PublicInvest Research

PublicInvest Research Headlines - 8 Oct 2024

PublicInvest
Publish date: Tue, 08 Oct 2024, 09:12 AM
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An official blog in I3investor to publish research reports provided by PublicInvest Research team.

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HEADLINES

Economy

US: Yields back at 4% for first time since Aug. Key US Treasury yields are back at 4%, a level last seen in Aug, after a blowout jobs report undercut chances for another big interest-rate reduction from the Fed. Bonds dropped, extending a plunge from late last week following surprisingly robust Sept payrolls data. The 10-year yield rose as much as 6 bps to 4.03%, while the two-year yield jumped as much as 10 bps to 4.02%. The underperformance in shorterdated Treasuries saw a key part of the yield curve briefly invert once again. The most reflect swirling doubts over the Fed’s next move. (Bloomberg)

EU: ECB will ‘quite probably’ cut rates this month, Villeroy says. The ECB will “quite probably” cut interest rates this month, according to Governing Council member Francois Villeroy de Galhau. Inflation fell below the ECB’s 2% target in Sept and the core measure of price increases should gradually recede close to that level in 2025, the BOF chief said in an interview with La Repubblica. He also said that market expectations for inflation in 2025 are below 1.8%, even lower than the ECB’s forecast. (The Edge)

EU: German factory orders sink 5.8% in Aug. Germany's factory orders declined at a faster-than-expected pace in Aug, preliminary figures from data Destatis showed. Incoming new orders contracted 5.8% on a monthly basis in Aug, reversing July's upwardly revised 3.9% expansion. Orders were expected to fall 1.9%. Further, this was the steepest decline since Jan, when orders had fallen 10.9%. Excluding large orders, new orders dropped 3.4% from July. New orders in the capital goods and intermediate goods sectors fell 8.6% and 2.2%, respectively. (RTT)

EU: Germany's economic model is not broken, finance minister says. Germany's economic model is not broken but Europe's biggest economy has lost competitiveness over the past decade, German Finance Minister Christian Lindner said on Monday. "We can't be satisfied with the economic developments in Germany," he told journalists ahead of a Eurogroup meeting. The German economy is expected to contract by 0.2% in 2024, an economy ministry spokesperson said on Monday, cutting the forecast from a previous projection of 0.3% growth this year.

UK: Pay growth weakest since Feb 2021. Britain's jobs market showed more signs of cooling in Sept as pay growth increased at the slowest pace in almost four years, according to a survey likely to reassure the BOE as it considers whether to cut borrowing costs again. The Recruitment and Employment Confederation and KPMG said their measure of growth in starting pay for people hired to permanent roles hit its lowest since Feb 2021. Its monthly permanent job placements index extended a two-year downturn but the drop in hiring was softer than in Aug. Companies faced uncertainty about Britain's tax and other economic policies ahead of finance minister Rachel Reeves' inaugural annual budget on 30 Oct. (Reuters)

UK: House price inflation highest since Nov 2022. UK house prices rose at the fastest annual rate in almost two years in Sept due to base effects, survey data from Halifax showed. The house price index rose 4.7% YoY in Sept, faster than the 4.3% rise in Aug. Further, this was the steepest increase since Nov 2022. Higher annual growth continues to reflect the base impact of weaker prices a year ago, Halifax said. On a MoM basis, house prices rose at a stable rate of 0.3% in Sept. Economists had forecast a 0.2% increase. Prices rose for the third successive month. The average house price now stands at GBP293,399 versus GBP292,540 in the previous month. Moreover, this was the highest price since June 2022. (RTT)

China: Stock scepticism gets louder as world-beating run extends. The world-beating rally in Chinese stocks is failing to convince many global fund managers and strategists. Invesco Ltd, JPMorgan Asset Management, HSBC Global Private Banking and Wealth, and Nomura Holdings Inc are among those viewing the recent rebound with scepticism and waiting for Beijing to back up its stimulus pledges with real money. Some are also concerned that many stocks are already reaching overvalued levels. Chinese shares have skyrocketed since late Sept as a barrage of economic, financial and market-support measures reinvigorated investor confidence and prompted the likes of Goldman Sachs Group Inc to upgrade the nation’s stocks to 'overweight'. (Bloomberg).

Japan: Leading index falls to 106.7, lowest since Oct 2020. Japan's leading index decreased more-than-expected in Aug to the lowest level in nearly four years, preliminary data from the Cabinet Office showed. The leading index, which measures future economic activity, dropped to 106.7 in Aug from 109.3 in the previous month. The expected score was 107.2. Further, this was the lowest reading since Oct 2020, when it was 106.5. Similarly, the coincident index weakened to a 6-month low of 113.5 in Aug from 117.2 a month ago. The coincident index measures the current economic situation. Meanwhile, the lagging index strengthened to 107.8 in Aug from 107.2 in the prior month. (RTT)

Markets

Dayang Enterprise (Outperform: TP RM4.65): Dayang Enterprise bags 6 workboat vessel provision contracts from PETRONAS Carigali. Dayang Enterprise Holdings (DEHB) has received six work order awards from PETRONAS Carigali Sdn Bhd (PCSB) for the provision of six units of accommodation workboat vessels. DEHB said the value of the contracts is based on the work orders issued by PCSB throughout the duration of the contracts. DEHB said the duration of the contracts will be 105 days (for Dayang Pertama), 92 days (Dayang Berlian), 112 days (Dayang Zamrud), 119 days (Dayang Opal), 61 days (Perdana Liberty) and 153 days (Perdana Sovereign). (The Star)

Comments: We estimate the daily charter rate (DCR) for the 6 workboats is about RM100,000 per day with the duration between 61 days to 153 days for each of the workboats. We are positive with the contract as it could support its marine charter segment to record higher utilisation rate in 3Q as compared to 91% recorded in 2Q. We believe there is a slight further upside on DCR given the tightness of offshore support vessel (OSV) market amid robust offshore activities. Maintain Outperform and TP of RM4.65.

Uzma: Achieves COD for its 50MWac large-scale solar plant. Uzma Kuala Muda SB, an indirect wholly owned subsidiary of Uzma, has achieved the commercial operation date (COD) for its 50MWac large scale solar photovoltaic plant under the Large Scale Solar (LSS) Cycle 4 project on 25 Sept. The plant, which is located in Sungai Petani, Kedah, is Uzma’s first venture into asset ownership and development of an LSS plant, pursuant to a power purchase agreement entered into between Uzma Kuala Muda and Tenaga Nasional Bhd in Aug 2021. “Uzma Kuala Muda achieved the project’s financial close date on 14 July 2023 and within a record 10 months of starting physical construction in Nov 2023, the project was able to hit its COD milestone,” said Uzma. (The Star)

HeiTech Padu: Cancels 30% stake acquisition in Souqa Fintech. HeiTech Padu has terminated its agreement to acquire a 30% stake in Souqa Fintech SB. In a filing with Bursa Malaysia today, HeiTech Padu stated that its subsidiary, Synergy Grid SB, issued a notice of rescission, rendering the agreement null and void with immediate effect. The company did not specify details regarding the clause leading to the termination. The rescission is not expected to have a material impact on HeiTech Padu’s earnings or net assets for the year ending 31 Dec 2024. (The Malaysian Reserve)

Tuju Setia: JV company bags RM318m construction job. Tuju Setia, which is valued at RM66.5m, said its joint venture (JV) company has secured a RM317.6m contract to build a new block at Gleneagles Hospital in Jalan Ampang. Tuju Setia–GPQ JV — an unincorporated JV between Tuju Setia's wholly owned unit Pembinaan Tuju Setia Sdn Bhd and GPQ Sdn Bhd, a unit of Terengganu Incorporated Sdn Bhd — was awarded the contract by Ampang 210 SB. The JV will undertake the design and construction of Block C of the hospital, with a project duration of 37 months, slated to begin this month. Tuju Setia said the contract is expected to positively impact the company’s earnings and net assets from the financial year ending 31 Dec 2024, until the contract’s completion. (The Edge)

MARKET UPDATE

The FBM KLCI might open lower today as US stocks slid Monday after Treasury yields hit their highest levels since the summer and oil prices continued to climb. The S&P 500 dropped 1%, though it’s still close to its all-time high set a week earlier. The Dow Jones Industrial Average fell 398 points, or 0.9%, coming off its own record, while the Nasdaq composite sank 1.2%. It’s a stall for US stocks after they rallied to records on relief that interest rates are finally heading back down, now that the Federal Reserve has widened its focus to include keeping the economy humming instead of just fighting high inflation. Friday’s blowout report on US jobs growth raised optimism about the economy and hopes that the Fed can pull off a perfect landing for it. In stock markets elsewhere, European indices were mixed following bigger gains in Asia. Japan’s Nikkei 225 index rose 1.8% after the value of the yen sank against the US dollar. A weaker yen can boost profits for Japanese exporters. Stock markets in mainland China will reopen today from a weeklong holiday, and the government said it plans to explain details of plans for economic stimulus at a morning news conference in Beijing. Back home, the FBM KLCI added 5.32 points or 0.33% to 1635.29.

Source: PublicInvest Research - 8 Oct 2024

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