PublicInvest Research

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PublicInvest Research Headlines - 12 Oct 2020

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US: Wholesale inventories revised to 0.4% in Aug. US wholesale inventories rose less than initially estimated in Aug, suggesting inventories were likely to build slowly after sliding in the early months of the coronavirus pandemic. The Commerce Department said on Friday that wholesale inventories increased 0.4% in Aug, instead of rising 0.5% as estimated last month. Stocks at wholesalers fell 0.2% in July. The component of wholesale inventories that goes into the calculation of GDP was unchanged in Aug. August inventories were down 5.2% from a year earlier. GDP declined at a record 31.4% annualized rate in the 2Q, with inventories subtracting 3.5 percentage points, the most in 32 years. GDP is expected to bounce back strongly in the 3Q but growth is seen slowing substantially in the last quarter of this year. (Reuters)

EU: ECB's Lane braces for tougher phase for euro zone economy – WSJ. The euro zone zone economy is entering a tougher phase as a surge in coronavirus cases puts a question mark over the recent rebound, the ECB’s chief economist Philip Lane said on Sunday. With a second wave of the Covid-19 pandemic sweeping Europe, governments across the region have started to implement fresh restrictions, albeit mostly localised and focused on leisure activities. “The next phase is going to be tougher,” Philip Lane said. Lane reaffirmed his line that the 1.3% inflation rate currently expected in 2022 was “far away” from the central bank’s goal of just under 2%. But he was keen to dampen expectations for fresh stimulus from the ECB as soon as this month, saying the central bank would wait to see how governments respond to the challenge as they publish their budgets for 2021. (Reuters)

EU: Italy industrial production growth tops expectations. Italy's industrial production rose at a faster-than-expected rate in Aug, figures published by the statistical office Istat showed on Friday. Industrial production rose 7.7% MoM in Aug, after a 7.0% increase in July. Economists had expected to rise 1.3%. Among all sectors, consumer goods production rose 6.6% monthly in Aug and intermediate goods rose 4.0%. Output of capital goods and energy gained by 4.3% and 3.5%, respectively. On a yearly basis, industrial output fell 0.3% in Aug, following an 8.3% decrease in the preceding month. Economists had forecast an annual decline of 6.6%. The unadjusted industrial production also decreased 0.3% yearly in Aug. (RTT)

UK: GDP growth moderates in Aug. Following a rebound from the reopening of the economy and government support measures, the UK economic growth moderated notably in Aug suggesting that growth momentum is losing steam. GDP climbed 2.1% MoM, slower than the 6.4% expansion seen in July, the Office for National Statistics reported Friday. Economists had forecast a monthly growth of 4.6%. This was the fourth consecutive monthly increase following a record fall of 19.5% in April. Aug GDP was 21.7% higher than its April low. Nonetheless, it remained 9.2% below the levels seen in Feb 2020. In the three months to Aug, GDP grew 8%, following two consecutive quarterly falls. This was slightly slower than economists' expectation of 8.2%. (RTT)

UK: NIESR expects recovery to slow significantly. UK economic recovery likely lost steam and is set to slow sharply in the 4Q of the year, the NIESR said Friday. The think tank estimates that growth stopped in Sept and the economy stagnated. Growth is expected to be nearly 15% in the 3Q. ONS data, released earlier on Friday, the UK economy grew by 2.1% in Aug, marking a fourth consecutive monthly increase. The estimates also showed that the UK economy grew by 8.0% in the three months to Aug. The NIESR's initial forecast for the final quarter of the year is for growth of 1.3%. (RTT)

China: Central bank to cut FX risk reserve ratio to zero. China's central bank said it will lower the reserve requirement ratio for financial institutions when conducting some foreign exchange forwards trading to zero with effect from Monday. Under current rules, financial institutions must set aside 20% of the previous month's yuan forwards settlement amount as foreign exchange risk reserves. The move came after the onshore spot yuan rate ended at a 17-month high on Friday against the dollar, its biggest one-day percentage gain since 2005. (Reuters)

India: Central bank leaves key rates unchanged. The Reserve Bank of India left its key interest rate unchanged on Friday as inflation remains above the tolerance band amid sharp economic contraction caused by the pandemic. The Monetary Policy Committee, led by Governor Shaktikanta Das, voted unanimously to maintain the policy repo rate at 4%, as widely expected. The Marginal Standing Facility, or MSF rate and the Bank rate remained unchanged at 4.25%. The reverse repo rate was retained at 3.35%. (RTT)

Philippine: Trade surplus fall in Aug. The Philippine trade surplus decreased in Aug from the last year amid declines in both exports and imports, the Philippine Statistics Authority showed on Friday. Exports declined 18.6% yearly in Aug, following a 9.1% decrease seen in July. This was the sixth consecutive fall.


Top Glove (Trading Buy, TP: RM9.70): Mulls raising USD1bn in Hong Kong listing . Top Glove Corp is considering raising more than USD1bn from a listing in Hong Kong, according to people with knowledge of the matter. Deliberations are ongoing and details of the offering, including size, could increase depending on investor feedback, the people said. A representative for Top Glove declined to comment ahead of an official announcement. (The Edge)

XOX: Proposes three-for-eight bonus warrants . XOX has proposed to undertake a bonus issue of up to 1.34bn free warrants on the basis of three warrants for every eight shares held on an entitlement date to be announced later. Assuming full exercise of 1.34bn warrants at an illustrative exercise price of 16 sen, the company will raise gross proceeds of RM213.8m. The proceeds arising from the exercise will be utilised for working capital, including defrayment of operational and administrative expenses. (The Edge)

WZ Satu: Receives RM16.5m contract for lubricant blending plant works. WZ Satu has received a purchase order worth about RM16.5m for the mechanical, electrical and instrumentation installation works for a lubricant blending plant in Port Klang from BP Group of Companies’ unit AsPac Lubricants (M) SB. The scope of work included the supply of partial materials, construction and commissioning of the upgrading system, the civil engineering and construction group said in a filing with Bursa Malaysia. (Bernama)

Kanger: Unit inks lease deal for autocity building in China . Kanger International Bhd’s unit, Ganzhou Kanger Industrial Co Ltd has entered into an agreement to lease the AutoCity Building in China to Ganzhou Jiache Automobile Trading Co Ltd. Kanger said the building in the Ganzhou Economic and Technological Development Zone will be specially outfitted primarily for used passenger vehicles in the mid to high-end market segments. “The agreed-upon monthly rental income from the building between Dec 1, 2020 and Nov 30, 2024 shall be CNY969,959.88, at a monthly rental rate of CNY24.00 per square metre. (Bernama)

Focus Dynamics: Acquires 12.19% stake in Brahims Holdings . Focus Dynamics Group has acquired 12.19% stake in Brahims Holdings following the former's strategy to increase its portfolio of food and beverage (F&B) assets. In a statement, the company said the acquisition is also part of the plan to revamp traditional business models to infuse digital technology and modern concepts while enhancing user experience. The acquisition also provides Focus Dynamics with a strong partnership with an established company in the provision of quality and efficiency of F&B services. (New Straits Times)

NetX: Partners DGB to provide cashless payment solutions . NetX Holdings has proposed to supply up to 1,000 contactless payment terminals to facilitate cashless and e-wallet payment solutions via DGB Networks SB’s next-generation artificial intelligence vending machines. The IT services provider told Bursa Malaysia that its subsidiary GEM Pay SB has entered into a collaboration agreement with DGB Networks for the venture. (The Edge)

Market Update

The FBM KLCI might open higher today after US stocks rose last Friday to clinch weekly gains as investors monitored the prospects for another round of fiscal stimulus from Congress, with President Donald Trump, once again, saying he was open to a broader package. The S&P 500 rose 0.9% to 3,477.13. The Dow Jones Industrial Averag advanced 161.39 points, or 0.6%, to 28,586.90, based on preliminary numbers. The Nasdaq Composite gained 1.4% to end at 11,579.94. For the week, the S&P 500 was up 3.8%, the Dow rose 3.3%, and the Nasdaq climbed 4.6%. Investors also saw some corporate deal-making after The Wall Street Journal reporting that Advanced Micro Devices Inc. was in talks to buy rival chip maker Xilinx Inc. European stocks traded choppy on Friday, weighed by a strong euro and as investors absorbed a policy shift announcement by Federal Reserve Chairman Jerome Powell. Drug stock Bayer and technology names fell. The Stoxx Europe 600 index eased 0.1% to 370.26, after dropping 0.6% on Thursday. The German DAX slipped 0.3%, the French CAC 40 was flat, and the FTSE 100 index rose 0.3%.

Back home, the FBM KLCI finished up 10.92 points or 0.72% at 1,530.35 on institutional buying and as Malaysia's political developments drove trading sentiment across Bursa Malaysia. The regional markets finished mixed with shares in Hong Kong fell as the Hang Seng dropped 0.31%. The Nikkei 225 lost 0.12% while the Shanghai Composite in China closed unchanged.

Source: PublicInvest Research - 12 Oct 2020

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