Economy

US: Consumers ebullient; home prices gain. US consumer confidence shot to its highest in more than 15 years in Dec as Americans saw more strength ahead in business conditions, stock prices and the job market following the election of Donald Trump as president in Nov. House prices continued their steady recovery in Oct, although a spike in borrowing costs after Trump's Nov 8 victory could present a headwind to sustained home value gains. The Conference Board said its Consumer Confidence Index rose to 113.7 this month from an upwardly revised 109.4 in Nov. That topped estimates in a Reuters poll for a reading of 109.0, and was the highest since Aug 2001. The private economic forecasting group's Expectations Index hit its highest since Dec 2003. (Reuters)

US: Home prices in 20 cities increased 5.1% in Oct. Home prices in 20 US cities maintained a steady pace of increases in Oct, while a gauge of nationwide property values rose by the most since mid-2014, according to S&P CoreLogic Case-Shiller data released Tuesday. 20- city property values index rose 5.1% from Oct 2015 (forecast was 5%), after a 5% gain in the year through Sept National home-price gauge increased 5.6% from 12 months earlier, the biggest gain since July 2014, to a record 185.06; the measure first exceeded the 2006 pre recession peak in Sept. On a monthly basis, the seasonally adjusted 20- city index increased 0.6% (forecast was 0.5%) from prior month, after a 0.5% gain. (Bloomberg)

Japan: Japan Inc could claim edge in overseas deals as China faces restraints. Japan Inc may become a more important force in dealmaking next year as its cashed-up companies seek to buy growth prospects elsewhere in the world and as Beijing's crackdown on capital outflows prevents some Chinese companies from making foreign acquisitions, bankers and lawyers said. Facing tepid prospects at home after decades of stagnation amid a shrinking population, Japanese companies had spent USD93bn overseas this year, up to Dec 19, little changed from a record USD96bn in all of 2015, but up from just USD51bn in 2013, Thomson Reuters data shows. Chinese companies have spent USD217bn so far in 2016. With Japanese companies hoarding a record USD3.2trn in cash, according to government data, outbound acquisitions are expected to maintain a fast pace next year, the bank and law firm sources said. (Reuters)

China: To relax foreign investment rules for aged care. China is set to relax regulations for foreign elderly care firms in an effort to attract investment, the State Council said. The statement said China will loosen approval processes for foreign aged-care firms and encourage overseas investors to establish non-profit pension funds. China is facing the looming challenges of a rapidly aging population, driven in part by its restrictive one-child policy which was partially relaxed in 2015. The country opened the industry to for-profit investment in 2014, allowing some foreign investors to manage wholly-owned firms in the sector, albeit under close surveillance and cumbersome approval processes. According to UN data, the number of Chinese people over 80 will surge three-fold to 90m, making it the largest aged population in the world. (Reuters)

Malaysia: Bank Negara to act against financial institution for breaching Act. Bank Negara Malaysia (BNM) has initiated enforcement actions against a financial institution for failure to promptly notify the central bank of a significant audit finding in relation to its dealers’ misconduct involving the fixing of the USD/ringgit exchange rate. The actions may include the imposition of monetary penalties, issuance of a written order to comply, making public reprimands and issuance of a written order to mitigate or remedy such breaches, as provided for under the Financial Services Act 2013 (FSA). BNM said the audit finding indicated that there were communications with traders from other foreign financial institutions, which included inappropriate references to the fixing rate submission process. In this regard, BNM has commenced the due process as stipulated under the FSA. (SunBiz)

Singapore: Proposes changes to peel off layers shielding beneficial ownership. Singapore's Ministry of Finance (MOF) and the Accounting and Corporate Regulatory Authority (ACRA) have launched a public consultation exercise, inviting views on proposed changes that should lead to greater transparency of beneficial owners of companies and limited liability partnerships (LLPs). The move comes after authorities this year started taking action on money laundering activities related to 1MDB’s fund flows through Singapore’s financial institutions. The Panama Papers leak in April had also put a spotlight on offshore tax havens, and how individuals and companies have kept their interest and ownership of assets hidden under layers of entities. The proposed changes were first mooted back in Sept 30 by senior minister of state for finance Indranee Rajah. (The Edge)

Markets

Maxis (Neutral, RM5.90), Astro (Outperform, RM3.19):Maxis buys 25% stake in AWT from Astro for RM15.8m. Maxis is taking full control of Advanced Wireless Technologies SB (AWT) by acquiring the remaining 25% in the wireless multimedia related services provider from Astro Malaysia Holdings’ unit MBNS Multimedia Technologies SB (MMT) for RM15.8m.The company said that it or its related corporations would also buy goods and services totalling RM3m from MMT and/or its related corporations as part of the deal. (StarBiz) Comments: AWT holds the 2,100MHz spectrum that was assigned by the Malaysian Communications and Multimedia Commission (MCMC) for 15 years expiring on 1 April 2018. This acquisition is mainly for the purpose of streamlining Maxis’ operational structure. With a full control over AWT, Maxis could accelerate its decision-making process surrounding the 2,100MHz spectrum i.e. renewal cost and potential capital commitment in the future. Also, given that 3G spectrum business is not a core competency of Astro, this acquisition/divestment makes economic sense for both parties. Potential financial impact arising from this is expected to be immaterial for Maxis and Astro.

Mitrajaya: Bags RM183m West Coast Expressway contract. Mitrajaya Holdings has clinched a portion of the RM5.04bn West Coast Expressway (WCE) construction project, with a RM183.4m contract to build the stretch from the South Klang Valley Expressway interchange to the Shah Alam Expressway interchange. (StarBiz)

KFM: To explore potential partnership with coal trader. Kuantan Flour Mills (KFM) is proposing an equity fund-raising exercise and a partnership with coal and starch trader Lotus Essential SB as part of its plan to restructure its debt and reconstruct its business. The company said it had signed an MOU to collaborate with Lotus, which imports, exports and trades steam coal, corn starch and tapioca starch, to carry out flour milling activities and trading of flour and food-related products. (StarBiz)

The Store Corp: Takeover offer turns unconditional. The Tang family said their takeover offer for The Store Corp turned unconditional today, after they gained control of 59.6% of the supermarket operator’s shares. The Store said TYS Consolidated SB, which is controlled by its group MD Tan Sri Tang Yeam Soon, owns 59.6% of the shares, of which 45.7% were through acceptances to the offer. (Financial Daily)

Selangor Properties: 4Q profit plunges 88% to RM57.4m. Selangor Properties’ net profit for the 4QFY16 plunged 88.1% to RM57.4m or 16.70 sen per share, from RM483.8m or RM1.41 per share a year earlier. For FY16 as a whole, Selangor Properties’ net profit tumbled 88.7% to RM67.4m, from RM593.7m in FY15. Revenue rose 22.4% to RM121.8m, from RM99.5m. (Financial Daily)

Inix: To shift away from IT business, focus on dredging and land reclamation. Inix Technologies Holdings said it is trying to shift away from its loss-making IT solutions business, reshaping the company to focus on its diversification into dredging and land reclamation instead, according to executive director Mohd Anuar Mohd Hanadzlah. Mohd Anuar said its IT losses were attributed to high administrative expenses from its ongoing projects, which cost the group about RM8m in its latest FY16. (SunBiz)

Market Update

The FBM KLCI might open with a positive note today after US equities pushed higher overnight in light trading after the holiday break as investors considered the import of upbeat data on American consumers. The 20,000 milestone, meanwhile, remained elusive for the Dow Jones Industrial Average, which came within 20 points of the psychologically important level only to give up most of the day’s gains. Retail stocks were in focus as investors looked to the first reads on the strength of the holiday shopping season. At the closing bell, the Dow Jones Industrial Average rose 0.1%, or 11.23 points, to end at 19,945.04, the S&P 500 advanced 5.09 points, or 0.2%, to 2,268.88 and the Nasdaq Composite Index added 24.75 points to settle at 5,487.44, a gain of 0.5%. The gains came after a report from the Conference Board showed that US consumer confidence jumped this month to its highest level since 2001, the latest indication that the economy has gained momentum after a disappointing start to 2016. On economic data, the S&P Case-Shiller index of home prices climbed 0.6% in October and was up 5.1% in the past year, unchanged from the prior month. Across the Atlantic, the Eurozone’s biggest stock markets on Tuesday closed in on double-digit gains for the final quarter of 2016, as a combination of resurgent bank shares and a weaker euro enticed investors into a region that has disappointed for much of 2016. Performance-wise, Germany’s Dax 30 returned from the Christmas break with a 0.2% advance taking it up more than 9% for the quarter. France’s CAC 40 also edged 0.2% higher, and is also 9% stronger for the final three months of the year.

Back home, the FBM KLCI index gained 2.53 points or 0.16% to 1,619.68 Tuesday. Trading volume increased to 1.09bn worth RM1.03bn. Market breadth was negative with 333 gainers as compared to 375 losers. In the region, Asian shares were a mixed bag with Japan’s Nikkei Stock Average flat at 19,403.06, Korea’s Kospi was up 0.2% and the Shanghai Composite Index was 0.3% lower. Markets in Australia, New Zealand and Hong Kong were closed.

Source: PublicInvest Research - 28 Dec 2016