Economy

US: Weak inventories seen weighing on 4Q growth. US wholesale inventories fell in Oct as businesses stepped up efforts to reduce stockpiles of unsold merchandise, suggesting inventories would again be a drag on growth in the 4Q. Wholesale inventories slipped 0.1% as stocks of both durable and nondurable goods fell. (Reuters)

EU: Germany sees 2016 budget close to balanced despite refugee crisis. Germany's national budget is on track to be close to balanced next year but an influx of refugees makes it harder to assess the outlook for the public finances, top finance officials said. Finance Minister Wolfgang Schaeuble has already planned additional expenditure of EUR8bn (USD8.8bn) in his 2016 budget to cope with the refugee influx. (Reuters)

EU: Waiver for Greek bonds on ECB's agenda. A move to let Greek banks again swap their country's government bonds for ultra-cheap ECB funding is being discussed, Greece's deputy central bank governor said. Last week ECB Vice President Vitor Constancio said the key to the waiver's reinstatement was that Athens showed it was sticking to its rescue program and implementing reforms. (Reuters)

EU: ECB’s Nowotny criticizes ‘absurd’ expectations for stimulus. ECB policy maker Ewald Nowotny said the financial community misjudged the state of the euro-area economy and thus had unrealistic expectations for more stimulus last week. The euro and bond yields surged on Dec 3 after ECB President Mario Draghi announced a “recalibration” of the central bank’s stimulus program that disappointed investors. (Bloomberg)

EU: Spain's uneven job market a challenge for recovery. Spain's over-reliance on short-term work contracts remains a major challenge as it overcomes a deep economic crisis, the EC said, adding it could hinder growth of productivity. Jobs will be a key concern for Spanish voters in a Dec. 20 general election, even amid an economic recovery that has prompted companies to start hiring again. Spain's unemployment rate has dropped from a peak of 27% two years ago, though at just over 21% it is still the second highest in Europe after Greece and one of the most damaging legacies of a double-dip recession. (Reuters)

China: Nov inflation edges up, but deflation risks dog economy. China's consumer inflation picked up slightly in Nov but remained well under the government's 2015 price target of 3%, raising concerns that the world's No. 2 economy could be sucked into a Japan-style deflationary trap. (Reuters)

China: Xi's pared-back growth minimum may already be in danger. China’s pared-back minimum growth rate may still be too high. Monetary easing, featuring six interest-rate cuts since late last year, has done little to spur an economy at risk of undershooting the 2015 growth target of 7%. The slowdown itself has made fiscal stimulus more difficult, through squeezing tax revenue and income from land sales by the local authorities who have long counted on them for spending money. That means President Xi Jinping’s goal for GDP gains averaging at least 6.5% per year for the next five years is facing doubters. (Bloomberg)

Markets

SP Setia (Outperform, TP: RM3.85): Federal Hill to contribute to sales from 2017. SP Setia expects its Federal Hill project with a GDV of RM15bn to start contributing to sales from 2017 onwards. Setia Federal Hill SB chairman Datuk Khor Chap Jen said the mixed residential and commercial project on a 21.0ha land in Bangsar, here, is expected to be launched in 2017. "This project is actually quite a long-haul development, so it will be contributing over the next 15 to 20 years (from 2017)," he said. (StarBiz)

DKSH: Acquires 20% stake in aCommerce. DKSH is acquiring a strategic 20% equity stake in Southeast Asian ecommerce service provider and online distributor aCommerce to accelerate its e-commerce expansion. The Swiss-based market expansion services provider said in a statement that the acquisition in the Bangkok-based aCommerce would help its clients sell their products even more through online channels in South East Asia. (StarBiz)

MWE: Board seeks more time to decide on RM391.4m takeover offer. MWE Holdings "non-interested" directors have requested for a further one month to deliberate on the RM391.4m takeover offer from director Tan Sri Surin Upatkoon via his investment vehicle Pinjaya Sdn Bhd. The company said that the directors were asking for the offer period, which ends on Dec 10 (Thursday), to be extended till Jan 9, 2016. They had accordingly written to Pinjaya for the extension of time, MWE said. (StarBiz)

SCGM: To increase production capacity by a third. SCGM will invest RM15m over two years to increase its production capacity by 34% to 22.5m kg per year. The company said that it had been receiving constant increase in sales orders over the past few months from domestic and overseas customers who doubled their orders from four containers per month to eight containers per month. (StarBiz)

KPS: To explore new investments after exiting water business. Kumpulan Perangsang Selangor’s (KPS) proposed disposal of its 90.83%-owned subsidiary Titisan Modal (M) SB (TMSB) to Pengurusan Air Selangor SB (Air Selangor) will help the state-owned investment holding company explore investment opportunities in new business sectors. (Bernama)

Country Heights: To revamp Palace of the Golden Horses management. Country Heights Holdings (CHHB) has entered a joint-venture agreement with deputy chairman Tan Sri Lee Kim Tiong @ Lee Kim Yew and Galaxus Corp SB to revamp the management and business of luxury hotel Palace of the Golden Horses in Seri Kembangan, Selangor. The company said that the JV would be done through a newly incorporated company, Stallion Management SB, in which CHHB would own 69%, Lee 1% and Galaxus 30%. (StarBiz)

Berjaya Food: Profit falls to RM6.2m. Berjaya Food (BFood) reported a 96.2% fall in its net profit for its second quarter ended Oct 31, attributed to a remeasurement gain of RM158.6m in the same quarter a year ago. The Berjaya Corp subsidiary posted a net profit of RM6.2m for the quarter compared with RM163.6m a year ago. The group said this was due to a recognition of gain arising from the remeasurement of its earlier 50% equity interest in Berjaya Starbucks Coffee Co SB (BStarbucks) prior to it buying the other 50% in the coffee chain operator in Sept 2014 for USD88m (RM374m). (StarBiz)

MARKET UPDATE

The FBM KLCI might continue to ease further as the global equity markets moved lower overnight due to continued weak oil prices. Brent crude traded as low as $39.57 a barrel before rising slightly to $40.31 and West Texas Intermediate slipped for a fourth straight session, falling 0.8% to $37.23. The oil prices have been falling since OPEC failed to agree on which producers should bear the brunt of output cuts to shore up prices. That left in place the group’s policy of pumping out oil in spite of a supply glut, removing any immediate hopes for a boost to prices. Meanwhile, the euro traded above $1.10 for the first time in five weeks. On Wall Street, the Dow Jones Industrial Average dropped 75.70 points or 0.4% to 17,492.30, after earlier gaining as much as 200 points. The S&P 500 index eased 15.97 points or 0.8% to 2,047.62 and the Nasdaq Composite lost 75.38 points, or 1.5%, lower at 5,022.87. The Federal Reserve’s monetary policy meeting on the widely expected decision to lift interest rates off crisis-era record lows is just a week away. Across the Atlantic, a tentative rebound on Europe’s main equity indices proved temporary, as investors across global markets continue to keep a wary watch on oil prices, which resumed a slide shortly before European markets closed. At the closing bell, European stocks fell for a second straight session, as investors searched for direction amid volatility in the commodity markets. Performance-wise, Germany’s DAX 30 fell 0.8% to 10,592.49, France’s CAC 40 lost 0.96% to 4,637.45 and the U.K’s FTSE 100 eased 0.1% to 6,126.68. As for economic data, German exports fell 1.2% in October from September, hurt by lower demand from China, Russia and other economies that have seen slowing growth.

Back home, the FBM KLCI ended lower in tandem with the regional markets. At the closing bell, the bellwether index lost 9.88 points to end at 1,659.36. Decliners trumped gainers by 435 to 373 with 1.66bn shares changed hands valued at RM1.82bn. In the region, most markets closed lower despite the better-than-expected economic data from Japan and China. Hong Kong’s Hang Seng ended 0.5% lower, while the Shanghai Composite bounced off modest intraday lows to close up 0.1%. Elsewhere, Japan’s Nikkei Stock Average extended declines into a second day, closing down 1% after a brief rally sparked by machinery orders data that sharply beat expectations and Australia’s S&P/ASX 200 slipped 0.6% after consumer confidence for December deteriorated. Meanwhile, South Korea’s Kospi ended the day flat.

Source: PublicInvest Research - 10 Dec 2015