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Author: PublicInvest   |   Latest post: Tue, 1 Dec 2020, 10:01 AM

 

PublicInvest Research Headlines - 16 Apr 2020

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Economy

Global: Pandemic could trigger social unrest in some countries – IMF. New waves of social unrest could erupt in some countries if government measures to mitigate the coronavirus pandemic are seen as insufficient or unfairly favouring the wealthy. Governments had already spent nearly USD8trn to combat the pandemic and mitigate the economic fallout, but more fiscal stimulus would be needed once the crisis gets abated. The IMF forecast the global economy to shrink 3.0% during 2020. (Reuters)

US: Retail sales plummet 8.7% in March. Reflecting the impact of the coronavirus-induced shutdown, retail sales plummeted by 8.7% in March after falling by a revised 0.4% in Feb. Economists had expected retail sales to plunge by 8.0% compared to the 0.5% drop originally reported for the previous month. Excluding a nosedive in sales of motor vehicle and parts dealers, retail sales still tumbled by 4.5% in March following a 0.4% decrease in Feb. (RTT)

US: Industrial production shows steepest drop in over 70 years. Industrial production plunged by 5.4% in March after rising by a downwardly revised 0.5% in Feb. Economists had expected production to tumble by 4.0% compared to the 0.6% increase originally reported for the previous month. Manufacturing output led the way lower, plummeting by 6.3% in March after edging down by 0.1% in Feb. Most major industries posted decreases, with the largest decline registered by motor vehicles and parts. (RTT)

EU: German recession to continue until mid-year - Ministry. The German economy entered a recession in March and the slowdown is expected to continue until the middle of the year, stressed the economy ministry. Collapsing global demand, interruption of supply chains, changes in consumer behaviour and uncertainty among investors are having massive impact on Germany. It said even if social distancing measures were eased, economic activity would continue to be very subdued. (Reuters)

UK: BOE to buy GBP554m of gilts over next three months. The BOE said that it intended to buy GBP554m of British government bonds over the next three months as part of its regular investment of its free capital and reserves. The BOE said it would also buy GBP10m worth of supranational bonds between April 15 and June 30. In the 1Q of 2020, the BOE bought GBP452m worth of gilts and GBP10m of supranational bonds. (Reuters)

China: Adds liquidity, trims rates ahead of poor GDP data. China’s central bank injected medium-term funding into the financial system and cut the cost of the funds as expected, bolstering measures aimed at countering the economic fallout from the coronavirus pandemic. The PBOC offered CNY100bn via the one year medium-term lending facility, cutting the rate to 2.95% from 3.15%. The reduction was expected as the central bank already cut the rate on 7-day market operations in late March and the different interest rates tend to move together. (Bloomberg)

China: FDI declines in March. FDI into China declined notably in March as measures to contain the spread of coronavirus hindered trade and investment. FDI declined 14.1% in March from the last year, which was 11.5% points less than Feb's fall. In the 1Q, the economy attracted USD31.2bn investment. Investment declined more than 10% percent in 1QFY2020. The IMF forecast China's growth to ease to 1.2% this year. (RTT)

Markets

Bumi Armada (Neutral, TP: RM0.21): India FPSO contract extension delayed due to lockdown. The extension of the floating production storage and offloading (FPSO) vessel contract in India has been delayed due to the current lockdown. (The Edge) Comments: The delay does not give any impact to the earnings as operation of the Armada Sterling FPSO is continuing. The JV company (Bumi 49% - Shapoorji Pallonji O&G 51%) had earlier received notification from India’s State-owned Oil and Natural Gas Corp Ltd (ONGC) to extend the charter hire of the Armada Sterling FPSO from 20 April 2020, hence the contract extension is just for formalisation. The FPSO which was originally signed on 10 Aug 2011 to operate at an oilfield located 200km off the coast of Mumbai has an initial tenure of 7 years which will expire on 19 April 2020 with 6 annual extension options. All said, we maintain our earnings forecast, Neutral rating and a TP of RM0.21 for Bumi. We had recently tweaked Bumi’s FY20F-22F earnings by an average 10.3% in the sector report dated 8 th April due to restricted mobility during the current operating climate, in our view, which has thereby curtailed speed as well as expectations on lower OSV utilisation.

Bursa Malaysia: Signs landmark MoU for collaboration with Shenzhen bourse. Bursa Malaysia and Shenzhen Stock Exchange (SZSE) have inked a memorandum of understanding (MoU) to broaden opportunities in investment and facilitate further cross-border collaboration between the two countries. Under the MoU, both exchanges will collaborate on several areas of mutual interest that are aimed to strengthen ties and promote the flow of investment between the two countries. (SunBiz)

Yinson: Completes USD800m FPSO refinancing exercise. Yinson Holdings has completed a USD800m (RM3.47bn) refinancing exercise for its floating, production, storage and offloading (FPSO) unit, John Agyekum Kufuor (JAK). The loan, with a tenure of 12 years, was successfully drawn down on April 14. The project commenced in Nov 2019, following the signing of the refinancing agreement by 13 local and international banks. (The Edge)

XiDeLang: Teams up with China firm to produce protective masks. XiDeLang Holdings Ltd (XDL) is expanding its operations into the production of replaceable protective masks, which encompasses medical-use masks and regular-use anti-dust masks, following the establishment of its new new-material technology division. XDL’s new-material technology division is collaborating with Fujian BiTiChong Baby Products Co Ltd. (SunBiz)

Sedania Innovator: Makes foray into India, teams up with e wallet operator Paytm First Games. Sedania Innovator has entered a partnership with Indian mobile wallet provider, Paytm First Games to expand its global esports tournament network and platform, via one of its special purpose vehicles, Esports Players League (ESPL). The partnership marks a milestone for the group as its first business footprint in India. (SunBiz)

Tiger Synergy: Announces new cash calls after aborting earlier exercise. Tiger Synergy proposed a rights issue with warrants, as well as a private placement, to raise up to RM102.14m for working capital needs and to repay bank borrowings. This comes after the group last month aborted similar cash calls announced on Feb 12, to raise up to RM80m. It is now plans to raise up to RM68.09m via a rights issue with free warrants, and up to RM34.05m in a private placement. (The Edge)

Market Update

The FBM KLCI might open weaker today as U.S. stocks ended lower Wednesday, amid an onslaught of disappointing corporate earnings reports and dismal economic data resulting from the COVID-19 pandemic. The Dow Jones Industrial Average fell 445.41 points, or 1.9%, to settle at 23,504.35. The Nasdaq Composite slumped 122.56 points, or 1.4%, to close at 8,393.18. The S&P 500 slipped 62.70 points, or 2.2%, to finish at 2,783.36. Major banks reported significant declines in earnings as they take charges for expected credit write-offs. Crude oil prices finished below $19 a barrel Wednesday, pressuring energy stocks after the IEA forecast a record fall in demand. The STOXX 600 Europe index tumbled 3.2%.

Back home, the FBM KLCI closed up 16.13 points or 1.18% at 1,387.79 while share trade volume across Bursa Malaysia rose past five billion units, as markets took cue from factors including US equities’ Tuesday overnight rise and after the US Department of Justice (DoJ) said it repatriated to Malaysia some US$300m (RM1.292bn) in additional funds misappropriated from 1Malaysia Development Bhd (1MDB). However, the regional markets finished broadly lower with shares in Hong Kong leading the region. The Hang Seng was down 1.19% while China's Shanghai Composite was off 0.57% and Japan's Nikkei 225 was lower by 0.45%.

Source: PublicInvest Research - 16 Apr 2020

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