Economy

US: Wholesale inventories rise in line with estimates in May . A report released by the Commerce Department on Wednesday showed wholesale inventories in the US increased in line with economist estimates in the month of May. The Commerce Department said wholesale inventories rose by 0.4% in May after climbing by 0.8% in April. The continued rise in inventories matched expectations. Inventories of durable goods edged up by 0.3% in May, as sharp increases in inventories of automotive products and professional equipment were partly offset by steep drops in inventories of lumber, metals and electrical equipment. The report said inventories of non durable goods also climbed by 0.5%, with notable growth in inventories of farm products and miscellaneous non-durable goods offsetting a slump in inventories of petroleum products. (RTT)

US: Jerome Powell flags rate cut as global chill outweighs good news. The Federal Reserve is preparing to cut interest rates for the first time in a decade because it sees a cooling global economy and no sign of overheating in the jobs market at home. Since the Fed opened the door to lower borrowing costs last month, plenty more data has arrived to back up the view that “manufacturing, trade and investment are weak all around the world,” Chairman Jerome Powell said. (Bloomberg)

EU: Sees euro-area weakness persisting as outlook for 2020 cut . The EC cut its euro-area growth and inflation forecast for next year as trade tensions and policy uncertainty weigh on the region, strengthening Mario Draghi’s case for further stimulus measures. The latest warning comes just two weeks before the ECB’s next policy meeting, where it may lower interest rates or signal that action is imminent. The fallout from slower global demand was already laid bare this week when German chemicals giant BASF SE shocked investors with a huge downgrade to its profit outlook. The EU’s executive arm trimmed its 2020 euro-area GDP projection to 1.4% from 1.5% amid what it said were increased downside risks. On inflation, both this year and next were lowered modestly to 1.3%. The ECB aims for inflation of just below 2% over the medium term. (Bloomberg)

UK: Economy returns to growth in May as car production gains. The UK economy rebounded in May as car factories resumed work following Brexit-related shutdowns. GDP rose 0.3% after a decline in the previous month, the Office for National Statistics said Wednesday. In the three months through May, GDP rose 0.3%, more than expected, after past figures were revised up. Powering the recovery was the manufacturing sector, as vehicle output returned to normal. Vehicle production surged 24% on the month, following a drop of the same magnitude in April. Manufacturing as a whole increased 1.4% and provided the biggest contribution to the overall expansion. (Bloomberg)

China: Factory prices fail to rise for first time in 3 years . China's factory prices in June were unchanged from a year ago after an almost three-year long sequence of increases, raising concerns of a return of deflation in the industrial sector. Meanwhile, consumer price inflation was steady despite a further rise in pork prices, and economists expect price growth pressures to remain subdued in future thus allowing the PBOC to add more stimulus to support the economy. Producer prices were flat YoY in June, which was the weakest outcome since Aug 2016, when they fell, data from the National Bureau of Statistics showed Wednesday. Factory prices had risen 0.6% in May and economists were looking for a 0.2% increase for June. (RTT) 

Markets

Yee Lee (Neutral, TP: RM2.28): Joint offerors still 0.07% short of 90% shareholding. A week after the voluntary takeover offer for Yee Lee Corp lapsed, the joint offerors are still unable to garner 90% shareholding in the company. There was an additional acceptance of 1.63m shares or a 0.85% stake, raising the shareholding of one of the offerors, Singapore-based Dymon Asia Private Equity (SE Asia) Fund II Ptd Ltd, to 60.4m shares or 31.5%, it said. (The Edge)

Media Prima (Neutral, TP: RM0.41): Proceeds with Vocket stake buy. Media Prima’s indirect wholly-owned subsidiary Rev Asia Holdings is going ahead with its acquistion of a 52% stake in a Malay-language digital news producer, which hit a legal hiccup in April. It said Rev Asia has signed a fresh agreement with the seller, Jaffa Sany Mohd Ariffin, to buy the controlling stake in The Vocket SB at an unchanged price of RM2.6m. The new deal is still subject to a satisfactory completion of legal and financial due diligence exercise on Vocket, besides obtaining other relevant approvals, the group said. (The Edge)

ARB: Makes maiden foray into Cambodia’s IoT and IT markets. ARB has entered into a MoU with Chean Chhoeng Thai Group Co Ltd (CCTG) to deploy Internet of Things (IoT) and information technology (IT) to the latter’s USD1.5bn (RM6.2bn) mixed development project in Phnom Penh, Cambodia. The total value for ARB’s IoT and IT project is not less than USD100m (RM417m). (SunBiz)

Paramount: To launch four projects worth RM783m GDV in 2H19. Paramount Corp is planning to launch four new projects with a combined estimated gross development value (GDV) of RM783 million in the second half of 2019 (2H19). Its group CEO and director Jeffrey Chew said that most of its launches for this year have been pushed to 2H19 as the property market has been soft. (The Edge)

MAHB: Passenger traffic up 7.3% in June, boosted by Aidilfitri demand. Malaysia Airports Holdings’ (MAHB) airports registered a 7.3% YoY growth in passenger volume in June 2019 to 12.1m, the second highest after the historically peak month of Dec 2018. MAHB said the high growth was partly spurred by higher demand in air travel due to the Aidilfitri and summer holidays that were also supported by the growth in airlines seat capacity for both the Malaysian airports and Istanbul Sabhina Gokcen International Airport (SGIA). (The Edge)

Eonmetall: In JV for Klang land acquisition. Eonmetall Group has formed a JV with two other companies to purchase a parcel of land measuring 420 acres in Klang, Selangor, for RM155.7m. The land is currently an oil palm plantation registered under Sime Darby Plantation SB. It expects relevant applications to the authorities in relation to the proposed JV to be completed within 85 days from its unconditional date. (The Edge)

MTD ACPI: Proposed acquisition of Putrajaya Perdana assets spurs speculation of possible RTO. MTD ACPI Engineering has proposed to acquire two construction and property units from privately-held Putrajaya Perdana, prompting speculation that a reverse takeover by the latter could be in the offing further down the road. Even so, it is early days yet as only a Heads of Agreement (HoA) has been inked for the acquisitions of Orangebeam Construction SB and Orangebeam Development SB. The purchase consideration has also yet to be determined. (The Edge) 

Market Update

The FBM KLCI might open higher today as the Nasdaq on Wednesday scored a record close, its first in about a week, and the broader market finished at or near all-time highs as investors raised their expectations for a decrease in benchmark interest rates at the end of the month. The Nasdaq Composite Index closed up 0.8% at 8,202, notching its first record close since July 3. The S&P 500 index meanwhile, carved out a fresh intraday record at 3,002.89, briefly punching through a psychological milestone at 3,000. The index, however, pulled back from that level to close 0.5% higher at 2,993, just shy of its July 3 closing record at 2,995.82. The Dow Jones Industrial Average finished with a gain of 77 points, or 0.3%, to reach 26,860. Market participants reacted to comments from Fed Chairman Jerome Powell who delivered his first in two days of semiannual congressional testimony, outlining the state of the domestic economy. The central bank boss said "uncertainties about the outlook have increased in recent months," providing some cover for policy makers to cut rates by at least 25 basis points at the conclusion of its two-day policy meeting on July 30-31. European markets finished lower with shares in Germany leading the region. The DAX was down 0.51% while France's CAC 40 was off 0.08% and London's FTSE 100 was lower by 0.08%.

Back home, the FBM KLCI index lost 3.90 points or 0.23% to 1,678.97 points on Wednesday. Trading volume decreased to 2.24bn worth RM2.02bn. Market breadth was negative with 329 gainers as compared to 434 losers. The regional markets finished mixed with the Hang Seng gained 0.31%, while the Shanghai Composite led the Nikkei 225 lower. They fell 0.44% and 0.15% respectively.

Source: PublicInvest Research - 11 Jul 2019