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Author: PublicInvest   |   Latest post: Mon, 6 Jul 2020, 10:13 AM

 

PublicInvest Research Headlines - 18 May 2020

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Economy

US: Business inventories drop in line with estimates In March. Business inventories edged down by 0.2% in March after falling by a revised 0.5% in February. Economists had expected inventories to dip by 0.2% compared to the 0.4% drop originally reported for the previous month. The modest decrease in business inventories came as manufacturing and wholesale inventories both fell by 0.8%, more than offsetting a 1.0% jump in retail inventories. Meanwhile, business sales plunged by 5.2% in March following a 0.5% decrease in February. Manufacturing and wholesale sales both tumbled by 5.2% while retail sales plummeted by 5.3%. With sales falling by much more than inventories, the total business inventories/sales ratio surged up to 1.45 in March from 1.38 in February. (RTT) Support level Share price Resistance level Share price 1 st support RM0.600 1 st resistance RM0.685

US: Consumer sentiment unexpectedly improves in May. With stimulus checks improving consumers' finances and widespread price discounting boosting buying attitudes, a report showed an unexpected improvement in US consumer sentiment in the month of May. Consumer sentiment index rose to 73.7 in May after plummeting to 71.8 in April. The rebound surprised economists, who had expected the index to slip to 68.0. The unexpected increase by the headline index came as the current economic conditions index jumped to 83.0 in May from 74.3 in April. On the other hand, the index of consumer expectations fell to 67.7 in May from 70.1 in the previous month. On the inflation front, one-year inflation expectations surged up to 3.0% in May from 2.1% in April, while five-year inflation expectations inched up to 2.6% from 2.5%. (RTT)

US: Industrial production plunges amid collapse in manufacturing output. The Fed highlighted a record drop in US industrial production in the month of April, as the COVID-19 pandemic led many factories to slow or suspend operations throughout the month. Industrial production plummeted by 11.2% in April after tumbling by a revised 4.5% in March. Economists had expected production to plunge by 11.5% compared to the 5.4% nosedive originally reported for the previous month. Manufacturing output led the way lower, cratering by 13.7 in April amid a 70% collapse in the output of motor vehicles and parts. Mining output also tumbled by 6.1% in April, while utilities output showed a relatively modest 0.9% decrease. Capacity utilization slumped to 64.9% in April from a revised 73.2% in March. Capacity utilization had been expected to plunge to 64.0%. (RTT)

US: Retail sales plunge a record 16.4% in April, far worst than predicted. Consumer spending tumbled a record 16.4% in April as the backbone of the US economy retrenched amid the coronavirus pandemic. Economist expected the advance retail sales number to fall 12.3% after March’s reported 8.3% dive already set a record for data going back to 1992. The March numbers were revised to be not as bad as the 8.7% initially reported. Some 68% of the nation’s USD21.5trn economy comes from personal consumption expenditures, which tumbled 7.6% in the 1Q just as social distancing measures aimed at containing the coronavirus began to take effect. (CNBC)

EU: Eurozone GDP contracts at sharpest rate on record. The euro area economy contracted at the sharpest pace on record in the 1Q due to the measures taken to contain the spread of coronavirus. GDP fell 3.8% sequentially in the 1Q, in contrast to a 0.1% rise in the 4QFY19. On a yearly basis, the economy shrank 3.2% after rising 1% in the 4Q. The rate was revised from -3.3%. This was the biggest decrease since the 3QFY19. While GDP growth will be even bleaker for the 2Q, it is important to keep daily data in mind at the moment given that this is a recession on steroids. Economist expects a sharp bounce back in the 3Q. (RTT)

EU: Germany plunges into recession with biggest slump in decade. The German economy shrank 2.2% in the 1Q, the most in more than a decade, offering an early flavour of the damage from the coronavirus outbreak. Less than two weeks of official lockdown caused slumps in consumer spending and capital investment. Government spending and construction provided some stabilization. A 3.8% slump in the euro-area economy led to a decline in employment, the first since 2013. A revision to Germany’s 4Q’s performance means Europe’s largest economy is already in a recession. With restrictions to contain the pandemic only slowly being lifted, the economy is set to suffer much more in the three months through June. The German government has already mobilized some EUR1.2trn to support German businesses, and is working on additional tools to kick-start the economy. (Bloomberg)

UK: Economy likely to recover slowly from COVID hit - budget office head. Britain’s economy is likely to have a slower economic recovery rather than a quick bounce-back after its coronavirus shutdown stressed the head of the country’s budget forecasting office. The quick V-shaped recovery published by the OBR last month was only meant to be illustrative to show the hit to the public finances. In practice, you are likely not to see the economy bouncing back to where they would have expected it otherwise to be by the end of the year, on that assumption, but instead a rather slower recovery. (Reuters)

China: Industrial production rebounds; sales fall at slower pace. China's industrial production rebounded and the decline in retail sales slowed in April, suggesting that the economy is recovering slowly as Covid-19 subsides. Industrial production grew 3.9% in April from the last year, reversing a 1.1% fall in March. Economists had forecast a moderate 1.5% growth. Retail sales fell 7.5% on a yearly basis, slower than the 15.8% increase seen in March. However, this was bigger than the expected drop of 7%. (RTT)

Markets

Rohas Tecnic: Clinches RM102m contract from Power Grid Company of Bangladesh. Rohas Tecnic has secured a RM102m contract in Bangladesh to design, supply, install, test and commission 400 kV and 132kV transmission lines. Rohas Tecnic had accepted the contract’s letter of award from the Power Grid Company of Bangladesh, it announced. The contract is expected to start in 3Q20 and has a tenure of 24 months. (The Edge)

Minetech: Wins sub-contract works worth RM30.4m. Minetech has been appointed as a sub-contractor by Mutual Premium SB to undertake and complete subcontract works worth RM30.4m. It said the contract is for the construction of a new school and other facilities at Parit Buntar, Perak. (Bernama)

Handal: Ploughs on despite tough obstacles. Handal Energy said at least two of its major contract activities have been deferred or dropped since Feb 2020 due to the pandemic and clients’ cost reduction efforts. It has also received requests for contract renegotiations and commercial rates discount. However, majority of deferred activities will likely be reassessed and rescheduled to 1Q21. (StarBiz)

Ho Wah Genting: To distribute China-developed Covid-19 diagnostic kit in Malaysia. Ho Wah Genting has been appointed as a distributor of a China-developed Covid-19 diagnostic kit in Malaysia, till end-CY20. It has also submitted an application to the MoH Malaysia for the certification of the diagnostic kit and is currently pending approval. Additionally, the Group has also appointed PM Care SB as the sub-distributor of the diagnostic kit. (The Edge)

Pentamaster: 1Q earnings hit by Covid-19 travelling restrictions. Pentamaster’s 1QFY20 net profit fell 14.28% YoY to RM16.77m, as revenue was hit by the travelling restrictions amid the Covid-19 outbreak, as it affected the Group’s project delivery schedule and site installation of the automated test equipment (ATE) operating segment. Pentamaster said FY20 will be challenging for the group. It said although the MCO in Malaysia and similar measures in other countries have been eased, the resumption of production normalisation will take time. (The Edge)

Kronologi: Asset impairment drags it into loss-making 1Q. Kronologi reported a net loss in 1QFY20, despite a 60% jump in revenue, as it recognised an RM11.64m one-time non-cash impairment amid the economic slowdown. It incurred a net loss of RM11.24m in 1QFY20, from a net profit of RM3.69 million a year ago. (The Edge)

Icon Offshore: Returns to black in 1Q with net profit of RM20.35m. Icon Offshore returned to the black with a net profit of RM20.35m in 1QFY20 against a net loss of RM7.64m in 1QFY19, partly due to gain on debt restructuring exercise, and waiver of interest payable. On the outlook for FY20, it said the current pandemic and reduction in crude oil price have resulted in a more volatile and challenging environment. As far as the reduction in crude oil price is concerned, for now there is minimal impact on the contracts that have already been secured. (Bernama)

Market Update

The FBM KLCI might open with a positive bias today after US stocks recovered from steep losses early Friday to close higher, despite data showing U.S. April retail sales plunged more than forecasts and news the Trump administration will block shipments of semiconductors to China’s Huawei Technologies, stoking fears of renewed trade tensions. However, sentiment was improved by news the House of Representatives was set to vote on another $3 trillion coronavirus package that could be the opening bid in another round of fiscal stimulus. The Dow Jones Industrial Average rose 61 points, or less than 0.3%, to 23,685.42, while the S&P 500 added 11.20 points, or 0.4%, higher to end the session at 2,863.70. The Nasdaq Composite Index closed at 9,014.56 after gaining 70.84 points, or 0.8%. European stocks also closed higher Friday, with the Stoxx Europe 600 adding 0.5%, while the FTSE 100 rose 1%.

Back home, the FBM KLCI closed 6.19 points or 0.44% higher to 1,403.44 points as global crude oil price gains offered an impetus to Bursa Malaysia's oil and gas (O&G)-related shares' price and volume rises, which propelled securities trade across the bourse above nine billion units again. In the region, the Hong Kong Hang Seng fell 0.1%, the Nikkei 225 rose 0.6%, the Shanghai Composite Index closed 0.1% lower, while the CSI 300 Index fell 0.3%.

Source: PublicInvest Research - 18 May 2020

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