Economy

Global: IMF warns stagnation as growth outlook cut again. A prolonged period of slow growth has left the global economy more exposed to negative shocks and raised the risk that the world will slide into stagnation, the IMF warned. The IMF cut its world expansion forecast, as weak exports and slowing investment dim prospects in the US, a consumption-tax hike saps growth in Japan, and a slump in the price of everything from oil to wheat continues to hobble commodities producers. The world economy will grow 3.2% this year, down from a projected 3.4% in Jan, the IMF said. (Bloomberg)

US: Posts USD108bn budget deficit in March. The US government posted a USD108bn budget deficit in March, more than double the amount from the same period last year, the Treasury Department said. The government had a deficit of USD53bn in March of 2015, according to the Treasury's monthly budget statement. Analysts polled by Reuters had expected a USD104bn deficit for last month. Accounting for calendar adjustments, March would have shown a USD102bn deficit compared with an adjusted USD89bn deficit in March 2015. (Reuters)

US: Two Fed officials urge caution on timing of next rate hike. Two Federal Reserve officials argued for caution over the timing of the next interest-rate increase as a stronger dollar and weakness abroad hinder efforts to drive inflation higher, while a third policy maker said the case for a hike was clear. Philadelphia Fed President Patrick Harker and Dallas Fed chief Robert Kaplan’s remarks echoed Chair Janet Yellen’s call for a slow approach to policy tightening that has reinforced expectations that officials won’t act when they meet on April 26-27. Richmond’s Jeffrey Lacker later argued in favor of tightening, while San Francisco’s John Williams said that two or three increases this year was a reasonable call. (Bloomberg)

EU: Greece to submit tax, pension reforms to conclude bailout review. Greece said it would submit pension and tax reform bills to parliament next week, as it seeks to persuade its international lenders that it is doing enough to receive more aid under a multi-billion euro bailout agreed a year ago. The latest review of Greece's progress on the terms of its bailout deal reached last July has dragged on for months, largely due to differences among its lenders over the country's economic progress and resistance in Athens to unpopular measures. Earlier on Tuesday, Athens and its lenders adjourned bailout review talks, potentially delaying a crucial cash handout to the debt-stricken nation, and will resume them immediately after this week's IMF spring meetings. Athens signed up to a new bailout worth up to EUR86bn (USD98bn) last year, its third international rescue package since 2010. (Reuters)

EU: German angst over ECB on show as Schaeuble, Weidmann disagree. Germany’s finance minister renewed his criticism of the ECB as his country’s own monetary chief defended the institution’s independence, in the latest escalation of tensions over low interest rates in the region’s largest economy. Wolfgang Schaeuble said ECB policy is causing “extraordinary problems” for German banks and pension planning, and could undermine support for a closer European Union. (Bloomberg)

UK: ‘Brexit’ fallout could cause severe global damage, IMF warns. The IMF cut its UK growth forecast and warned of “severe” damage to the world economy if Britain leaves the European Union. In a quarterly update to its World Economic Outlook, the Washington-based lender cited a potential UK exit as one of the key international risks. It said a vote to quit the bloc would pose “major challenges” and could do “severe regional and global damage by disrupting established trading relationships.” (Bloomberg)

Japan: Facing 'end-game' as public debt soars while hiding behind zero interest rates. Japan is heading for a full-blown solvency crisis as the country runs out of local investors and will ultimately be forced to inflate away its debt in a desperate "end-game," one of the world's most influential economists has warned. Olivier Blanchard, former chief economist at the IMF, said zero interest rates have disguised the underlying threat posed by Japan's public debt, which is likely to reach 250% of GDP this year and spiralling upwards on an unsustainable trajectory. (Bloomberg)

India: CPI eases more than estimated, good rains forecast. India’s retail inflation eased more than estimated and the weather office predicted above normal rainfall, which could create room for more monetary easing. Consumer prices rose 4.8% in March from a year earlier after a 5.3% increase in Feb, the Statistics Ministry said. (Bloomberg)

Markets

Axiata (Neutral, TP: RM6.30): Completes Ncell stake acquisition. Axiata Group has completed the acquisition of an 80% stake in Nepal-based Ncell Private Ltd, the number one mobile telecommunication network operator there. Axiata said the terms of the sale and purchase agreement (SPA) were met for the USD1.4bn transaction. Axiata said the transaction had obtained approvals regulators in Nepal and Malaysia. Axiata president and group CEO Datuk Seri Jamaludin Ibrahim said Ncell "represented perfect expansion opportunity" for Axiata to expand globally. Jamaludin said Axiata via Ncell planned to offer high-speed data connectivity to cater for the young and maturing Nepal market. (Financial Daily)

DRB-Hicom (Outperform, TP: RM1.39): Bank Muamalat expects to maintain growth at 7% for FY17. Bank Muamalat Malaysia expects to maintain its profit growth of 7% for FY17 -- the same level achieved in the previous financial year. CEO Datuk Mohd Redza Shah Abdul Wahid said the growth was expected to be moderate on the back of slowing economy and rising cost of living. “The growth would continue to be driven mainly by consumer financing and probably about 30% to 40% from the corporate sector,” he said. (StarBiz)

Eco World: Confident of hitting RM4bn sales target. Eco World Development Group (EW) is confident of meeting its sales target of RM4bn for this financial year (FY) ending Oct 31, 2016. The property developer said that its confidence was based on strong year-to-date group sales of RM607.8m achieved as at Feb 29 and positive reception to the recent unveiling of its strata offices at Bukit Bintang City Centre (BBCC). (StarBiz)

Picorp: Loses RM43.6m sewerage plant contract. Progressive Impact Corp (Picorp) has announced that Danga Bay SB has issued a formal notice to mutually terminate the letter of award to its 90% owned subsidiary Alam Sekitar Eco-Technology SB for a RM43.6m sewerage project in Johor Baru. The company said that the termination was due to the recent changes in the design of the sewerage treatment plant, which led to the increase of the total project cost. (StarBiz)

PIE Industrial: Proposes one-for-five share split. PIE Industrial has proposed a one-for-five share split. The company said the exercise will see its issued and paid-up capital increase to 384.0m shares of 20 sen each, from 76.8m shares of RM1 each at at Apr 4. “The proposed share split is expected to improve the liquidity of PIB shares on the main market of Bursa Securities, by increasing the number of shares in issue,” PIE Industrial said. (Financial Daily)

Eden: Exits Pakistan's power business. Eden Inc is exiting Pakistan's power business, after disposal of its minority shareholding in power plant developer S K Hydro (Pvt) Ltd. Eden and its executive chairman Tan Sri Abd Rahim Mohamad are selling their entire 5,600 shares in S K Hydro to White Crystal Ltd for PKR56,000 (RM2,077). They acquired the stake in 2005. Eden said it was disposing of its shares, because it deems the project not viable due to a change in the Pakistan government policies and the requirement by the government to increase the capacity from 440 megawatt (MW) to 840MW. (Financial Daily)

MARKET UPDATE

The FBM KLCI could open higher today after crude oil prices moved higher on hopes of a production freeze, bolstering global equities as investors remained hopeful at the start of a challenging earnings season in the US. Brent crude climbed to a four-month high of $44.63, up 4.2% ahead of the world’s largest energy producers’ meeting this weekend to discuss a production freeze. On Wall Street, its positive showing came in spite of Alcoa unofficially starting the US first-quarter corporate earnings season with a downbeat profit forecast. Stocks rose as surging oil prices sparked a rally in energy shares. The energy sector was by far the best performer in the S&P 500, rising 2.8%, its largest gain since Feb. 17. Chevron led the Dow industrials, rising $2.27, or 2.4%, to $97.51. Performance-wise, the Dow Jones Industrial Average notched its largest one-day point and percentage gain since March 11, rising 164.84 points, or 0.9%, to 17,721.25. The S&P 500 rose 19.73 points, or 1%, to 2,061.72, while the Nasdaq Composite Index added 38.69 points, or 0.8%, to 4,872.09. Across the Atlantic, European stocks also ended higher with Germany’s DAX 30 finished up 0.8% at 9,761.47, France’s CAC 40 added 0.8% at 4,345.91, and the U.K’s FTSE 100 rose 0.7% to 6,242.39.

Back home, the FBM KLCI ended almost flat after easing 0.28 of a point to 7,715.00. Market breath was positive with gainers outpaced losers by 390 to 371 with 1.61bn shares changed hands valued at RM1.46bn. In the region, most equity markets ended higher, led by Japanese shares, which rose as the Yen weakened slightly. The Nikkei Stock Average moved 1.1% higher. Elsewhere, South Korea’s Kospi was up 0.6%, and Australia’s S&P/ASX 200 rose 0.9% and Hong Kong’s Hang Seng Index gained 0.4%. In China, stocks slipped after the country’s securities regulator said late Monday that it approved seven initial public offerings that are expected to raise a total 2.8bn Yuan ($433m). Investors were selling stocks ahead of the offerings, on worries that an impending batch of new stock-sales would divert money from other shares. The Shanghai Composite Index fell 0.3%.

Source: PublicInvest Research - 13 Apr 2016