside the ECB's monetary policy, adding: "and I believe there is scope for this". The comments marked an end to the tacit coalition of ECB support in combination with German-style fiscal austerity that has been in place since the outbreak of the euro zone crisis. (Reuters)

UK: Wage growth in manufacturing offers hope for economy. Manufacturers are paying their workers more in a tentative sign that wage growth – a missing piece of the UK’s recovery – is starting to pick up in some parts of the economy. The average annual pay settlement in the sector was 2.6% in the six months to July, up from 2.4% a year ago. The proportion of respondents using pay freezes fell to 6.4% from 14.6% a year ago. Manufacturing pay growth was ahead of the wider economy, “with signs that the pressure on household budgets, at least for employees in the industry, is starting to unwind”. (Financial Times)

Markets

EA Holdings: More acquisitions in store. Bumiputra ACE company EA Holdings (EAH), which had just completed the acquisition of Murasaki Technology SB late last month, is still looking for additional acquisitions to broaden its earnings base. “EAH is aiming to become a world class service-oriented company. Hence it is currently looking at other companies which are project management consultancy specialists in lucrative industries such as oil and gas, as well as construction and development.” “It is looking particularly for acquisitions with high margins.” (Business Times)

Eversendai: Subsidiary gets RM113m job to renovate Qatar stadium. Eversendai Corporation's subsidiary in Qatar has secured a RM113m contract to renovate the Khalifa Olympic Stadium. Under the contract, Eversendai will undertake the total renovation comprising re-engineering and dismantling of the existing lighting arch and ancillary steel structures, engineering, supply, fabrication and construction of steel structures. Eversendai's executive chairman and group MD Tan Sri A K Nathan said this contract would add the total amount of new contracts secured by Eversendai to date in 2014 to RM1.1bn and current order book to RM1.7bn. (StarBiz)

Malaysia Airlines: Nursing to health may cost RM5bn. The cost of reviving Malaysia Airlines (MAS) could come up to RM5bn over the next three years, according to sources familiar with the restructuring. They said the figure was a rough estimate and that the final bill to put the national carrier back on track was still being hammered out by consultants engaged by Khazanah Nasional. “The amount includes compensation for workers, penalties for breaking existing contracts and additional funds to steer MAS off its current rough patch. It’s the cost to put the airline on a new template,” a source said. Khazanah, which had proposed to take MAS private on Aug 8, is expected to make a major announcement on the way forward for MAS on Friday. (StarBiz)

NCB: Northport's latest berth operational by Nov. Upgrading work on Northport’s Wharf 16 is 56% complete and is on track to be fully operational by Nov this year, said NCB Holdings chairman, Tun Ahmad Sarji. "Northport also plans to upgrade one of its oldest wharves, Wharf 8, and facilities at Container Terminal 4 (CT4). Upon completion, Northport will be able to berth more ultra-large-sized vessels at CT4 which would translate into higher terminal capacity and connectivity," he said. Ahmad Sarji said all these capacity expansion work was part of its RM1bn capital expenditure allocated until 2016. (StarBiz)

UMW-OG: Posts RM60.3m net profit. UMW Oil & Gas Corporation posted a net profit of RM60.3m for its 2Q ended June 30, 2014. Revenue was RM238.77m and EPS at 2.79 sen. Overseas operations contributed about 46.9% and 38.7% of the group revenue for the 2Q and 1H of 2014, respectively. “Higher revenue contributions from both the drilling & oilfield services segments resulted in the revenue improvement in the 2Q of 2014,” it said. UMW Oil & Gas expects a stronger FY14 when compared with FY13 with new rigs in operation. “The company is now in active negotiations with potential customers to secure a contract for UMW Naga 6 to start operations in the 4Q of 2014,” it said. (StarBiz)

MARKET UPDATE

US stocks closed higher amid signs of more corporate deals and hopes of more monetary stimulus for the European economy. The S&P 500 index crossed above 2,000 intraday for the first time and gained 0.48% to close at 1,997.9. With the S&P 500 crossing the psychologically important 2,000 milestone, it gave investors a confidence boost. Dow Jones Industrial Average and Nasdaq also added 0.44% and 0.41% respectively.

Comments from European Central Bank (ECB) president, Mario Draghi, during Jackson Hole meeting lifted expectations of further monetary stimulus measures from ECB. Investors were also encouraged by increasing corporate deals such as Burger King is in talks to merge with Tim Horton and Roche acquiring biotechology company - InterMune for USD8.3bn. Over in Europe, stocks rallied to their highest level in August, lifted by hopes of additional stimulus (moving towards quantitative easing) from ECB. Germany’s DAX and France’s CAC 40 rallied 1.83% and 2.10% respectively, while UK market was closed for a public holiday. Italy’s FTSE MIB and Spain’s IBEX also gained 2.30% and 1.81% respectively.

Asian markets closed mixed yesterday. Japan’s Nikkei 225 gained 0.48%, lifted by a weak yen which benefited exporters such as Toyota, Panasonic and Sony. China’s Shanghai Composite Index declined 0.51%, weighed down by financials such as Bank of Communications with concerns over slower-than-expected lending growth. Hong Kong’s Hang Seng Index added 0.22%, driven by gains in PetroChina, HSBC and AIA. Asean markets were also mixed with markets in Philippines, Singapore and Thailand closing in the positive, but Indonesian and Malaysian markets closed lower.

Back home, FBM KLCI fell 8.68 pts or 0.46% to close at 1,862.31, marking the third consecutive day of decline. The local market started yesterday positively but soon succumbed to profit-taking and drifted lower. Notably, the FBM KLCI was weighed down by Petronas-linked companies (e.g. Petronas Chemicals (-2.1%) and Petronas Dagangan (-3.2%)) and plantation counters (e.g. IOI (-1.9%) and KL Kepong (-2.0%)). Market trading volume remained robust with 3.01bn units traded (trading value of RM1.98bn). Overall market breadth was in line with weaker FBM KLCI with 637 losers outnumbering 276 gainers. While we believe the local market may attempt to stage a technical rebound today, individual stock performance will be more closely linked to its individual corporate earnings amid the results reporting season. Notable companies announcing their results yesterday include FGV, UEM Sunrise, Boustead, UMW O&G and IOI Properties

Source: PublicInvest Research - 26 Aug 2014