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PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 11 May 2021, 9:26 AM

 

PublicInvest Research Headlines - 2 Apr 2021

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Economy

Global: Factory recovery picks up, but cost pressures grow. Factories across Europe and Asia ramped up production in March as a solid recovery in demand helped manufacturers move past the setbacks of the pandemic, although escalating costs and supply chain disruptions were creating challenges and driving prices. IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) jumped to 62.5 in March from Feb’s 57.9, above the initial 62.4 “flash” estimate and the highest reading since the survey began in June 1997. (Reuters)

US: Manufacturing index jumps to 37-year high in March. A report released by the Institute for Supply Management showed the pace of growth in US manufacturing activity accelerated by much more than anticipated in the month of March. The ISM said its Manufacturing PMI jumped to 64.7 in March from 60.8 in Feb, with a reading above 50 indicating growth in manufacturing activity. (RTT)

US: Construction spending pulls back less than expected in Feb. T he Commerce Department released a report showing a pullback in construction spending in the month of Feb. The construction spending fell by 0.8% to an annual rate of USD1.517trn in Feb after jumping by 1.2% to a revised rate of USD1.529trn in Jan. Economists had expected construction spending to slump by 1%. RTT)

US: Weekly jobless claims rebound from lowest level in a year. T he Labor Department released a report showing first-time claims for US unemployment benefits rebounded from their lowest level in a year in the week ended March 27th. The initial jobless claims rose to 719,000, an increase of 61,000 from the previous week's revised level of 658,000. Economists had expected jobless claims to edge down to 680,000 from the 684,000 originally reported for the previous week. (RTT)

EU: Manufacturing sector expands at record pace. The euro area manufacturing sector grew at the strongest pace in nearly 24 years of data collection, underpinned by strong production and orders, final data from IHS Markit showed. The final factory Purchasing Managers' Index rose to 62.5 in March from 57.9 in Feb. The flash reading was 62.4. The score has been above the neutral 50.0 no-change mark for the ninth consecutive month, suggesting growth in the sector. There were record rises in both output and new orders in March. (RTT)

EU: German retail sales recover in Feb. Germany's retail sales grew for the first time in three months in Feb but the pace of expansion was slower than economists' expected, data from Destatis revealed. Retail sales rose 1.2% MoM in Feb, reversing a 6.5% fall in Jan. Economists had forecast sales to grow at a faster pace of 2%. This was the first increase in three months. On a yearly basis, retail sales decreased 9% after easing 9.3% in the previous month. (RTT)

UK: Factory sector growth at decade high. The UK manufacturing sector logged the fastest growth in a decade in March driven by strong inflows of business from domestic and overseas markets, survey data from IHS Markit and Chartered Institute of Procurement & Supply showed. The factory Purchasing Managers' Index rose to a decade-high of 58.9 in March, its best outcome since Feb 2011. The score was also above the flash 57.9. (RTT)

China: Manufacturing growth moderates in March. China's manufacturing sector growth moderated in March suggesting that the post-epidemic recovery was continuing to falter, survey results from IHS Markit showed. The Caixin factory Purchasing Managers' Index fell to 50.6 in March from 50.9 in the previous month. This was the lowest reading since April 2020. Nonetheless, a score above 50 indicates expansion in the sector. Chinese manufacturers raised their production in March but the rate of growth edged down to an 11- month low. (RTT)

India: Power demand falls for first time in 35 years. India’s annual electricity demand fell for the first time in at least 35 years in the fiscal year to March, government data reviewed showed, mainly due to strict coronavirus-induced lockdowns across the country. Power demand fell 1% during the year ended March 2021, the data showed, mainly due to the imposition of lockdowns that resulted in a decline in electricity consumption for six straight months ending in Aug. (Reuters)

Markets

Cypark (Outperform, TP: RM1.84): Launches Southeast Asia’s largest floating solar plant. Cypark together with its copartner, Kelantan Utilities Mubaarakan Holdings SB has launched the country’s largest floating power solar plant (FSP) in Danau Tok Uban, Kelantan. (StarBiz) Comment: This is not a new development, though the location is new. Initially planned for construction and commissioning in Negeri Sembilan, the project will now be undertaken in Kelantan. We make no changes to estimates, having already accounted for this, but only from FY22 onwards. We continue to like Cypark's growth prospects, now with a wider reach and more entrenched position in the renewable energy space. Our Outperform call is maintained with an unchanged RM1.84 target price.

Bermaz Auto (Neutral, TP: RM1.46): To manufacture and distribute Kia vehicles. Bermaz Auto (BAuto) is partnering Kia Motors to undertake manufacturing and distributing Kia vehicles in Malaysia. (The Edge) Comment: The newly incorporated company, Kia Malaysia SB will be 33.33% and 66.67%-owned by Bermaz and Kia Corp respectively. For Bermaz’s portion, the funding requirement works out to be RM20m, which will be supported by internally generated funds. Along with this, Kia Corp has appointed Bermaz as the new distributor of Kia vehicles in Malaysia (taking over from Naza Kia). In 2020, Kia’s unit sales fell by 78% (market share deteriorated to 0.1% from 0.6% in 2019). This JV will be positive for Bermaz as it helps to broaden its earnings base and complement existing automotive businesses. Nevertheless, earnings contribution is not expected to be significant in the early stage. We believe more capex and marketing effort would be required in order to improve the sales and profitability of the Kia marque in Malaysia. We maintain our Neutral rating on Bermaz.

HB Global: Acquires 60% stake in engineering firm servicing telco industry. HB Global is acquiring a 60% stake in Forward Resources & Construction SB for RM66m. The purchase consideration will be satisfied via the issuance of 208.41m HB Global shares, together with RM12m cash. (The Edge)

SHH Resources Holdings: Proposes one-for-one bonus issue. SHH Resources has proposed a one-for-one bonus issue. Its share capital will increase to about 100m shares following the issuance. The bonus issue is expected to be completed by 2Q21. (The Edge)

Solution: To supply 3.5m doses of CanSino vaccine to Health Ministry. Solution has entered into a Supply Agreement with the Ministry of Health (MoH) involving Convidicea, Recombinant Novel Coronavirus Vaccine (Adenovirus Type 5 Vector). It said the agreement is to supply 3.5m doses of the vaccine to MoH for the prevention of Covid-19. (The Edge)

Tasco: Team up with MASkargo to provide smooth vaccine delivery. MAB Kargo SB (MASkargo) is partnering with Tasco to achieve the shared objective of an enhanced and seamless logistics delivery service for customers involved in the production of Covid-19 vaccines. Both companies have inked an MoU. (The Edge)

Market Update

The FBM KLCI might end the week with positive note after global equity markets surged on Thursday, with US and European benchmark indices hitting record highs, as the strongest manufacturing data around the world in decades and a drop in bond yields drove investor optimism. US President Joe Biden’s sweeping $2.3tn plan to rebuild America’s crumbling infrastructure added to the enthusiasm for risk assets, as did accelerating vaccine rollouts.

On Wall Street, the S&P 500 also touched a new high as it charged past the 4,000 mark after the Institute for Supply Management said its index of U.S. factory activity soared to its highest level in more than 37 years in March. On Wall Street, the Dow Jones Industrial Average rose 0.52%. The Nasdaq Composite added 1.76%, riding the tech rally, while S&P 500 gained 1.18% to close above 4,000. The pan-European STOXX 600 index rose 0.5%, hovering just 2 points below its all-time high. The benchmark ended the first quarter with a 7.7% rise - its fourth straight quarter of gains. The German DAX climbed 0.6% to hit a record high, while the UK’s FTSE 100 also gained 0.6%.

Back home, the FBM KLCI settled up 0.58% or 9.13 points to settle at 1,582.64 points. It was reported that China’s March manufacturing data rebounded in March to 51.9% — its highest this year and putting the sector in expansion territory for 13 months in a row. The Shanghai Composite index rose 0.71% while the Shenzhen Composite index rose 1.11% and Hong Kong’s Hang Seng Index rose 1.97%.

Source: PublicInvest Research - 2 Apr 2021

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