Economy

US: Fed liftoff has futures and economists at odds for next week. Many economists are sticking to predictions the Federal Reserve will lift interest rates next week. Money-market derivative traders still need convincing. Thirty-eight of 78 economists surveyed by Bloomberg predict the central bank will increase its target when policy makers gather on Sept 16-17, after holding it close to zero since 2008 to support the economy. Yet the probability of such a move as gauged by federal funds futures contracts, a bellwether for traders for decades, is 28.0%, signaling fewer people in that market are buying the argument that a tightening is just days away. (Bloomberg)

US: Consumer comfort stalls as Americans see mixed economic picture. Consumer attitudes in the US held steady last week as weaker perceptions about the buying climate offset more sanguine views of household balance sheets. The Bloomberg Consumer Comfort Index was unchanged at 41.4 in the period ended Sept 6. The gauge of whether it’s a good time to make purchases dropped to a five-week low, while the measure of personal finances rose to the highest since mid-July. Lasting momentum in the job market is buoying consumers even as they await a pickup in wage growth. Stable attitudes among Americans should keep a floor under the consumer spending that makes up the biggest part of the economy. (Bloomberg)

US: Decline in jobless claims shows resilient job market. Fewer Americans lined up last week to file for jobless benefits, highlighting the persistent strength of the labor market. Claims for unemployment insurance fell by 6,000 to 275,000 in the week ended Sept 5, from a revised 281,000 in the prior period, a report from the Labor Department showed Thursday. The figure matched the median forecast in a Bloomberg survey of economists. For the last six months first-time claims have been below the 300,000 level that economists associate with a healthy labor market as steady demand persuades employers to retain workers. What’s more, the unemployed have a greater chance of finding work after a report Wednesday showed a record number of job openings in July. (Bloomberg)

EU: Brighter German economic prospects trigger overheating alarm. Germany’s economy is growing at its strongest pace since 2011 and accelerating – and one of the country’s leading research institutes says that’s a problem. The Kiel Institute for the World Economy predicted on Thursday that Germany’s expansion in GDP will pick up to 2.3% in 2017 from 1.8% in 2015. With next to no slack and potential output growth at only 1.4%, Europe’s largest economy is poised to overheat, according to Stefan Kooths, head of the institute’s forecasting center. (Bloomberg)

UK: BOE says global turmoil hasn’t shaken its economic outlook. Bank of England policy makers said the UK economic outlook remains healthy and market turmoil related to China’s slowdown hasn’t shaken their view that the time for a rate increase is approaching. At their Sept meeting, the nine-member Monetary Policy Committee said it’s too early to draw clear conclusions about developments overseas, a sign they remain focused on withdrawing emergency stimulus that’s been in place since 2009. While the panel voted 8-1 to keep the key interest rate at 0.5%, with only Ian McCafferty dissenting, there were still some members who saw potential upside inflation risks. (Bloomberg)

Japan: BOJ stimulus odds increase for next month in economist survey. With Japan’s economy struggling to gather momentum after a contraction last quarter, more than a third of economists see the central bank expanding monetary stimulus next month, according to a Bloomberg News survey. Eleven of 35 respondents see the Bank of Japan stepping up its easing on Oct 30, while two forecast a move as early as next week, the Sept 7-10 survey shows. Barclays Plc, Credit Agricole SA and JPMorgan Chase & Co. - which predict the BOJ will hold off until next year - see growing risk of action on Oct 30. The central bank last expanded asset purchases in Oct 2014. (Bloomberg)

Markets

KNM: Unit awarded USD42m Pengerang contract. KNM Group's indirect 70%-owned JV company CNI Engineering & Construction Malaysia SB has been awarded a USD42m (RM183m) erection work contract by Toyo Thai Malaysia SB. The group said the 25-month contract is to undertake erection work in relation to Petronas' Pengerang Integrated Complex Project. (SunBiz)

Asian Pac: Buys Sabah leasehold land for RM21.8m. Asian Pac Holdings’ unit Taman Bestari SB (TBSB) is buying a 6.7ha leasehold land in Papar Road, Papar District, Sabah, for RM21.8m for property development. Asian Pac announced that TBSB had entered into a conditional sale and purchase agreement (SPA) to acquire the 99-year lease unencumbered land expiring on June 28, 2924 from vendor Lee Wat Lan. (Financial Daily)

Guocoland: Units plan disposal of properties for RM66m. BLV Fashions SB (BLVF) and Guobena Development SB (GDSB), indirect wholly-owned subsidiaries of Guocoland (Malaysia) SB, are planning to sell two floors of leasehold commercial office spaces, together with some car park parcels, in Menara Pandan at Pandan Indah, Cheras, for RM66m. Guocoland said both companies have entered into conditional sale and purchase agreements with Mayapada Capital SB for the proposed disposal. (Financial Daily)

Focus Dynamics: Proposes par value reduction to pare down accumulated losses. Focus Dynamics Technologies has proposed to reduce the par value of its shares by cancelling 5sen out of the par value of every existing ordinary share of 10sen each to pare down its accumulated losses. The proposed par value reduction will give rise to a credit of between RM35.3m under the minimum scenario and RM67.4m under the maximum scenario, which will be utilised to set off against the accumulated losses of the company. (Financial Daily)

Malaysia Airports: Passenger movements up 8.4% in Aug. Passenger movements for Malaysia Airports Holdings’ (MAHB) airports, including Istanbul Sabiha Gokcen International Airport (SGIA), grew by 8.4% YoY to record its highest ever monthly traffic at 10.3m in Aug 2015. MAHB said domestic traffic grew 9.3% to 5.6m passengers while international traffic totalled 4.6m passengers, up 7.2% YoY. (StarBiz)

Wintoni: Entire board replaced. Wintoni Group saw its entire board of directors being replaced yesterday. This comes along a month after a group of shareholders requisitioned for the board changes. These shareholders, who held not less than a tenth of the company’s outstanding shares, had earlier issued a special notice pursuant to Sections 153 and 128 (2) of the Companies Act 1965 to remove the board. (StarBiz)

Berjaya Auto: Braces for challenging year after weaker 1Q earnings. Berjaya Auto’s (BAuto) earnings slipped 6.9% to RM52.2m in the 1Q ended July 31, 2015 from RM56.1m a year ago on higher spending on advertising and promotion expenses and it expects a challenging year. Its pre-tax profit fell by 3.9% to RM73.5m from RM76.5m a year ago. Its revenue increased by 0.9% only to RM512.5m from RM507.9m largely due to an unfavourable sales mix. It rewarded shareholders with an interim dividend of 2.25 sen a share, an increase from the two sen a year ago. (StarBiz)

MARKET UPDATE

US stocks edged higher overnight even as investors continued to keep a wary eye on economic developments to glean thoughts on what the Federal Reserve would do next week at its policy meeting. Unemployment benefit claims fell 6,000 to 275,000 last week, highlighting the strength of the job market which is now seemingly sustainable. This comes after the previous day’s report of job openings surging to a record in July. For the day, both the Dow Jones Industrial Average and S&P 500 rose 0.5% after having traded as much as 1.2% higher earlier. European stocks eased off however on fresh concerns that the US rate hike may be on next week, contrary to earlier expectations of a delay, and that the global economy may not be strong enough to withstand the move even if the US is. The IBEX 35 and CAC 40 led index losers lower by 1.8% and 1.4% respectively while the FTSE 100 fell 1.2%. Italy’s FTSE MIB and Germany’s DAX slipped 1.0% and 0.9% respectively. Always the first to react to any US-related developments, Asian markets also ended lower on the uncertainties over the US rate hike decision, in addition to concerns over China’s growth as data showed August producer prices falling 5.9% (the most in 6 years) for a 42nd month of declines. The Shanghai Composite Index fell 1.4% as a result. The Nikkei 225 gave back some of the previous day’s 7.7% gain, ending 2.5% lower for the day in a market which is now being increasingly viewed as more volatile than China’s. Elsewhere, the Hang Seng Index and Straits Times Index tumbled 2.6% and 1.4% respectively. New Zealand’s NZX50 Index was little changed (+0.04%) even as its central bank lowered interest rates and said the currency should fall further. The one to buck regional trends was the FBM KLCI which rose 0.7% in a late buying spurt, though the Ringgit fell to a 17-year low amid risk aversion in emerging market economies following Brazil’s credit rating downgrade to junk status by Standard and Poor’s (S&P).

IOI Corporation announced the proposed acquisition of Cremer Oleo GMBH and Co KG’s oleochemical business in Germany for about RM433.3m. Meanwhile, SP Setia reported a strong 3QFY15 net profit of RM261.8m, representing a 153.1% increase from the previous corresponding period, primarily on maiden contributions from its Fulton Lane project in Australia. Please refer to the accompanying reports today for details on these two developments, amongst others. Companies with Brazilian-related exposures could be closely watched again today for any greater fallouts following S&P’s move, the notable ones being SapuraKencana Petroleum and Supermax Corporation. KNM announced the securing of Pengerang-related works amounting to about RM182m, to last over the next 25 months commencing September 2015.

Source: PublicInvest Research - 11 Sep 2015