Economy

US: Payrolls rose in 40 states in April, led by California. Payrolls rose in 40 states in April and the unemployment rate fell in 23 as the US labor market picked up following a soft patch a month earlier. California led the nation with a 29,500 increase in employment, followed by a 27,000 advance in Pennsylvania. (Bloomberg)

EU: Officials dismiss Greek statement on aid agreement being drafted. Greece's government on Wednesday said it is starting to draft an agreement with creditors that would pave the way for aid, but European officials quickly dismissed that as wishful thinking. Greece and its European and IMF lenders have been locked in tortuous negotiations on a reforms agreement for four months without a breakthrough in sight. Without a deal, Athens risks default or bankruptcy in weeks. (Reuters)

EU: ECB halts emergency funding hike to Greek banks, outflows pick up. The ECB left the ceiling on emergency funding for Greek banks unchanged for the first time since Feb, maintaining pressure on Athens and its creditors to reach an aid-for-reforms deal. The move came as deposit outflows spiked again in the past week over fears Greece may default on a loan repayment to the IMF next month and worries over potential capital controls. (Reuters)

China: Relaxes rules on local government financing arm bond sales. China has relaxed rules for bond sales by local government financing vehicles as the onshore market faces a third default in two months amid an economic slowdown. The National Development and Reform Commission cut the required debt-to-asset ratio for LGFVS that need to provide guarantees on their securities to 65%. (Bloomberg)

China: April industrial profits reverse six-month falling trend. Chinese industrial sector profits posted their first annual rise since last Sept, in a sign that margin pressures may be easing at some for firms, particularly in the price sensitive energy sector. Industrial sector profits in April rose 2.6% from a year earlier, but were down 1.3% for the year to date, reflecting the extreme weakness of growth in the 1Q. The statistics bureau said recent interest rate and fee cuts were boosting industrial profits, but that companies still faced weak demand and falling prices. (Reuters)

Japan: Kuroda faces opposition even after BOJ extended price target. Even the Bank of Japan’s recently extended timeframe for achieving its inflation target may be too optimistic, according to some members of the BOJ’s policy board. A few members said inflation wouldn’t reach 2% until after the fiscal year through March 2018, according to minutes released on Wednesday. (Bloomberg)

Japan: Government ups view on consumer spending for first time in 10 months. Japan's government raised its assessment of consumer spending for the first time in 10 months in May but kept its overall view of the economy unchanged. It also cut its view on exports and factory output in its monthly report, worrying signs as the economic recovery struggles to gain momentum after last year's recession. (Reuters)

Malaysia: Moody’s sees soft landing with 1MDB pain contained. Moody’s Investors Service said financial woes at state investment company 1Malaysia Development aren’t a sign of broad-based distress, with government-linked corporates and other debt issuers seen withstanding the country’s economic slowdown. The Malaysian economy is expected to have a “soft landing” with growth easing to 4.8% in 2015 from 6% last year. Risks include low commodity prices, currency weakness and contingent liabilities, according to Rahul Ghosh, a vice president with the ratings company. (Bloomberg)

Markets

UOA Development: Sees property outlook unpredictable. UOA Development foresees the property market to be unpredictable this year compared with last year, mainly due to the Goods and Services Tax (GST). "Construction costs are expected to rise, but it's too early to estimate how much it's going to go up. “But, we expect revenue to be consistent with last year's," said its general manager Eugene Lee. (StarBiz)

Masterskill: To pay RM20m in dividends from surplus cash. Masterskill Education Group (MEGB) has revised how it would use proceeds from the sale of its property assets, adding a surprise RM20.0m dividend payout. MEGB said that only RM34.2m of the RM79.7m proceeds would be used as working capital and RM25.5m would be for repaying borrowings. Initially, there was no dividend distribution planned. A total of RM53.0m was for working capital and RM26.7m was to be used for repayment of borrowings. (StarBiz)

Icon Offshore: Profit falls 86% in Q1. Icon Offshore recorded an 86% drop in net profit for the first quarter to RM2.7m from a year earlier. Revenue for 1QFY15 also fell 20.5% YoY to RM63.6m. Icon said that the reduced revenue was primarily due to lower fleet utilisation rate of 64% for the quarter compared to 79% for Q1 2014, arising from lower demand and slower activities in the oil and gas industry. However, this was partly offset by contribution from a new accommodation work boat vessel during the quarter under review. (StarBiz)

Maybulk: Posts pre-tax losses of RM23m. Malaysian Bulk Carrier (Maybulk) registered a pre-tax loss of RM23.1m in 1QFY15 down by RM46.4m from the RM23.2m profit a year ago. Maybulk said revenue fell to RM51.8m from RM71.7m. The main contributors to the drop were the extremely depressed dry bulk rates and lower contribution from PACC Offshore Services Holdings Ltd (POSH). The company said dry bulk freight rates plunged at the beginning of the year with the Baltic Dry Index (BDI) registering an all-time low of 509 on Feb 18, 2015. (StarBiz)

MISC: Allocates USD1.0bn for capex this year. MISC has allocated USD1.0bn for capex this year to primarily focus on the petroleum segment business, despite lower oil prices in the global market. President and CEO Yee Yang Chien said the capex is right for the company to remain competitive in the industry. "Falling oil prices have minimal impact on freight rates which are directly driven by supply and demand for oil, not the oil price. “The capex this year is mainly for the construction and delivery of new liquefied natural gas (LNG) carriers, for which we secured a contract from Petronas in the first quarter of this year," he said. (StarBiz)

Protasco: Net profit up 23.6%. Protasco’s net profit for 1QFY15 rose 23.6% to RM13.1m compared to RM10.6m a year ago mainly contributed from construction division. Its revenue for the quarter jumped 48.2% to RM219.1m, from RM147.8m a year ago due to improvement of performance from all divisions including maintenance, construction, property development, engineering services, education as well as trading and manufacturing. For its construction division, its revenue and profit before tax surged more than 100% from Perumahan Penjawat Awam 1Malaysia project which started in the third quarter of 2014. As at end of the first quarter, the project has been 26% completed. (StarBiz)

MARKET UPDATE

US stocks rebounded strongly yesterday from Tuesday’s slump with the Nasdaq index closing at a new record high. Equity investors were encouraged by progress in Greece bailout talks and a pause in the climb in US dollar and bond yield. Dow Jones Industrial Average and S&P 500 gained 0.7% and 0.9%, while the Nasdaq gained 1.5% to close at all-time high of 5,106.6. Apple (+1.9%), Microsoft (+2.2%) and a strong rally in semiconductor & biotechnology stocks helped to lift the Nasdaq to its record high. Among the S&P 500’s 10 main industry groups, nine gained led by technology stocks which rallied 1.8%.

Over in Europe, stocks also closed higher after news that Greece is close to finalising a deal with its creditors. Key European indices such as UK’s FTSE 100, France’s CAC 40 and Germany’s DAX gained 1.2%, 2.0% and 1.3% respectively. Peripheral European markets such as Italy’s MIB and Spain’s IBEX rallied 2.3% and 1.7% respectively. Asia- Pacific markets closed mixed yesterday. While Japan’s Nikkei 225 and China’s Shanghai Composite continued their respective rally by gaining 0.2% and 0.6% respectively, other markets such as Hong Kong, Australia and Korea closed lower. Asean markets except Thailand (+0.2%) ended lower yesterday, led by Philippines’ PSEi (-1.7%) and Indonesia’s JCI (-1.3%).

Back home, the FBM KLCI continued its downtrend yesterday by declining 9.0 pts or 0.5% to close at 1,755.1, recording its fifth consecutive day of decline. The local market was in the negative territory throughout yesterday and hit a low of 1,749.8 (-14.3 pts) amid intense selling in key banking stocks before buying support from local funds helped to pare down the losses in the afternoon. Key movers in the KLCI include FGV (-4.5%), KL Kepong (-3.9%), IHH (-2.4%), Genting Malaysia (+1.4%) and AMMB (+1.3%). Overall market breadth remained negative with 506 decliners, 274 gainers and 327 counters traded unchanged. Trading volume continued to be subdued with 1.78 bn units traded (trading value of RM2.19 bn). Companies which reported earnings yesterday include AirAsia X, AFG, Genting Plantations, Jaya Tiasa, Malakoff, Maybulk, Ta Ann, Time Dotcom and UOA. On a separate note, Icon Offshore announced it has secured a 2-year charter contract for accommodation workboat worth RM99m with Brunei-based Zell. For today, we believe the local market may attempt a technical rebound in tandem with positive overnight US and European markets.

Source: PublicInvest Research - 28 May 2015