Economy

US: Budget deficit expanded slightly in fiscal 1H. The deficit through the 1H of the budget year ran slightly above last year's pace, with the Mar imbalance up USD16bn over a year ago. The Treasury Department said that the Mar deficit came to USD52.9bn compared to a deficit of USD36.9bn in Mar 2014. Through the first six months of the budget year, the deficit totaled USD439.5bn, 6.3% higher than last year's sixmonth deficit of USD413.3bn. (Bloomberg)

US: Dollar rises against euro on continued Fed hike bets. The US dollar rose against the euro in a continuation of last week's bets that the US Federal Reserve will hike interest rates in the coming months, while the yen edged higher on comments from a high-profile economic adviser. With little US economic data, recent commentary from Fed officials and minutes from the central bank's Mar policy meeting suggesting the possibility of a June rate hike boosted demand for the dollar against the euro. (Reuters)

EU: Pace of ECB bond buying slows as QE enters second month. The ECB bought EUR9.2bn worth of government bonds in the fifth week of its QE program, a slower pace than a week earlier and below the average amount needed to keep the program on track. The ECB said it had settled a total of EUR61.7bn (USD65.2bn) of purchases of mainly sovereign bonds as of April 10, up from 52.5bn the week before. (Reuters)

China: World Bank sees slower developing East Asia growth. Developing East Asian economies will grow slightly slower this year, the World Bank said, with China’s moderating expansion overshadowing the benefits of lower oil prices and a recovery in rich countries, China’s growth will cool to 7.1% in 2015, slower than the 7.2% predicted in Oct and last year’s 7.4% expansion, the World Bank said. (Bloomberg)

China: Export engine loses steam, adding to growth concern. China’s exports unexpectedly slumped the most in more than a year in Mar, eroding the outlook for one of the economy’s better performing areas in recent months. Overseas shipments fell 14.6% from a year earlier in Yuan value, the customs administration said. Bloomberg)

Japan: BOJ's Kuroda said Japan's economy recovering moderately. BOJ Governor Haruhiko Kuroda voiced confidence over the country's economic recovery and stressed the central bank will maintain its massive stimulus program for as long as needed to hit its 2% inflation target. "Japan's economy is expected to continue recovering moderately as a trend," Kuroda said. (Reuters)

India: CPI unexpectedly eases, boosting chances of rate cut. India’s retail inflation unexpectedly slowed despite crop damage from unseasonal rains, boosting the possibility that central bank Governor Raghuram Rajan will cut rates outside the review cycle for a third time this year. Consumer prices rose 5.2% in Mar from a year earlier after a 5.4% increase in Feb, the Statistics Ministry said. (Bloomberg)

Markets

TNB (Neutral, TP: RM14.64): Moves to compulsorily acquire Integrax. Tenaga Nasional (TNB) has received valid acceptances amounting to 292.7m shares, representing a 97.3% stake in Integrax at the closing date of its revised and final offer for the port operator. TNB will proceed to exercise its rights to compulsorily acquire the remaining shares in Integrax within two months. (Financial Daily)

Daya Materials (Neutral, TP: RM0.15): Terminates JVA with Connect Energy. O&G services provider Daya Materials has terminated the joint venture agreement (JVA) entered into between Daya Sheffield SB and Singapore-based human capital management and recruitment solutions provider Connect Energy Services Pte Ltd. The company said the JVA dated Sept 11, 2013 that was entered into had been terminated by Daya Sheffield via a notice of termination of the JVA given to Connect Energy. (Financial Daily)

RHB Capital: Proposes internal reorganisation. RHB Capital has announced its proposal for an internal reorganisation which will see RHB Bank taking its parent’s listing status. The bank also announced a rights issue to raise proceeds of up to RM2.5bn to finance the group’s working capital requirements and meet the requirements of Basel III. After the proposed rights issue, RHB Capital will be distributing its entire shareholding in RHB Bank to entitled shareholders, with RHB Capital ceasing to be a shareholder of RHB Bank. (Financial Daily)

PetChem: Capex at RM3bn. Petronas Chemicals Group (PetChem) will keep this year’s capital expenditure (capex) at RM3bn, with 60% of the budget being allocated to completing the group’s massive fertiliser project in Sabah. PetChem’s Datuk Wan Zulkiflee Wan Ariffin said the bulk of the capex would be for the Sabah Ammonia Urea (Samur) project, while the rest is for two key projects in Gebeng, Pahang, and statutory plant maintenance activities. (StarBiz)

MRCB: Submits bid to buy French embassy land. Property developer Malaysian Resources Corp (MRCB) has confirmed that it has submitted a bid to acquire the French embassy land in Kuala Lumpur. MRCB said the company had on Feb 12 submitted the tender for the French embassy land and is still waiting for the outcome of the tender. (StarBiz)

Metronic: To form JV to bid for solar power plant project. Metronic Global’s unit, Metronic Integrated System SB has inked an agreement with UMK Business Ventures SB in order to bid for a 100MW solar power plant project in Kelantan. Metronic said both parties would form a JV company in order to submit tenders for the power plant project, which would be constructed over 20 years. Under the agreement, both parties will build a solar power plant using photovoltaic technology to produce electricity on a 120ha in Bachok. (Bernama)

Ken Holdings: Plans RM80m property project in Kelantan. Property developer Ken Holdings is planning a RM80m project, comprising hotels and service apartments, in Kelantan this year as it seeks to expand revenue base to the east coast. Group executive chairman Datuk Kenny Tan said the proposed development in Kelantan would have 200 service apartments and a 150-room hotel on an acre next to the Kota Bharu Mall. (StarBiz)

MARKET UPDATE

US stocks closed lower yesterday, snapping a three-day winning streak as investors took some money off the table ahead of earnings season. Dow Jones Industrial Average (DJIA) fell 0.5%, while S&P 500 and Nasdaq declined 0.5% and 0.2% respectively. Investors took profit after recent gains amid a dearth of economic data and heavyweights such as JP Morgan, Wells Fargo and Intel will be reporting their 1Q15 earnings on Tuesday. Notably, General Electric fell 3.1%, dragging both DJIA and S&P 500 as investors sold the stock after it rallied 10.8% on last Friday following share buyback news. Eyes will be on the performance of the financial stocks to get a pulse of the economy, in particular lending growth.

Over in Europe, stocks closed mixed following strong gains in the past week. European stocks fluctuated between positive and negative territory throughout the trading day. Notably, mining stocks were negatively affected by weak data from China. Key European indices such as UK’s FTSE 100 and Germany’s DAX fell 0.4% and 0.3% respectively, while France’s CAC 40 gained 0.3%.

Asian markets were generally higher yesterday, led strong rallies in China and Hong Kong markets. Ironically, China’s weaker-thanexpected trade data (exports down 14.6% YoY in March) lifted investors’ hopes of further stimulus measures from the Chinese government. China’s Shanghai Composite gained 2.2% led by banks such as Agricultural Bank of China (+2.6%) and ICBC (+4.3%). Hong Kong’s Hang Seng jumped 2.7% to its highest since January 2008, while the Hang Seng China Enterprises (HSCEI) surged 4.3% with Chinese investors rushing into H-stocks listed on Hong Kong to take advantage of the price discount between stocks listed on Hong Kong and Shanghai exchanges. Japan’s Nikkei 225 closed flat after fluctuating between gains and losses throughout the trading day. Asean markets were mixed with Singaporean and Thai markets closing higher, while markets in Indonesia and Philippines ended lower.

Back home, the FBM KLCI fell 2.2 pts or 0.1% to close at 1,842.1. The FBM KLCI traded in the positive territory for the most of yesterday until the last hour of trading. The FBM KLCI weaker closing was mainly due to last-minute selling in Genting (-2.4%) and Telekom Malaysia (-1.2%). Despite the lower KLCI closing, broader market was positive with 467 gainers, 378 decliners and 319 counters traded unchanged. Trading volume was 2.12 bn units traded, while trading value remained lacklustre at RM1.87 bn. On the corporate front, the key news was RHB Capital announced its internal organisation in which RHB Bank will take over its parent’s listing status and a rights issue to raise up to RM2.5bn. Meanwhile, TNB has received valid acceptances of 97.3% in Integrax at the closing of its offer and will proceed to compulsorily acquire the remaining shares in Integrax within two months. On a separate note, Metronic has entered into a JV agreement with University Malaysia Kelantan for tender submission to government for a 100MW solar power plant project in Kelantan.

Source: PublicInvest Research - 14 Apr 2015