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PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 14 Aug 2020, 10:38 AM

 

PublicInvest Research Headlines - 12 Jun 2020

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Economy

Global: Trade barriers most harmful in times of crisis – BOE. Imposing new trade barriers is particularly harmful in times of crisis and nations should try to open up if they want to limit the damage to both the economy and health caused by coronavirus stressed economists at the BOE. The pandemic has acted as a shock to both demand and supply, making it deeper than the trade collapse of 2008-09. While global value chains have amplified spill-overs between different countries, protectionist measures can disrupt the production of medical supplies. (Bloomberg)

US: Jobless claims extend gradual decline, remain elevated . Applications for US unemployment benefits extended their slow decline despite a stream of business re-opening, underscoring the longer-term labour-market challenges caused by the coronavirus pandemic. Initial jobless claims for regular state programs totalled 1.54m in the week ended June-6, down from 1.9m in the prior week. Applications for unemployment insurance have fallen consistently each week since peaking at the end of March, but the volume of weekly filings is still more than double the worst week during the Great Recession. Continuing claims, the total number of Americans claiming ongoing unemployment benefits in state programs decreased by less than estimated to 20.9m in the week ended May- 30. (Bloomberg)

US: Producer prices rise more than expected in May. The producer price index for final demand climbed by 0.4% in May after tumbling by 1.3% in April. Economists had expected the index to inch up by just 0.1%. The bigger than expected increase in producer prices reflected sharp jumps in prices for food and energy, which surged up by 6.0% and 4.5% respectively. Excluding food and energy prices, core producer prices edged down by 0.1% in May after falling by 0.3% in April. The dip in core prices matched economist estimates. (RTT)

US: New York Fed tweaks repo operations as market functioning improves. The New York Fed is slightly raising the price of its operations in the market for repurchase agreements after seeing “substantial improvements” in market conditions. Beginning next Tues, the minimum rate on the Fed’s overnight repo operations will be set at 0.05% point above the interest rate on excess reserves (IOER), or the rate that the Fed pays to banks holding balances at the central bank. Currently, the minimum bid rate for overnight repo is equal to the IOER. (Reuters)

EU: ECB's Lane says ready to adjust all instruments as needed. The Governing Council stands ready to adjust all its instruments as needed to support the euro area economy during the severe crisis triggered by the coronavirus pandemic, stressed the ECB’s Chief Economist Philip Lane. The central bank is ready to adjust its key policy rate, which is the deposit rate that is currently at -0.50%. He was quoted saying that "In the current environment of exceptional uncertainty and remaining stress in financial markets, asset purchases within the PEPP have proven a particularly effective tool, so we focused on these in our most recent decision". (RTT)

EU: Germany's stimulus package to lift GDP by 1.3% points – DIW Institute. Germany's economic stimulus package worth EUR130bn should increase economic output by 1.3% points this year and next. According to DIW, the largest euro area economy will shrink 9.4% in 2020 but will expand 3% next year. If the stimulus package is implemented as designed, the economic slump should be lower this year at -8.1%. The think tank forecast Germany's unemployment to rise by around 500,000 to an average of 2.7m a year. This would be equivalent to a jobless rate of 6.0%. (RTT)

UK: House price balance at 10-year low – RICS. The house price balance fell to -32% in May from -22% in April. This was the weakest monthly figure since 2010. Moreover, near-term price expectations remained downbeat, with the index standing at -43%. Further, a net -16% forecast prices to fall over the year ahead. There was a slight improvement in the sales outlook as estate agents were permitted to reopen on May-13. Nonetheless, given the economic uncertainty caused by the pandemic, overall sentiment remained cautions. The net balance for new buyer enquiries rose to -5% in May from a record low of -94% in April. (RTT)

UK: Three million jobs idled in virus-hit retail and hospitality segments. UK retailers, hotels and restaurants sought the most money from the government in wage subsidies. Retail and wholesale firms furloughed more than 1.6m staff through May-31, at a cost of GBP3.3bn. Accommodation and food services saw 1.4m jobs furloughed, costing about GBP2.6bn. Together, the two sectors account for over a third of all jobs idled. The Job Retention Scheme, which pays 80% of a furloughed worker’s wage, is supporting almost 9m jobs, and will last until Oct, albeit at a slightly tapered support level. The program has been credited with preventing a mass wave of unemployment in the wake of the coronavirus pandemic, and will carry a final price tag of around GBP60bn. (Bloomberg)

Japan: Large firms' business sentiment deteriorates in the 2Q. Japan's large business firms' sentiment deteriorated sharply in the 2Q. The index for business conditions among large companies declined to -47.6 in the 2Q from -10.1 in the previous quarter. However, conditions are expected to improve in the next quarter, with the score rising to -6.6 points. The conditions index among large manufacturers plunged to -52.3 from -17.2 a quarter ago. The outlook index for third quarter rose to -7.9. The non-manufacturers index came in at -45.3 versus -6.6 in the preceding period. The outlook index advanced to -6.0. (RTT)

Markets

Hibiscus (Neutral, TP: RM0.65): Associate completes farmout of offshore field in Australia . Hibiscus associate completes farmout of offshore field in Australia. Hibiscus Petroleum's associate company in Australia, 3D Oil Ltd (TDO), has completed the farmout transaction of its T/49P offshore field to ConocoPhillips Australia SH1 Pty Ltd (COP). Under the terms of the joint operating agreement, COP will hold an 80% interest in the permit and become operator, said TDO. (The Edge)

Versatile Creative: Unit sells nearly 26m Iris Corp shares. Versatile Creative's unit disposed of 25.98m shares of Iris Corporation from Feb 11 to June 3 for RM4.02m.Versatile Paper Boxes SB disposed of the shares in the open market. The original cost of investment in the Iris Corp shares was about 18.75 sen per share. “The disposal will contribute positively on the earnings per share and net asset per share of Versatile Creative. The expected gain or loss from the disposal to Versatile Creative is RM1.72m.” it said. Versatile Creative said the Iris Corp shares were considered a non-core investment and were recorded as available-for sale financial assets in its financial statements. (The Star)

BHIC: Names Izaddeen Daud as director. Boustead Heavy Industries Corp (BHIC) announced that Izaddeen Daud has joined its board of directors as a non-independent non-executive director. Izaddeen, 51, who started his career as an auditor at Earnst and Young, also sits on the board of directors of Boustead as an independent non-executive director. Izaddeen was a senior manager at Affin Merchant Bank and senior vice president at Permodalan Nasional Bhd before holding the position of CEO at ASM Investment Bhd. (The Edge)

Pantech: 4Q profit falls 36%, declares treasury share dividend . Pantech Group Holdings saw its 4QFY19 net profit decline 35.88% to RM7.23m from RM11.28m a year earlier, dragged by slow oil and gas activities, sale of smaller-margin products and higher taxes. Quarterly revenue, however, rose marginally to RM143.91m from RM142.61m, backed by higher sales in the manufacturing division. For the whole of FY20, Pantech’s net profit was down 24.45% to RM35.86m from RM47.46m in FY19, mainly due to weaker trading business on lower activities in local oil and gas projects. Full-year revenue fell 1.11% to RM602.47m from RM609.22m, as the oil and gas business slowdown more than offset higher sales from the manufacturing segment. (The Edge)

Airlines (Underweight): Malaysia Airports sees 15% increase in daily flights since RMCO . Malaysia Airports has seen a 15% increase in average daily flights since the implementation of the Recovery Movement Control Order (RMCO) and said it is expecting passenger numbers to pick up again. In a statement, it said the Kuala Lumpur International Airport (KLIA) saw average daily flights increase from 97 to 122 over the past two days, as the country’s three main airlines - Malaysia Airlines, AirAsia and Malindo Air - have resumed local flight routes with new offerings to entice Malaysians to travel locally. Over the past two months, aircraft movements were mainly contributed by repatriation and cargo flights. There was a contraction of total passenger movements due to the MCO. (The Edge)

Market Update

The FBM KLCI might open with a downward bias today after U.S. stocks on Thursday marked the worst day since the height of the coronavirus-induced rout, amid signs of a re-acceleration of cases of COVID-19, and as investors digested Wednesday’s sobering economic outlook from Federal Reserve Chairman Jerome Powell. The market moves came even as the number of Americans filing for first-time jobless benefits declined again in the most recent week. The Dow Jones Industrial Average closed down 1,861.82 points, or 6.9%, to 25,128.17, marking the index’s worst daily drop since March 16. Meanwhile, the S&P 500 was down 188.04 points, or 5.9%, to finish at 3,002.10 and the Nasdaq Composite ended down about 527.62 points, or 5.3%, at 9,492.73. In Europe, the Stoxx Europe 600 index finished the session down 4.1%, while the FTSE 100 index shed about 4%.

Back home, the FBM KLCI closed lower in tandem with other regional benchmark indices, as the US Federal Reserve’s muted outlook on the economic giant presented a bitter pill to investors banking on a quicker economic recovery. The KLCI fell 18.02 points or 1.14% to 1,557.25 points. In the region, Japan’s Nikkei tumbled 2.8%, the China CSI 300 finished 1.1% lower and Hong Kong’s Hang Seng Index closed off 2.3%. South Korea’s Kospi index retreated 0.9%.

Source: PublicInvest Research - 12 Jun 2020

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