Economy

Global: OECD trims growth outlook but urges Fed action this week. The global economic outlook has grown darker than it was only a few months ago, but the United States is doing well enough that its central bank should go ahead with its first rate increase since the financial crisis, the OECD said. The world economy is set to grow 3.0% this year and 3.6% next year, the Paris-based Organisation for Economic Cooperation and Development said. (Reuters)

US: Fed begins two-day meeting, result seen too close to call. The Federal Reserve began a two-day policy meeting on Wednesday with economists evenly split on whether Thursday will see the first official US interest rate rise since 2006. The decision by the US central bank's Federal Open Market Committee (FOMC) is expected on Thursday at 2 p.m. (1800 GMT). US economic data are flashing conflicting signals, with unemployment falling but inflation subdued, while slowing growth in China has led to a 40% fall in Shanghai stocks. (Reuters)

US: Weak inflation complicates Fed rate decision. US consumer prices unexpectedly fell in Aug as gasoline prices resumed their decline and a strong dollar curbed the cost of other goods, pointing to tame inflation that complicates the Federal Reserve's decision whether to hike interest rates. Consumer Price Index slipped 0.1%, the first drop since Jan, after edging up 0.1% in July. In the 12 months through Aug, the CPI rose 0.2% after a similar gain in July. (Reuters)

US: Homebuilder confidence in strengthens to highest since 2005. Confidence among U.S. homebuilders rose in Sept to the highest level in almost a decade, signaling momentum in residential real estate will support growth in the 2H of 2015. The National Association of Home Builders/Wells Fargo builder sentiment gauge rose to 62, the highest level since Oct 2005, from 61 the prior month (Bloomberg)

EU: ECB gives central banks power to announce emergency funding. National central banks in the euro zone will now have the power to make announcements about any emergency funding that they provide to their banks, the European Central Bank said. Official announcements about the supply of Emergency Liquidity Assistance (ELA), such as in the case of Greek banks, had so far been made by the ECB itself. Central banks will still have to seek ECB approval to provide ELA and to make any announcement about it. (Reuters)

EU: Germany snubs ECB in new law fortifying national bank controls. Germany is resisting the ECB’s drive to unify banking supervision, retaining the right to make rules in an amendment of the nation’s banking act. The Finance Ministry in Berlin will be able to issue rules on banks’ recovery plans, risk management and internal decisions under a bill being discussed by the Bundestag, the lower house of parliament. (Bloomberg)

UK: Carney says BOE interest-rate rises may start in early 2016. Bank of England Governor Mark Carney said there’s a chance that interest rates may need to increase from a record low in early in 2016 if the economy continues to grow and inflation pressures pick up. Addressing UK lawmakers in London, Carney said the Monetary Policy Committee’s debate on when to raise the benchmark rate from 0.5% will become clearer around the turn of the year. (Bloomberg)

China: Top economic planner urges firms to borrow more cheaply offshore. China's top economic planner on said, Chinese firms with good credit to issue bonds in cheaper offshore markets to support domestic investment and major national projects. (Reuters)

Japan: Output seen flat in 3Q on China slowdown. Japanese factory output will remain flat in the current quarter and an expected pick-up in Oct-Dec is clouded with uncertainty as shipments to Asia take a hit from China's slowdown, the BOJ said. Slumping growth in emerging economies is hurting Japanese machinery makers, while electronic parts makers are suffering from weak exports of smartphone parts to China, the central bank said. (Reuters)

Markets

Sunway: Unit in deal to buy WTSB. Sunway Holdings SB (SunHoldings), a unit of Sunway, has entered into a second supplemental agreement to buy hardware and household product trader Winstar Trading SB (WTSB) for RM131.0m. Sunway said SunHoldings would acquire 80% of the issued and paid-up share capital of WTSB instead of the entire issued and paid-up share capital of WTSB. (StarBiz)

Protasco: Eyes contract expansion. Protasco said it is in talks with the Public Works Department (PWD) to secure a long-term extension on a contract to provide road maintenance services in Selangor. The current seven-year contract, which was awarded to its 70% owned PKS-HCM SB, will expire this month. Protasco said the unit had already obtained a 3½-month extension from the PWD. (StarBiz)

Tanjung Offshore: Partners China’s Jereh. In a move to reduce costs, Tanjung Offshore through its unit Tanjung Offshore Services SB has signed a three-year collaboration with China-based Jereh Group. The agreement will see Tanjung Offshore explore opportunities and market Jereh’s services in Malaysia while Jereh will provide oil field equipment for projects that are awarded by Petronas. (StarBiz)

Pentamaster: To invest RM20m in Batu Kawan plant. Pentamaster Corp will invest RM20m in a new manufacturing facility in Batu Kawan next year despite the global economic downturn. Group executive chairman C.B. Chuah said, the plant would be located on 3 acres to manufacture a new generation of test and robotic equipment for the semiconductor industry. Construction work is expected to start next year and the plant is scheduled to start operations in 2017. (StarBiz)

Fututech: Proposes private placement to raise RM150m. Fututech, which is acquiring two construction firms for RM458m, is looking to raise some RM150m from a proposed private placement of 100m new Fututech shares. “Together with the proposed acquisitions, we are also announcing a proposed private placement of which details and pricing are to be determined at a later date. The proposed private placement is intended to raise funds to facilitate the earlier mentioned proposed acquisitions,” its executive chairman Datuk Tee Eng Ho said. (SunBiz)

Damansara Realty: Partners Sumitomo to bid for Pengerang jobs. Damansara Realty is planning to set up a JV company with Japan’s Sumitomo Warehouse Co Ltd (SWC) to participate in downstream oil and gas operation in Pengerang Integrated Petroleum Complex (PIPC). The company announced that it has entered into a non-binding MoU with SWC to participate in future business operations involving the handling and logistics for oil and gas downstream product in PIPC. (SunBiz)

Auto: August vehicle sales up 4.5%. Total vehicle sales in August rose 4.5% or 2,326 units to 53,452 units from 51,126 units in the same month a year ago, the Malaysian Automotive Association (MAA) said. However, the August sales was 8.9% or 5,194 units lower than July 2015, due to uncertainties among businesses over the weakening of the ringgit as well as the gloomy global economic outlook, it said. (StarBiz)

MARKET UPDATE

Markets are betting the US Federal Reserve will hold off from raising its interest rates at the end of its two-day policy meeting later today, with most benchmark indices ending higher for the day. Over in the US, the Dow Jones Industrial Average rose 0.8% while the S&P 500 was higher by 0.9% amid the country’s inflation rate falling in August as cheaper gasoline during the month kept prices in check and crucially, below policy makers’ objectives. Oil prices are swinging back higher however on reports of US crude inventories declining as refiners boosted production. Stocks also ended higher in Europe, led by SABMiller’s 20% gain after the company said Anheuser-Busch InBev NV intends to make a takeover proposal. The world’s largest jewelry marker, Richemont, saw its share price gain 6.6% after it said five-month sales grew amid higher demand in Japan and Europe. Market-wise, gainers were led by Spain, France and UK’s 2.0%, 1.7% and 1.5% rises while Germany and Italy’s indices 0.7% and 0.4% higher. Earlier in the day, Asian markets tracked the previous day’s healthy performance of the US bourses higher, with energy-related stocks leading the race. The Shanghai Composite Index made the most notable impression overnight, making a late surge to end the day 4.9% higher on signs of government support in the market. With the Hang Seng Index, KOPSI Index and Straits Times Index all higher by 2.4%, 2.0% and 0.9% respectively, the FBM KLCI which was closed for the Malaysia Day holiday yesterday looks set for a healthy opening in a while. Elsewhere around the continent, India and Thailand’s benchmarks notched up 1.0% and 0.9% gains though Indonesia’s slipped 0.3%.

Mega First has finally signed its long-awaited concession agreement with the Laotian government pertaining to its construction of a 260MW hydropower plant in the country, a move very much welcomed. Please refer to the accompanying report today for more details. SapuraKencana Petroleum announced a sharp 61.8% drop in its 1HFY16 net profit to RM364.8m as it took an impairment charge of RM539.9m in the current quarter, though partly mitigated by foreign exchange gains of RM109m. SKP Resources made a supplemental announcement to the one done on Monday, saying that the contract it had secured from Dyson Ltd amounts to RM600m per annum. The quantum is slightly ahead of our expectations and will make an even more positive impact to its earnings growth going forward, though we retain our estimates at this juncture. Our Outperform call and target price of RM1.71 are reaffirmed nonetheless.

Source: PublicInvest Research - 17 Sep 2015