Economy

US: Seeks China trade moves on autos, financials, chips, says source. Top Trump administration officials are asking China to cut tariffs on imported cars, allow foreign majority ownership of financial services firms and buy more US-made semiconductors in negotiations to avoid plans to slap tariffs on a host of Chinese goods and a potential trade war. A person familiar with the discussions said these were among the asks from Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer as they pursue talks with Beijing. The Wall Street Journal first reported the demands from US officials, saying they came in a letter sent to Beijing last week. White House trade adviser Peter Navarro confirmed that President Donald Trump asked Mnuchin and Lighthizer to try to resolve trade differences with China. (Reuters)

US, South Korea: Revise trade deal, Korean steel faces quota. The US and South Korea agreed to revise a trade pact sharply criticised by US President Donald Trump, Seoul said on Monday, with US automakers winning improved market access and Korean steelmakers hit with quotas but avoiding hefty tariffs. The planned changes in the US-Korea Free Trade Agreement (KORUS) were seen as limited, leaving South Korea’s key passenger car exports untouched and helping soothe fears that Trump’s tough approach could start a spiralling global trade war. The agreement means South Korea will be forced to cut its steel exports to the US by 30% of past three years’ average, in exchange for becoming the first US ally to receive an indefinite exemption on steel tariffs imposed by Trump. (Reuters)

EU: IMF head tells euro zone time right to set up rainy day fund. International Monetary Fund (IMF) head Christine Lagarde said on Monday euro zone leaders should set up a “rainy day fund” to help cushion member states in economic downturns. Officials in the bloc have been discussing such a fund since last year as one option for setting up a euro zone budget or boosting fiscal capacity — an idea championed by France and to which opposition from Germany appears to be softening. The Fund’s MD welcomed a “sustained and broadly shared upswing” in the global economy, which she said offered a precious window of opportunity for governments to “complete the architecture” of the euro zone. (Reuters)

UK: Mortgage approvals fall 11% in Feb. The number of mortgages approved by British banks during Feb fell by 11% compared with the same month last year after rising for the first time in four months in Jan, industry data showed. Mortgage approvals fell to 38,120 from 40,031 in Jan, industry association UK Finance said, and suggesting a downturn in Britain’s housing market since the 2016 Brexit vote remains. Consumer credit rose by 0.8% in annual terms in Feb, having risen by 0.6% in Jan which was its weakest increase since UK Finance’s new consumer credit series started in April 2017. (Reuters)

China: Asks US to offset trade loss due to metal tariffs. China asked the US to provide compensation for lost trade due to President Donald Trump’s proposed tariffs on steel and aluminum, in a preliminary step that could lead to a dispute between the two nations at the World Trade Organization. In two filings with the WTO on Monday, China dismissed the US assertion that the metal tariffs were instituted on national security grounds, arguing instead that they were safeguard measures -- temporary trade restrictions aimed at protecting domestic producers. China responded to the US action by threatening to impose tariffs on USD3bn of US imports -- including agricultural, steel and aluminum products -- and its ambassador to the US said all options are on the table, though the Asian nation doesn’t want a trade war. (Bloomberg)

China: Push for tech self-sufficiency threatens Asia's exporters. China’s rampant economic growth has been a boon for exporters in Japan, South Korea and Taiwan, who’ve supplied high-end components and machines for its factories. The risk for them now is that China changes from customer to competitor as it ascends the value chain. Japanese shipments to China reached a record USD130bn in 2017, leading an export-driven economic recovery that’s run for eight-straight quarters. Korean sales to its neighbor have jumped 70% in a decade, while shipments from Taiwan climbed to an all-time high. (Bloomberg)

Singapore: Factory output rises 8.9%, tops forecast. Singapore’s industrial production in Feb rose more than expected from a year earlier due to a surge in electronics production. Manufacturing output rose 8.9% last month from a year earlier, data from the Singapore Economic Development Board showed, exceeding the median forecast in a poll that flagged a 5.1% expansion. On a MoM and seasonally adjusted basis, industrial production fell 0.5% in Feb, a much smaller decline than the 8.4% contraction forecast in the poll. Electronics continued to be the star of the show for Singapore’s factories, growing at double digits for the second consecutive month. Electronics output in Feb jumped 17.4% from a year earlier after a 28.3% surge in Jan and it is likely to remain strong due to rapid digitisation across industries. (Reuters)

Markets

Sapura Energy (Trading Buy, TP: RM1.11): Enters New Zealand market with five approved offshore exploration permits. Sapura Energy has cemented its foray into New Zealand with a series of farm-in agreements to five offshore exploration permits in the oil and gas region of Taranaki Basin. Comments: The Group’s foray into potentially lucrative arrangements in New Zealand, albeit holding only 30% interests, highlights its strong abilities in continuously expanding on its work flows. Concerns over its forthcoming financial results may still keep a lid on share price performance however. We retain our Trading Buy call with an RM1.11 target price as we like the Group’s prospects.

Serba Dinamik (Outperform, TP: RM4.00): Takes 25% stake in JV for Tanzania chemical plant. Oil and gas services company Serba Dinamik Holdings is taking up a 25% stake in a JV company in Tanzania to set up and run a chlor-alkali plant. It said this follows a JV agreement with Junaco (T) Ltd to set up a 45 tonne per day chlorine skid mounted chlor-alkali plant in Msufini area in Tanzania in Oct 2017. (StarBiz)

MRCB: Bags RM11bn related party job for mixed project in Bukit Jalil. Malaysian Resources Corp (MRCB) has bagged an RM11bn contract to undertake project management services for a proposed mixed development in Bukit Jalil. MRCB said its wholly-owned subsidiary MRCB Land SB has entered into a management contract with Bukit Jalil Sentral Property SB (BJSP), a related party, for the appointment of MRCB Land as the management contractor for the design and construction of the mixed development to be carried out on three parcels of leasehold land. (The Edge)

WCE Holdings: Makes cash call to fund additional cost of West Coast Expressway. WCE Holdings has proposed a renounceable rights issue of five-year, zero coupon redeemable convertible unsecured loan stocks (RCULS) and free detachable warrants, in a bid to raise up to RM417.8m to fund additional costs of the West Coast Expressway. (The Edge)

MBMR, UMW: MBMR shareholders reject UMW takeover offer. UMW Holdings has hit a snag in its proposed acquisition of MBM Resources as the latter's shareholders have turned down its takeover offer. Med-Bumikar Mara SB and its wholly-owned subsidiary, Central Shore SB (CSSB), have separately rejected the conditional offer made by UMW for their collective 50.07% equity interest in MBM Resources, UMW said. (The Edge)

Uchitech: Proposes 20 sen capital repayment totalling RM90.4m. Uchi Technologies has proposed a capital repayment of 20 sen a share to the shareholders of up to RM90.4m. It said the coporate exercise would involve a reduction of the share capital from RM157.5m to between RM68.1m and RM72.1m. This would not affect the number and percentage of shares held by its shareholders. (StarBiz)

Progressive Impact: To develop Saudi health lab for RM18.7m. Progressive Impact Corp is undertaking a health laboratory project in Jeddah, Saudi Arabia for SAR18m (RM18.7m). It said its wholly owned unit Saudi Asma Environmental Solutions LLC has accepted a letter of award from the Jeddah Municipality to undertake the project. The duration of the project is three years, it added. (The Edge)

Market Update

The FBM KLCI might open higher today after Wall Street stocks made a strong start to the week overnight, with all three major indices posting their largest single-day advance since August 2015, tracking hopes that talks between the US and China could prevent any escalation of the trade dispute between the two countries. At the closing bell, the Dow Jones Industrial Average climbed 669.40 points, or 2.8%, to 24,202.60, for its third-best point gain in history. Meanwhile, the S&P 500 rallied 70.29 points, or 2.7%, to 2,658.55, recouping all of its Friday losses and the Nasdaq Composite Index advanced 227.88 points to 7,220.54, a rise of 3.3%. In Frankfurt, the DAX 30 dropped 0.8% to close at 11,787.26, and in Paris, the CAC 40 index erased 0.6% to finish at 5,066.28. The FTSE 100 index gave up 0.5% to end at 6,888.69 in London.

Back home, the FBM KLCI index lost 5.31 points or 0.28% to 1,859.91 points. Trading volume decreased to 1.98bn worth RM1.79bn. Market breadth was negative with 334 gainers as compared to 589 losers. Japan’s Topix touched a six-month low before finding support to bounce 0.4% higher overall. Hong Kong’s Hang Seng index followed a similar pattern to rise 0.8%. The Shanghai Composite fell 0.6%, with financial stocks taking the heaviest toll, leaving the index heading back towards its February lows. South Korea’s Kospi Composite rose 0.8% on reports the country was set to sign changes to its trade deal with the US after coming to an agreement over issues including Mr Trump’s new steel tariffs.

Source: PublicInvest Research - 27 Mar 2018