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PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 27 Nov 2020, 11:04 AM

 

PublicInvest Research Headlines - 26 Oct 2020

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Economy

  • US: Business activity picks up in Oct - IHS Markit. US business activity increased to a 20-month high in Oct, but the pace of new business growth and new orders eased slightly amid the lingering COVID-19 pandemic and caution ahead of the Nov. 3 presidential election. Data firm IHS Markit said US Composite PMI Output Index rose to a reading of 55.5 this month. That was the highest since Feb 2019 and was up from 54.3 in Sept. It said some manufacturers and service industry companies noted the coronavirus crisis had weighed on demand. The survey found several clients were holding back on placing orders until after the fiercely contested race to the White House between Republican President Donald Trump and former Vice President and Democratic Party candidate. (Reuters)
  • EU: Business activity contracts in Oct as COVID-19 resurges - PMIs. Eurozone economic activity has slipped back into decline this month as renewed restrictions to control the coronavirus pandemic forced many businesses in the bloc’s dominant service industry to limit operations. A second wave of the virus is sweeping across Europe, and nearly 90% of economists said there was a high or very high risk that this would halt the nascent eurozone economic recovery. IHS Markit’s flash Composite Purchasing Managers’ Index fell to 49.4 from Sept’s final reading of 50.4, below the 50-mark separating growth from contraction and only slightly better than the 49.3 predicted in a poll. That number was dragged down by the service industry’s PMI, which sank to 46.2 from 48.0. (Reuters)
  • UK: Private sector growth moderates in Oct. The UK private sector growth moderated in Oct reflecting weaker contribution from the service economy due to tighter restrictions across the hospitality sector and the impact of local lockdowns on general consumer spending. The flash IHS Markit/Chartered Institute of Procurement & Supply composite output index declined more-than-expected to 52.9 in Oct from 56.5 in Sept. The latest reading pointed to the weakest rise in private sector output since a return to growth was first signalled in July. The services Purchasing Managers' Index fell notably to 52.3 in Oct from 56.1 a month ago. Similarly, the manufacturing PMI came in at 53.3 versus 54.1 in the previous month. (RTT)
  • UK: Sees record 3Q retail sales growth in post-lockdown rebound. British retail sales beat expectations in Sept to cap a record quarter of growth that took total sales volumes further above their pre-pandemic level, but rising COVID cases risk crimping demand going forward. Retail sales volumes expanded by 1.5% in Sept alone and are 4.7% higher than a year earlier, the largest annual rise since April 2019 and above all forecasts in a poll of economists. Strong household demand has been the mainstay of Britain’s recovery from the initial shock of the coronavirus lockdown, when output contracted by 20%, more than in any other major advanced economy. Retail sales in Sept were 5.5% higher than before the pandemic started in Feb. (Reuters)
  • China: Reconsiders its global strategy for the Yuan. China is reconsidering its strategy for the internationalization of the yuan and planning for more policy support after completing a comprehensive review recently, according to a senior central bank official. The government can be more proactive with policy support to facilitate the role of the markets. For instance, the central bank can improve bilateral currency swap agreements to better promote trade and investments and try to coordinate various means of yuan crossborder settlements and payments infrastructure. The yuan rallied to the strongest in more than two years earlier this week, aided by dollar weakness and China’s economic recovery from the virus pandemic. (Bloomberg)
  • Japan: Inflation slips 0.1% on month in Sept. Consumer prices in Japan were down a seasonally adjusted 0.1% on month in Sept, the Ministry of Internal Affairs and Communications said. That was in line with expectations and unchanged from the Aug reading. Individually, prices were up for furniture, clothing and education, while they were down for fuel, communications and recreation. They were flat for food, housing and medical care. On a yearly basis, inflation was flat - shy of expectations for a gain of 0.2%, which would have been unchanged from the previous month. Individually, prices were up for food, housing, furniture, clothing, medical care and communications. Prices were down for fuel, education and recreation. (RTT)
  • Japan: Manufacturing PMI improves to 48.0 in Oct. The manufacturing sector in Japan continued to contract in Oct, albeit at a slower pace, the latest survey from Jibun Bank revealed with a manufacturing PMI score of 48.0. That's up 47.7 in Sept, although it remains beneath the boom-or-bust line of 50 that separates expansion from contraction. Production and new orders fell further but at weaker rates. The decline in backlogs also moderated while employment fell marginally. Business expectations about the year ahead outlook remained positive. The report also showed that the services index fell to 46.6 from 46.9 and the composite index rose to 46.7 from 46.6. Among services, new business inflows shrank again, although the pace of decline was its weakest in 3 months. (Reuters)
  • Singapore: Consumer prices steady in Sept. Singapore's consumer prices remained unchanged in Sept, data from the Monetary Authority of Singapore and the Ministry of Trade and Industry showed. The consumer price index remained unchanged YoY in Sept, after a 0.4% fall in Aug. Economists had expected a 0.25% decline. This latest inflation outcome was largely due to a more gradual decline in private transport costs. MAS core CPI fell 0.1% annually in Sept, following a 0.3% decrease in the preceding month. Economists had forecast a 0.2% fall. The latest modest decline can be attributed to smaller declines in the costs of services, and electricity and gas. The statistical office expects external inflation to remain low in the coming quarters, amid weak demand conditions. (RTT)

Markets

  • AirAsia (Underperform, TP: RM0.50): Secures RM300m loan to fund development projects in Sabah. AirAsia Group confirmed that it has secured a RM300m loan from Sabah Development Bank as part of the group's fundraising exercise and to pivot the airline into the digital business. The airline clarified that the loan is not backed by any government guarantee. The loan was mainly intended to enhance AirAsia's logistics presence in Sabah, creating over 100,000 new jobs in the process. (The Edge)
  • MAHB: Sets record straight over lawsuit against AAX. Malaysia Airports Holdings (MAHB) clarified that its RM78m lawsuit against AirAsia X will not derail the latter’s debt restructuring scheme. “Malaysia Airports is pursuing its legal rights to recover the debt from AirAsia X which is critical for the upkeep and maintenance of the airports,” it said in response to a local media news report on Oct 24 headlined, ‘MAHB checkmates AirAsiaX’. (Bernama)
  • Parlo: Sees potential RM420m in revenue from new biz activity. Parlo's expansion into foreign workforce management services sees the company potentially raking in RM420m in revenue next year. This is as the company recently entered into an agreement to provide a range of migrant workforce-related services for 160,000 Myanmar migrant workers. Newly-appointed ED Ti Lian Seng said Parlo, whose core activity is related to corporate and leisure travel arrangements, has been affected due to the Covid-19 pandemic. (SunBiz)
  • Key Alliance: Teams up with diagnostics lab to offer onsite Covid-19 testing. Key Alliance Group is teaming up with clinical diagnostics laboratory firm Dunia Wellness Laboratories SB to offer onsite testing services for Covid-19 within Peninsular Malaysia. Under the arrangement, Key Alliance will provide Care Gene Covid-19 PCR test kits to Dunia Wellness for onsite testing services, for clients provided by the former only. (The Edge)
  • Vsolar: To develop rooftop solar power system at AT Sytematization's glove plant. Vsolar Group has entered into a memorandum of understanding to instal rooftop solar panels at a plant belonging to AT Systematization's glove manufacturing subsidiary in Perak, with a 15-year tenure lease. A formal corporate power purchase agreement is to be signed by both parties at a later stage. The rooftop solar power system will have installed capacity of 1MW. (The Edge)
  • JF Technology: To partner with a Chinese smartphone giant to set up plant in China, sources say. JF Technology will be partnering with a Chinese smartphone giant to set up a manufacturing plant in China, according to sources familiar with the plan. The new investment is for the ACE Market-listed company to set a foothold in China. It is understood that the rationale to invest in a manufacturing plant in the mainland is to get a chance to be part of the supply chain in China's semiconductor industry. It is not known the amount JF Technology will need to pour in for the new production facilities as well as the partnership structure between the group and the smartphone giant. (The Edge)

MARKET UPDATE

  • The FBM KLCI might open higher today as US stocks, government debt and high-grade corporate bonds rose on Friday after weathering mixed messages on negotiations between Republicans and Democrats on a stimulus deal. The S&P 500 index of bluechips closed the day 0.4% higher, but finished the week down 0.5%, the worst week since September. US stocks rallied in the afternoon after Mark Meadows, White House chief of staff, told reporters that a deal could emerge as soon as the next day or two. The comments came after Steven Mnuchin, Treasury secretary, said hurdles remained in reaching an agreement with Nancy Pelosi, the Democratic speaker of the House of Representatives. European equities snapped a four-day losing streak on Friday on upbeat earnings from some of the region’s leading companies, but still closed lower for the week. The continent-wide Stoxx 600 index ended the day up 0.5%. European bourses were buoyed by financial stocks following forecast-beating earnings from the Barclays and Nordea banks. Europe’s banking sector, which has tumbled almost 40% this year, ended the day 2% higher. Data released on Friday gave investors a mixed picture of the strength of Europe’s economic recovery. UK retail sales rose 1.5% in September from the previous month, higher than the 0.4% anticipated.

    Back home, the FBM KLCI, which posted gains at the end of the morning trading session, fell into the negative zone in the afternoon trading session. The benchmark index dropped by 4.16 points or 0.3% to close at 1,494.64. Asian bourses were largely in the green. The Nikkei 225 was up by 0.18% or 42.32 points at 23,516.59. Hong Kong's Hang Seng Index was up 0.54% or 132.65 points at 24,918.78, while the Shanghai Composite Index was down by 1.04% or 34.50 points at 3,278.

Source: PublicInvest Research - 26 Oct 2020

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