PublicInvest Research

PublicInvest Research Headlines - 20 Jun 2023

PublicInvest
Publish date: Tue, 20 Jun 2023, 10:03 AM
PublicInvest
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An official blog in I3investor to publish research reports provided by PublicInvest Research team.

All materials published here are prepared by Public Investment Bank Berhad. For latest offers on Public Invest trading products and news, please refer to: https://www.publicinvestbank.com.my/pbswecos/default.asp

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Economy

US: Homebuilder confidence improves much more than expected in June. Homebuilder confidence in the US has improved by much more than expected in the month of June. The NAHB/Wells Fargo Housing Market Index jumped to 55 in June from 50 in May. Economists had expected the index to inch up to 51. The housing market index increased for the sixth straight month, climbing above the midpoint of 50 for the first time since July 2022. Builders are feeling cautiously optimistic about market conditions given low levels of existing home inventory and ongoing gradual improvements for supply chains. However, access for builder and developer loans has become more difficult to obtain over the last year, which will ultimately result in lower lot supplies as the industry tries to expand off cycle lows. The bigger than expected increase by the housing market index reflected continued advances by all three component indices. (RTT)

US and China: Blinken and Xi pledge to stabilize relations in rare Beijing talks. US Secretary of State Antony Blinken on June 19 ended a high-stakes visit to Beijing with an unexpected meeting with Chinese President Xi Jinping. The latter stressed the importance of steady relations between the two nations after a period of simmering tensions. During the meeting at the Diaoyutai state guest house — which lasted 35 minutes, Xi said that the world needed a “generally stable” China-U.S. relationship. Xi added that whether the two countries “can find the right way to get along bears on the future and destiny of humanity. He hopes that, through this visit, Blinken will make more positive contributions to stabilizing China-U.S. relations following “candid and in-depth discussions” between the two officials that led to progress and agreement on some undetailed “specific issues.” Both sides agreed on the need for the US and China to stabilize bilateral ties, before adding that Washington had “no illusions” about the challenges of managing the relationship. (CNBC)

EU: To focus on export controls, critical tech in security plan. The European Union will propose new oversight on critical technologies that can be used for military purposes and it will aim to table by the end of the year a proposal to curb outbound investments that could threaten the bloc’s security. The European Commission, the EU’s executive arm, will propose as part of its new security strategy a list of dual-use technologies for risk assessment that could be adopted by member states as soon as Sep. It will also  seek to coordinate export controls across the bloc. The EU is seeking to strengthen the security tools at its disposal as countries such as China and Russia increasingly use trade and the control of critical supply lines to further political and military goals. The text, which is still subject to change, will be unveiled on Tuesday. Russia’s war of aggression against Ukraine showed how over reliance on any single country, especially when they have systemically divergent models and interests, reduces Europe’s strategic options and puts our economies and citizens at risk. The EU now needs a comprehensive and strategic approach to economic security, de-risking and promoting technological edge in strategic sectors. The strategy identifies a series of potential risks the bloc could face, including the targeting of its supply chain and its critical infrastructures. (Bloomberg)

UK: Housing market undergoes early summer slowdown. British housing affordability constraints as well as fading price expectations among sellers brought forward the usual summer slowdown. House prices dropped only GBP82 in June. This marked the first monthly decrease in asking prices this year and also the first drop in June since 2017. Over the previous ten years, average house prices posted an increase of 0.6% at this time of year. Some buyers paused their buying plans due to significant increases in fixed mortgage interest rates. However, Rightmove expects no immediate impact on activity with most movers determined to carry on if they can afford it. House prices posted an annual growth of 1.1% in June after rising 1.5% in May. (RTT)

UK: Brits are facing a major mortgage crisis as lending rates soar. UK borrowers are facing a cliff edge that could damage the economy as rising mortgage costs hit deal renewals and the number of products available shrinks. New figures from financial information company Moneyfacts showed the average two-year fixed rate mortgage on a residential property in Britain rose from 5.98% to 6.01%, its highest level since Dec 1. The spike in late 2022 came in the wake of the government’s market-rattling mini budget. Prior to this, two-year fixed rates were last above 6% in Nov 2008. The number of residential mortgage products available has also fallen, from 5,264 to 4,683. The last nine months had been “seismic” for the mortgage and housing sector, “on a par with the financial crisis,” although with different causes. The market is dysfunctional and arguably broken. We have seen evidence where advisers are in queues alongside 2,000 others all trying to secure something that might not actually exist by the time they get to the front of the queue. (CNBC)

Hong Kong: Jobless rate remains unchanged at 3.0%. Hong Kong's unemployment rate remained unchanged in March to May period. The jobless rate came in at a seasonally adjusted 3.0%, the same as in Feb to April period. The rate was forecast to fall to 2.8%. The underemployment rate also held steady at 1.2%. The unemployment rates of various sectors showed diverse movements during March to May period. Data revealed that the unemployment rate of the consumption and tourism-related sectors held steady at 4.2%. The unemployment rate of the retail sector was 3.8%, in line with the previous three-month level. Likewise, the rate in food and beverage service sector remained at 4.8%. Meanwhile, the jobless rate of the accommodation services sector dropped 0.4 percentage point to 3.5%. The number of people out of work decreased around 1,300 to 113,100. At the same time, employment increased about 17,900 to 3.67m. The labour market should improve further in the coming months as the economy continues to recover. (RTT)

Markets

Reservoir Link (Neutral, TP:RM0.39): Secures RM18.1m worth of solar contracts as at May. Reservoir Link Energy’s 51%-owned subsidiary, Founder Energy SB, has secured three solar contracts since May 2023, totaling RM18.1m. Under the first contract, Reservoir Link will supply and deliver fixed tilt solar mounting structures for a large-scale solar project. Meanwhile, the second contract involves the supply of labour and materials which include plants and machinery. In addition, the group has been appointed as a subcontractor for the engineering, procurement, construction and commissioning of a solar project. (StarBiz)

Green Ocean: To diversify its existing business to include distribution of F&B. Green Ocean is proposing to diversify its existing business to include the distribution and trading of food and beverage (F&B) as well as food services. Green Ocean said its F&B business has been exhibiting growth, while its gloves business has been affected by the decrease in average selling price and market demand on gloves. (StarBiz)

Signature International: Sells aluminium, façade businesses for RM17.5m. Kitchen cabinet maker Signature International Bhd is selling its aluminium and façade businesses for RM17.53m amid increasing challenges in the construction market such as cost overrun and a spike in project material costs.Proceeds raised from the divestment will be utilised for working capital and repayment of bank borrowings, said Signature. Signature, which is 31%-owned by Chin Hin Group Bhd, is selling its entire equity interest in Signature Aluminium SB and a 51% stake in Signature Façade Treatment SB, to another aluminium and façade player Fortune Greenbest SB. (The Edge)

Carlsberg: Asahi Group mutually agree not to renew distribution of Asahi brand in Malaysia. Carlsberg Brewery Malaysia (CBMB) and Asahi Group Holdings Ltd have mutually agreed not to renew the exclusive distribution of the Asahi brand or trademark in Malaysia, which expires on 31 Dec 2023. CBMB MD Stefano Clini said the group will continue to drive its premiumisation strategy. “We are in the midst of exploring opportunities to expand our premium portfolio to deliver the best drinking experience to our Malaysian consumers.” (StarBiz)

LKL International: To distribute SECA and TOP medical devices LKL International has signed distribution agreements with both Germany-based manufacturer SECA GmbH & Co KG (SECA) as well as local company Meditop Corp (Malaysia) SB to distribute their medical devices. LKL said the agreement with SECA was inked via its wholly owned LKL Advance Metaltech SB, while the deal with Meditop was entered into via LKL's wholly owned Medic Gen SB. SECA is a market leader in the international medical manufacturing industry, commanding an impressive 60% of market share globally, said LKL. (The Edge)

GUH Holdings: To launch projects worth RM480m in second half. GUH Holdings Bhd is launching RM480m of residential and commercial properties in Negri Sembilan in the second half of 2023. Group MD Datuk Seri Hng Bak Tee told StarBiz that 332 residential units would be launched in Bukit Kepayang, where the group still owned approximately 150 acres. GUH is developing 30 units of 2½ and three-storey shop offices, priced between RM1.2m and RM2.2m, for the Kepayang Sentral 2 commercial project. (StarBiz)

Market Update

The FBM KLCI might open lower today after European equities fell on Monday as investors’ worries over demand from China overshadowed basic resources companies, while healthcare shares were hit by gloomy corporate forecasts. Europe’s region-wide Stoxx 600 closed 1.1% lower, its sharpest one-day fall this month. France’s Cac 40 also lost 1% while the FTSE 100 fell 0.7%. US markets were closed for the Juneteenth federal holiday. The Stoxx 600 Basic Resources index fell 2.1% on concerns that China’s economic rebound from its zero-Covid policy would take longer than expected.

Back home, Bursa Malaysia pared most of its earlier losses to end marginally lower Monday, tracking the downbeat performance in regional bourses as market sentiment turned cautious ahead of China’s rate decision and the US Federal Reserve (Fed) chair Jerome Powell’s upcoming testimony. At the closing bell, the FBM KLCI eased 1.28 points to 1,387.33 from 1,388.61 at the close last Friday. Asian equities were also down, with Hong Kong’s Hang Seng index falling 0.6% and China’s CSI 300 giving up 0.8% as investors expected the People’s Bank of China to cut its benchmark loan prime interest rates on Tuesday to boost the economy.

Source: PublicInvest Research - 20 Jun 2023

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