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PublicInvest Research Headlines - 20 Apr 2021

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Economy

EU: Bundesbank report says German economy shrank in 1Q . Germany's economic output decreased in the first quarter as activity was dampened in all sectors, the latest monthly report from Bundesbank said. Industrial production continued to fall in Feb. "Supply bottlenecks for raw materials must have played an important role in the decline, so that there were production delays despite the good order situation," the report said. While stricter and longer-lasting lockdown restrictions worsened the losses in several firms in the service sector, a renewed increase in VAT rates and exceptionally harsh weather in Jan and Feb led to a sharp reduction in construction output, the report said. However, incoming orders meant the slump may not last long. The report also said that the short-time work rose sharply in Jan, by 40% from Oct before the coronavirus restrictions were tightened again. Consequently, employment remained stable at the beginning of the year and the unemployment rate was steady at 6.0%. (RTT)

EU: Eurozone construction output decreases in Feb. Eurozone's construction output declined in Feb after rising in the previous month, data form Eurostat showed. The construction output fell 2.1% MoM in Feb, after a 0.8% rise in Jan. In Dec, construction output decreased 1.4%. Production in building construction decreased 1.9% monthly in Feb and output in civil engineering fell 3.4%. On a YoY basis, the construction output fell 5.8% in Feb, following a 2.6% decline in the prior month. (RTT)

UK: Asking prices for UK houses hit new high after tax cut extended – Rightmove . Advertised prices for homes in Britain hit a record high after finance minister Rishi Sunak stoked the market again by extending a tax cut for home-buyers last month, property website Rightmove said. Asking prices jumped by 2.1% in the five weeks to April 10, only the second time in five years that prices have risen by more than 2% from one month to the next, Rightmove said. The rise took the average price of property coming to market to an all time high of 327,797 pounds (USD451,737) and homes were selling in record-fast time, it said. (Reuters)

China: Sticks with old growth drivers to spur Covid recovery . After fueling its V-shaped recovery by boosting spending on housing and infrastructure, China appears in no rush to drop its investment-led growth model despite international calls for it to “rebalance” its economy. 1Q data released underlined just how reliant China remains on its current approach: investment spending rose 6% compared with a 4.2% increase in retail sales, based on two-year average growth rates to strip out base effects from last year’s coronavirus lockdowns. Beijing approved investment projects in energy, transport and hi-tech sectors worth CNY45.4bn (USD7bn) in the first quarter alone, it said. (Bloomberg)

China: Has no desire to replace USD with digital CNY . China sought to allay fears it wants to topple the USD as the world’s main reserve currency as Beijing makes bigger strides in creating its own digital CNY. People’s Bank of China Deputy Governor Li Bo said the goal for internationalizing its currency is not to replace the USD, and the efforts to create a digital CNY are aimed at domestic use. “For the internationalization of the renminbi, we have said many times that it’s a natural process, and our goal is not to replace the US dollar or other international currencies,” Li said on a panel at the Boao forum. “I think our goal is to allow the market to choose, to facilitate international trade and investment.” (Bloomberg)

Japan: March exports rise 16.1% YoY – MOF . Japan’s exports jumped 16.1% in March from a year earlier, Ministry of Finance (MOF) data showed, as demand for goods recovered from low, pandemic-hit levels last year. The reading compared with an 11.6% increase expected by economists in a Reuters poll. It followed a 4.5% drop in Feb. Imports gained 5.7% in the year to March, versus the median estimate for a 4.7% increase and following a 11.8% rise in the previous month. The trade balance came to a surplus of JPY663.7bn (USD6.11bn), versus the median estimate for a JPY490.0bn surplus. (Reuters)

Indonesia: Rates seen on hold as Rupiah depreciates. Bank Indonesia is expected to keep its benchmark interest rate unchanged for a second straight month as volatility in global financial markets continues to weigh on the nation’s currency. All 35 economists surveyed by Bloomberg say Bank Indonesia will keep its seven-day reverse repurchase rate at a record low of 3.5%. The central bank has said it believes the rupiah is “very undervalued” at the moment, but could strengthen going forward with the economy improving and price pressures subdued. Bank Indonesia “is likely to be mindful not to exacerbate rupiah depreciation pressures through further rate cuts,” TD Securities strategists including Mitul Kotecha wrote in a research note. “Improving growth prospects should give BI some space to keep rates on hold this month.” (Bloomberg)

Markets

Homeritz (Outperform, TP: RM0.77): Shuts plants, office in Muar as more workers test positive for Covid-19. After having implemented a seven-day stoppage at one of its manufacturing plants due to Covid-19 infections, Homeritz announced a oneweek suspension of operations across all of its factories and administrative office. "Following this, the operations of these factories as well as its administrative office are implementing a temporary stoppage from April 18 to 24," it said. (The Edge)

HLT Global: Buys 2.56 acres of land to expand glove production capacity. HLT Global is buying 2.56 acres of leasehold land in Kuala Langat. Selangor for RM16.25m. "Upon completion of the proposed acquisition, the subject property will be fully utilised for the fabrication of glove-dipping lines," the company said. Currently, the glove maker is operating at its peak production capacity. (StarBiz)

Boustead, Sunway: Sells Jalan Cochrane land to Sunway. Boustead is selling a parcel of land located along Jalan Cochrane to Sunway for RM233.4m cash. The estimated gain from the disposal of the 6.6 acres of land was about RM54.1mil. "The proposed disposal also allows Boustead to strengthen its liquidity and cash flow position by raising total net cash proceeds of approximately RM213.8m (net of estimated expenses), which will be utilised for repayment of bank borrowings and working capital," it said. (StarBiz)

Magna Prima: To dispose of commercial property in KL for RM56m. Magna Prima is disposing of a four-storey commercial building in Kuala Lumpur for RM56m, which will use to help settle its debts. The property, located in Mukim Batu and with its lower ground floor designated for a supermarket, is being sold to Cowboy (KL) SB. (The Edge)

Freight Management: Proposes one-for-one bonus issue. Freight Management has proposed a bonus issue of 279.22m shares on the basis of one bonus share for every share held on an entitlement date to be announced later. The bonus issue serves to improve the marketability and trading liquidity of its shares on lower trading price which would attract a broader range of investors to participate. (The Edge)

M3 Technologies: Shareholders reject private placement exercise. The majority of shareholders in M3 Technologies has rejected the company's proposed private placement exercise at an EGM. Seven shareholders with a combined holding of 146m shares, or 65.66% of the company have voted against the proposed fund raising exercise. (StarBiz)

Tan Chong: To settle RM109m Customs bill via instalments over 36 months. Tan Chong Motor, which said last month its RM180m bills of demand from the Royal Malaysian Customs Department (RMCD) will be settled out of court and that the sum has been reduced to RM109m, announced that the sum will be settled via instalment payments over 36 months. This will involve the company paying RM10.81m by April 20 this year, with the remaining balance of RM97.26m to be paid via 36 equal monthly instalments of RM2.7m. (The Edge)

Market Update

The FBM KLCI might open weaker today as global stocks on Monday ended mostly lower after touching a record high as investors looked for earnings to justify the high valuations in equities. On Wall Street, indices fell, with the Nasdaq being the biggest decliner. The Dow Jones Industrial Average fell 123.04 points, or 0.36%, to 34,077.63, the S&P 500 lost 22.21 points, or 0.53%, to 4,163.26 and the Nasdaq Composite dropped 137.58 points, or 0.98%, to 13,914.77. The pan-European STOXX 600 index lost 0.07%.

Back home, the FBM KLCI bucked the regional uptrend to close 0.5% lower, as the daily number of new Covid-19 cases stayed above 2,000 for the fifth consecutive day since last Thursday. At the closing bell, the benchmark index fell 8.09 points to 1,600.29. Elsewhere in the region, Japan’s Nikkei 225 inched up 0.01%, while Singapore's Straits Time Index went up 0.19%. Hong Kong’s Hang Seng Index rose 0.47% while the Shanghai Stock Exchange Composite Index jumped 1.49%.

Source: PublicInvest Research - 20 Apr 2021

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