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Author: PublicInvest   |   Latest post: Tue, 14 Jul 2020, 10:11 AM

 

PublicInvest Research Headlines - 3 Jun 2020

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Economy

Global: Asia called on to coordinate policies to avert global slump . Coordination among Asian nations is key to steering the global economy toward recovery from the coronavirus crisis, according to former senior government officials and academics in the region. Asian leaders should hold a summit to arrange financial, trade, public health and food security policies, according to a strategic plan released Wednesday by the Australian National University. The group behind the initiative includes advisers to the governments of China, Japan, Indonesia, India, Singapore and others, the statement said. (Bloomberg)

US: GDP is now projected to fall nearly 53% in 2Q, according to a Fed gauge. Economic activity in the 2Q has been cut by more than half, according to a tracker employed by the Atlanta Federal Reserve. The GDPNow outlook is now showing a 52.8% tumble, following data Monday that US manufacturing remains firmly in decline and will weigh on investment and consumption. That data from the Institute for Supply Manufacturing showed just 43.1% of firms seeing expansion in May. Extrapolating from that data, the Atlanta Fed anticipates personal consumption expenditures, which make up 68% of the nation’s GDP, to fall 58.1% in the April-to-June period. (Reuters)

US: To initiate tariff probe into India, Spain over digital tax. The Trump administration is set to start an investigation into India and Spain’s digital services taxes that could lead to tariffs being imposed on the countries’ exports to the US, according to people familiar with the plans. The probe will determine whether digital services taxes in India and Spain are discriminating against American tech giants like Apple Inc, Alphabet Inc’s Google and Amazon.com Inc. The so called section 301 investigation is led by the Office of the US Trade Representative and it can take months before a decision is made on whether to impose tariffs. (Bloomberg)

UK: Nationwide house prices fall most since 2009. The UK house prices declined at the fastest pace since 2009 as the impact of the coronavirus pandemic filtered through the property market, data from the Nationwide Building Society. House prices fell 1.7% MoM in May, in contrast to a 0.9% rise in April. This was the biggest fall since February 2009. Economists had forecast a fall of 1% On a yearly basis, house prices grew 1.8% in May, much slower than the 3.7% rise in April and economists' forecast of 2.8% increase. Housing market activity has slowed sharply as a result of the measures implemented to control the spread of the virus, Robert Gardner, Nationwide's chief economist, said. (RTT)

UK: No-deal Brexit threat looms over pandemic-ravaged UK. The threat of a no-deal Brexit is back -- and with it the risk that the UK economy’s shaky recovery from the coronavirus pandemic will be hobbled. As British and EU negotiators head into the last round of talks scheduled before a key summit this month, chances are growing that the UK will end the post-Brexit transition period on Dec. 31 without a free trade agreement in place -- spelling turmoil for businesses. Instead of postponing its final parting with the bloc because of the coronavirus, the UK government has so far ruled out any delay. (Bloomberg)

China: Auto sales set to rise 12% in May: industry body . China’s vehicle sales for May are set to rise 11.7% YoY to 2.14m, the country’s top auto industry body said in a post on its official WeChat account. The China Association of Automobile Manufacturers (CAAM) said that its forecast was based on sales data it had collected from key companies, without giving further details. It expects January to May auto sales in China, the world’s biggest auto market, to fall 23.1% YoY to 7.9m units. (Reuters)

China: Halts some US farm imports, threatening trade deal. Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods including soybeans as Beijing evaluates the ongoing escalation of tensions with the US over Hong Kong, according to people familiar with the situation. State-owned traders Cofco and Sinograin were ordered to suspend purchases, according to one of the people, who asked not to be identified discussing a private matter. Chinese officials also told state-buyers to halt American cotton and corn imports, the person said. (Bloomberg)

Australia: Keeps policy rates unchanged . Australia's central bank left its interest rate and the target yield on three-year government bonds unchanged, as widely expected. At the monetary policy meeting, the Reserve Bank of Australia board kept its interest rate at a record low 0.25% and the targeted yield on three-year government bonds at around 0.25%. Policymakers said this accommodative approach will be maintained as long as it is required. The Board said it will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3% target band. The bank observed that the outlook, including the nature and speed of the expected recovery, remains highly uncertain and the coronavirus pandemic is likely to have long-lasting effects on the economy. (RTT)

Indonesia: Inflation slows in May. Indonesia's consumer price inflation slowed in May, data from the statistics bureau showed. Consumer prices climbed 2.19% YoYin May, following a 2.67% increase in April. Economists had expected a 2.7% rise. The latest inflation was mainly driven by an increase in prices of goods including clothing and footwear, housing, water, electricity and household appliances. Prices also increased in health, transportation, information, communication and financial services, recreation, sports, and culture, food and beverage and restaurant, and the personal care and other services. (RTT)

Markets

DRB-Hicom (Outperform, TP: RM2.80): To acquire remaining stake in Media City for RM100m. DRB-Hicom entered into a share sale and purchase agreement with Enigma Permata SB to acquire the remaining 49% share in Media City Ventures SB for a cash consideration of RM100m. The proposed acquisition is expected to be completed in June 2020. (SunBiz)

TNB (Neutral, TP: RM13.28): Expects 7%-15% drop in electricity consumption this year. Tenaga Nasional (TNB) is expecting lower usage of electricity this year due to overall weakness in the economic activity led by the Covid-19 pandemic. President and CEO Datuk Seri Amir Hamzah Azizan expects electric consumption to drop 7%-15% YoY this year, due to the slowdown of activity in the commercial sector. “This estimation is still in its early stage. “Of course if the recovery in economic activity is better than expected, the demand of electricity will pick up,” he said. (StarBiz)

BCorp: Buys Singer for RM388m on PE ratio of 19.4x. Berjaya Corp has inked a MoU with its executive chairman Tan Sri Vincent Tan Chee Yioun and Berjaya Retail SB to acquire a 100% stake in Singer (Malaysia) SB from BRetail for a net payment of RM388m. The acquisition will involve the issuance of 1.18bn new BCorp shares at an issue price of 33 sen each. (SunBiz)

TA Enterprise: SC rejects takeover withdrawal. TA Enterprise application to withdraw its conditional voluntary take-over offer of TA Global has been rejected by the Securities Commission (SC) after having considered the justifications provided on a holistic basis, the company said. This means the takeover will proceed, but it is not clear if the privatisation exercise will still be undertaken. (SunBiz)

Boustead Plantations: Sees lower 1Q losses as revenue strengthens on improved prices of palm products. Boustead Plantations narrowed its net loss in the 1QFY20, as revenue strengthened with improved prices of palm products. Hence, its net loss was reduced to RM9.55m in the 1QFY20, from RM16.2m in 1QFY19. On prospects, it said the group’s profitability hinges mainly on the realized selling prices of its palm products, and the group’s planned transformation programme. Notwithstanding that, it said FY20 is expected to be a challenging year for many industries due to the Covid-19 outbreak. (The Edge)

KESM: Sees dull demand ahead after 3Q losses. KESM Industries posted a RM3m net loss in the 3QFY20 as the lockdown in China and prolonged movement control order at home disrupted its operations. This was the company's first quarterly loss since Jan 2013. KESM said that its revenue in the 3Q fell 27% to RM54.2m. It expects demand for its services is to remain "dull" for the rest of the year. "Our priority is to focus on improving asset utilisation and aligning cost structure with production levels," it said. (StarBiz)

Market Update

The FBM KLCI might open with a positive note after the Dow ended higher for a second straight day Tuesday, as investors trained their attention on the prospect of fuller business activity in the wake of the coronavirus pandemic, rather than the fresh round of civil unrest in major U.S. cities. President Donald Trump reiterated threats to deploy military troops across cities facing protests if governors and local officials prove unable to contain violent demonstrations. The Dow Jones Industrial Average rose 267.63 points, or 1.1%, to end at 25,742.65, the S&P 500 index rose 25.09 points, or 0.8%, closing at 3,080.82, and the Nasdaq Composite Index advanced 56.33 points, or 0.6%, to finish at 9,608.37, after trading negative earlier in the session. In Europe, the Stoxx Europe 600 index booked a 1.6% gain, while the FTSE 100 index closed 0.9% higher.

Back home, the FBM KLCI closed 17.55 points or 1.18% higher at 1,507.69 in an apparent reaction to Malaysia’s short-term economic recovery plan announcement. In the region, Japan’s Nikkei rose 1.2%, the China CSI 300 added 0.3% and Hong Kong’s Hang Seng Index added 1.1%.

Source: PublicInvest Research - 3 Jun 2020

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