Economy

US: Service sector activity shrinks for first time in over ten years . A report released by the Institute for Supply Management showed US service sector activity contracted for the first time since Dec of 2009 in the month of April. The ISM said its non manufacturing index tumbled to 41.8 in April from 52.5 in March. The non-manufacturing index slumped to its lowest level since hitting 40.1 in March of 2009 but still came in above economist estimates for a reading of 36.8. (RTT)

US: Trade deficit widens to USD44.4bn in March . With the value of exports showing a steeper drop than the value of imports, the Commerce Department released a report showing a notable increase in the US trade deficit in the month of March. The report said the trade deficit widened to USD44.4bn in March from USD39.8bn in Feb. The trade deficit was expected to widen to USD44.0bn. The increase in the size of the trade deficit came as the value of exports plunged by 9.6% to USD187.7bn, while the value of imports plummeted by 6.2% to USD232.2bn. (RTT)

EU: Eurozone producer prices decline at faster pace . Eurozone producer prices declined at a faster pace in March due to a sharp fall in energy prices, data from Eurostat showed. Producer prices decreased 2.8% YoY in March, faster than the 1.4% decrease in Feb. On a monthly basis, producer prices fell 1.5% after easing 0.7% in Feb. This was the second consecutive drop in prices. Data showed an 11.3% annual fall in energy prices. Intermediate goods prices were down 1.8%. (RTT)

UK: Economy set to shrink 7% or more, April PMIs dive — IHS Markit . Britain's economy is on course for an unprecedented 7% quarterly contraction after measures to slow the spread of the coronavirus forced business closures across the country last month, a business survey showed. IHS Markit said its monthly PMI for the services sector fell to its lowest since the survey started in 1996, dropping to 13.4 in April from 34.5 in March, only a fraction better than an initial flash estimate of 12.3.. (Reuters)

UK: New car sales fall to lowest level since 1946. British new car sales slumped by around 97% in April to the lowest level of any month since Feb 1946 with factories and dealerships shut due to the coronavirus outbreak. Lockdown measures have been in place across Europe since mid-March to contain the pandemic, leading to the closure of many businesses and limiting people's movements. Last month, around 4,000 cars were registered with most of the sales being fleet purchases, according to preliminary data from the Society of Motor Manufacturers and Traders. (Reuters)

Singapore: Retail sales suffer biggest drop in over 20 years. Singapore's retail sales in March fell at the steepest pace in more than 20 years on an annual basis, as consumption, especially of discretionary items such as clothes and jewellery, fell due to the Covid-19 outbreak. Retail sales fell 13.3% on a YoY basis, the biggest drop since September 1998, data showed. On a seasonally adjusted basis, retail sales declined 1.3% in March from the previous month. (Reuters)

Markets

Serba Dinamik (Outperform, TP: RM2.49): Ink agreement to nurture startup ecosystem with MTDC. Serba Dinamik Group and Malaysian Technology Development Corporation (MTDC) signed a a MoU to foster the growth of digital startup ecosystem in Malaysia, by providing guidance and mentoring to the budding entrepreneurs for innovative transformation. Under the MoU, both parties launched The Innovative Transformation Seed Fund worth RM6m that will encourage newly established start-ups involved in digital or business innovation. (SunBiz)

ATS: To produce tooling parts for face mask machines. AT Systematization (ATS) has teamed up with a Chinese firm to produce high precision tooling parts for melt-blown nonwoven fabric mask-making machines. ATS said its units AT Precision Tooling SB had signed a memorandum of understanding with Shanghai JieNaXin Mech & Elec Equipment Co Ltd (JNX) to produce the tooling parts known as Spinneret. (NST)

MCE: Eyes RM34m in revenue from new contract. MCE Holdings expects its new six-year contract from Perusahaan Otomobil Kedua SB (Perodua) to generate RM34m in revenue. The group’s unit, MultiCode Electronics Industries (M) will supply electronics and mechatronic components and parts for Perodua's new car models from the 1Q2022. (Bernama)

Nestle: To spend highest capex in six year, posts resilient FY20. Nestle is setting aside RM280m capex this year, its highest in six years. The capex would be used to expand Malaysia's current production capacity for MAGGI Noodles. In terms of their financials, their net profit dropped 20.8% YoY to RM186.3m in 1QFY20. This was affected by Covid-19 on the local Out-of-Home channels, as well as higher commodity costs and the earlier Chinese New Year timing. (NST)

KLCCP Stapled: Post lower 1Q profit on bigger loss in hotel segment, proposes 8.3sen dividend. KLCCP Stapled Group has reported a 3.8% decline in net profit to RM176.9m for the 1QFY20 from RM183.9m a year earlier, due to the negative impact in its hotel segment. This was as a result of travel restrictions imposed from the Covid-19 outbreak and MCO enforced by the government. The group has proposed a distribution per stapled security of 8.3sen, comprising: 5.84sen for KLCC REIT and 2.46sen for KLCC Property. (The Edge)

Dufu Technology: 1Q net profit triples on higher revenue, unrealised forex gain. Dufu’s 1Q net profit more than tripled to RM14.1m from RM4.1m a year earlier, on higher revenue and unrealized forex gain, as a result of the stronger USD. Moving forward, the group remains confident that they have enough financial liquidity to weather the storm, on the back of its strong footing in the 1Q and with current orders in hand. (The Edge)

Tasek Corp: Posts RM4.19m net profit in 1Q. Tasek Corp posted a net profit of RM4.2m for the 1QFY20 compared with a net loss of RM10.4m a year ago mainly contributed by the cement segment and from a reduction in sales rebates and lower production cost. It said the outlook for the 2Q is expected to be even more challenging. The group is affected by the MCO which caused the cessation of the operations of the group’s cement plant and ready-mix concrete operations. (SunBiz)

Market Update

The FBM KLCI might add a few points at the opening today after U.S. stocks ended slightly higher Tuesday for a second straight day, but finished well off session highs, as investors watched business restrictions begin to ease in the U.S. and Europe and progress toward an early vaccine to prevent the further spread of the COVID-19 pandemic. Rising crude oil prices also bolstered equity benchmarks as Wall Street looked to corporate earnings for an outlook on the pandemic, with Disney’s results in focus after the close. The Dow Jones Industrial Average gained 133.33 points, or 0.6%, to end at 24,883.09, the S&P 500 index advanced 25.70 points to finish at 2,868.44, a gain of 0.9%, while the Nasdaq Composite index added 98.41 points, or 1.1%, to close at 8,809.12. In Europe, stocks closed higher, with the Stoxx Europe 600 gaining 2.2%, and the FTSE 100 up 1.7% on Tuesday.

Back home, the FBM KLCI closed up 12.96 points or 0.94% at 1,389.55 as a confluence of factors, including higher crude oil and palm oil prices as well as Bank Negara Malaysia’s (BNM) 50 basis point overnight policy rate (OPR) cut to 2.00%, spurred broad based buying across Bursa Malaysia. In the region, Hang Seng Index rose 1.2%, recovering a portion of its more than 4% drop from Monday. Markets in Japan, Korea and China were closed for holidays.

Source: PublicInvest Research - 6 May 2020