Economy

Global: Factories hum from Detroit to Dortmund as economies perk up. Factories from America’s Rust Belt to Germany’s Ruhr region to Japan’s Aichi prefecture are revving up production lines in a unified acceleration not seen in years. Global manufacturing indexes have forged ahead to multi- year highs, in concert with improving economies rich with the tinder of easy monetary policy. In the US, a resurgence in corporate investment is driving equipment orders. Germany, where business sentiment is near a record, is helping engineer a pickup in Europe’s economy. Combined with solid manufacturing in Japan, a measure of activity among producers in developed nations has muscled ahead to the highest level in nearly seven years. (Bloomberg)

US: 3Q growth revised down to 3.2% pace from 3.3%. The US economy’s 3Q growth was revised slightly downward on lower contributions from consumer spending and trade, though the pace remained the fastest since early 2015, Commerce Department data showed Thursday. GDP grew at 3.2% annualized rate, revised from 3.3% and following 3.1% in 2Q. Consumer spending, biggest part of the economy, grew 2.2%, revised from 2.3% and following 3.3% in 2Q. The revisions for GDP, the value of all goods and services produced, still show the economy was on a strong run last quarter, with recent reports indicating the momentum extended into the current period. (Bloomberg)

US: Americans’ economic expectations cool to match lowest of 2017. Americans’ outlook for the US economy fell in Dec to match the weakest for the year and a weekly measure of confidence cooled to a two-month low, even as both gauges remain high by historical standards, the Bloomberg Consumer Comfort Index showed Thursday. Monthly gauge of economic expectations declined to 47 in Dec from 53. Weekly comfort index fell to 50.8, lowest since week ended Oct 8, from 51.3. The pullback in the monthly gauge reflects an increased share of people saying the economy is getting worse, which at 34% is the highest since Nov 2016 and 6 percentage points above this year’s average. (Bloomberg)

US: Jobless claims rise by most since storms to five-week high. US filings for unemployment benefits jumped to the highest in five weeks, though the level remained low by historical standards, Labor Department figures showed Thursday. Jobless claims increased by 20k to 245k; biggest rise since week ended Sept 2, which reflected Hurricane Harvey. Continuing claims rose by 43k to 1.932m in week ended Dec 9. Four-week average of initial claims, a less-volatile measure than the weekly figure, rose to 236,000 from the prior week’s 234,750. The latest period encompasses the reporting week that the Labor Department surveys for its monthly employment figures, which includes the 12th of the month. The four-week average is still below its 240,000 level for the previous survey week in Nov. (Bloomberg)

US: Dalio says benefits from tax plan will be small, costly and fade. The US tax overhaul will provide a “short-term minor boost” to the economy that will ultimately fail to impact the nation’s economic, social and political issues, according to billionaire hedge fund manager Ray Dalio. The legislation, which Congress passed this week, will do little to bolster investment and productivity in the long-term, he said. While changes to the corporate tax structure -- including slashing the rate businesses pay to 21% from 35% -- will make the US a more attractive place to do business, the nation would be better off investing more in infrastructure and education, he said. (Bloomberg)

UK: City of London should be optimistic about Brexit, May says. Prime Minister Theresa May said the UK’s financial sector should be optimistic about the outcome of Britain’s trade talks with the European Union that are due to start early next year. May said her counterpart’s openness to a special deal on services was “encouraging.” She cited comments by Italian Prime Minister Paolo Gentiloni last week that there should be a “tailor-made deal” for the UK as evidence that other EU leaders are open to Britain carving out a bespoke trading relationship with the bloc. (Bloomberg)

India: Dip in revenue is pushing India to crack down on tax compliance. A slowdown in tax collections is pushing Prime Minister Narendra Modi’s administration to be more vigilant on compliance. Collections under the new goods and services tax dipped to INR833bn (USD13bn) in Oct from about INR920bn the previous month, and the central bank is wary of a further dip after the government lowered rates on several items to win public support before state elections. The weakness in GST collections following a July 1 roll out has pushed down overall revenue growth. In response, India’s tax office this month asked officials to compare payments made by the top 100 assesses in each of their zones to understand variations in pre- and post-GST payments, according to an internal letter seen by Bloomberg News. (Bloomberg)

Japan: BOJ maintains stimulus as inflation lags behind growth. The Bank of Japan left policy settings unchanged in the final meeting of 2017, retaining its unprecedented monetary stimulus as it waits for a pickup in stubbornly low inflation. With Japan’s economy continuing to grow at a healthy pace, and inflation at least moving in the right direction, there is little pressure on the BOJ adjust its interest-rate and asset- purchase targets any time soon. This sets it apart from its global counterparts, with the Federal Reserve hiking interest rates and the ECB moving closer toward policy normalization. Economists and investors are looking further ahead, with some speculating that the BOJ will follow some of its peers next year. (Bloomberg)

Markets

Daya Materials (Neutral, TP: RM0.07): Wins chemical supply contract from Petronas Carigali. Daya Materials has bagged a contract from Petronas Carigali SB for the provision of integrated production chemicals supply and services worth an estimated RM67m. Daya Materials said its 67%-owned subsidiary Daya Secadyme SB was awarded the contract for SK Oil — Miri Waters with a tenure of five years effective Dec 11. The contract comes with a one-year extension option. Daya Materials group CEO Datuk Lim Thean Shiang said the contract has raised the group's outstanding order book to RM608m. (The Edge) Comments : Securing of this contract is an undoubtedly positive development for the Group, and marks another slow step in its gradual turnaround from recent years’ of challenges due to its subsea oil and gas business which it has since excited. Financial contributions will be small given the estimated RM7+m turnover recognized per annum over the next 5 years through its 55% stake in Daya Secadyme. We retain our earnings estimates at this point, with the RM0.07 target price and Neutral call also unchanged.

Wah Seong (Neutral, TP: RM1.31): Sells plantation unit for USD6m. Wah Seong Corp intends to sell its plantation unit WS Agro Industries Pte Ltd to Agro Panorama SB for USD6m (RM24.46m). Wah Seong, which is principally involved in the energy and industrial sectors, said that WS Agro’s disposal is meant to “streamline, realign and rationalise” its business activities, while realising resources that are tied to non-core operations. “The aggregate consideration is based on the approximate carrying value of WS Agro’s investments in its plantation business,” it said. (The Edge)

FGV: Unit sells almost entire stake in general insurer to Affin, AXA Asia for RM224.38m. Affin Holdings firmed up an agreement to buy 12.87% more in AXA Affin General Insurance (AXA Affin GI) from Felda Marketing Services SB (Felma) for RM180.54m, while AXA Asia agreed to buy up almost all Felma's remainder stake for RM43.84m. Felma, an indirect unit of Felda Global Ventures Holdings, inked two sales and purchase agreements for the stake disposal, one with Affin for the 15.33m share disposal, and the other with AXA Asia for the sale of 3.72m shares. (The Edge)

Ibraco: To unveil RM1.5bn mixed development in Kuching by 1Q18. Sarawak-based Ibraco is looking to launch its 123-acre mixed development called Northbank in Kuching by 1Q of 2018. Located in the greater Tabuan area, a prime spot in Kuching, Northbank has a GDV of RM1.5bn and will comprise residential, retail and office suites. The project will be developed over five to seven years. “Our main focus over the next five years would be Northbank. The first launch would be landed homes followed by Small-office Home-office apartments,” said Ibraco MD Datuk Chew Chiaw Han. (The Edge)

Yinson: JV unit to receive USD213.6m termination fee. Yinson Holdings’ 49%-owned JV unit PTSC Asia Pacific Pte Ltd (PTSC AP) will receive a termination fee of USD213.63m (RM870.97m) from Petrovietnam Technical Services Corp (PTSC) by Jan 26, 2018 for cancelling a bareboat charter contract. Yinson said PTSC AP has signed a settlement and amendment agreement with Petrovietnam Technical Services Corp (PTSC) in relation to the bareboat charter that was terminated on June 30 this year. The remaining 51% stake in PTSC AP is owned by PTSC. (The Edge)

SMRT: Places out 16.9% of Asiamet shares to third party investors, including Tabung Haji. SMRT Holdings will place out 210m shares in Asiamet Education Group, representing a 16.9% stake in the company to third party investors namely Dayatahan SB, Lembaga Tabung Haji, Kenanga Private Equity SB and Kenanga Investment Bank. SMRT said that its wholly-owned subsidiary SMR Education SB (SESB) had entered into placement agreements with various third-party investors to place out the shares. (The Edge)

Fajarbaru: Ups stake in PA Resources to 9.22%. Fajarbaru Builder Group has upped its stake in PA Resources by 0.89 ppts to 9.22% through subscription of the latter’s issuance of rights share. According to PA Resources’ annual report for FY17, Fajarbaru’s shareholding stood at 8.33% as at Sept 28 this year. Fajarbaru said it has been allotted a total of 78.31m rights share in PA Resources, which consist of 63.08m rights shares at an issue price of five sen each, on the basis of four rights shares for every five shares held in PA Resources and 15.23m excess rights shares being issued at the same price. (The Edge)

Muhibbah: Lands MRT2 job worth RM189m. Muhibbah Engineering has been awarded a RM189m work package by Mass Rapid Transit Corp SB for the construction of the MRT Sungai Buloh Serdang-Putrajaya line, also known as MRT2. Muhibbah said the group will be responsible for the design, supply, installation, testing and commissioning of noise barriers and enclosures for the package. The contract is scheduled to commence immediately and is expected to be substantially completed by end-2019. (The Edge)

Ahmad Zaki: Bags RM138.4m job to build academic blocks at UTP. Ahmad Zaki Resources (AZRB) has bagged a RM138.38m contract to build two academic buildings for the faculty of geosciences and petroleum engineering, as well as a Tenaga Nasional 33kv substation, at Universiti Teknologi Petronas (UTP) in Bandar Seri Iskandar, Perak. AZRB said its wholly-owned subsidiary Ahmad Zaki SB has received and accepted the letter of award from Institute of Technology Petronas SB for the proposed project. The contract works are expected to be completed in the next 30 months, until July 15, 2020. (The Edge)

Asia Poly: Unit gets environmental permit for Aceh power plant. Asia Poly Holdings' Indonesian unit has obtained the environmental and location permits for its proposed 12 megawatt power capacity hydro-electric power plant in Aceh province. Asia Poly said it received notification that PT Rimba Tripa, in which it has a 51% indirect share, obtained the permits from the relevant local authority on Dec 12. The permits would allow PT Rimba to carry on the project which has passed the environmental study at the designated location. PT Rimba has also been given the authority to purchase the land required for the project. (The Edge)

Sarawak Cable: Bags 18.4m helicopter services contract from Health Ministry. Sarawak Cable has bagged a two-year contract valued at RM18.41m from the Ministry of Health for helicopter services in the state. Sarawak Cable said the Medical Evacuation Service and Flying Doctor Service will be undertaken by its wholly owned subsidiary, Aerial Power Lines SB, which provides chartered or non-scheduled helicopter services. The group said the contract is expected to contribute positively to the earnings and net assets of the group from 2018 to 2020. (The Edge)

Market Update

The FBM KLCI might end the week with a positive note after stocks resumed their rally towards record highs following a midweek pause with London’s FTSE 100 setting a fresh all-time peak amid increasing investor optimism over global growth. A two day retreat in equity markets ended as economic indicators on both sides of the Atlantic provided upbeat news, with US third quarter GDP accelerating at the quickest pace in nearly three years and a Eurozone consumer confidence indicator registering its highest levels for 16 years. The week’s bond market sell-off in the wake of the successful legislative passage of $1.5tn tax cut plans by President Donald Trump and Congressional Republicans was also checked as US Treasury yields dipped. European markets shrugged off the looming political risk of elections in Catalonia that will be a crucial test of the independence movement’s strength as Spanish stocks outperformed and the euro was modestly higher. Exit polls and early results showed Catalan independence supporters on course for a majority in the region’s parliament. On Wall Street, the Dow Jones Industrial Average rose 55.64 points, or 0.2%, to 24,782.29, ending well off its highs of the session. Meanwhile, the S&P 500 added 5.32 points, or 0.2%, to 2,6854.57 and the Nasdaq Composite Index rose 4.4 points to end at 6,965.35, a rise of less than 0.1%. Across the Atlantic, Germany’s DAX 30 index reversed course and finished up 0.3% at 13,109.74, France’s CAC 40 claimed at 0.6% rise to end at 5,385.97 and the UK’s FTSE 100 index charged up 1.1% to 7,603.98, a record close.

Back home, the FBM KLCI index gained 4.58 points or 0.26% to 1,751.20 points. Trading volume decreased to 2.48bn worth RM2.06bn. Market breadth was negative with 398 gainers as compared to 481 losers. The regional markets finished mixed with the Hang Seng gained 0.45% and the Shanghai Composite rose 0.38%. The Nikkei 225 lost 0.11%.

Source: PublicInvest Research - 22 Dec 2017