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PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 18 Oct 2019, 9:14 AM

 

PublicInvest Research Headlines - 10 May 2019

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Economy

US: Goods trade deficit with China tumbles to five-year low. The US goods trade deficit with China shrank to its smallest in five years in March, which could embolden President Donald Trump as he escalates his trade war on Beijing. The report from the Commerce Department came as the US and China began two days of make-or-break talks to salvage a faltering trade deal. Trump said he would start paperwork to launch tariffs on a new USD325bn category of Chinese imports previously untouched by the trade feud. This is in addition to an expected increase of duties on USD200bn worth of Chinese goods to 25% from 10% on Friday. China has promised to retaliate if the tariffs are imposed. The politically sensitive goods trade deficit with China decreased 16.2% to a seasonally unadjusted USD20.7bn, the lowest level since March 2014. (Reuters)

US: Wholesale inventories unexpectedly edge lower in March. A report released by the Commerce Department unexpectedly showed a modest decrease in US wholesale inventories in the month of March. The Commerce Department said wholesale inventories edged down by 0.1% in March after climbing by an upwardly revised 0.4% in Feb. Economists had expected inventories to come in unchanged. The slight drop in wholesale inventories came as inventories of non-durable goods slid by 0.6% amid a sharp pullback in inventories of drugs. On the other hand, the report said inventories of durable goods rose by 0.3%, reflecting notable increases in inventories of machinery and metals. The Commerce Department also said wholesale sales surged up by 2.3% in March after rising by 0.3% in Feb. (RTT)

US: Weekly jobless claims dip less than expected to 228,000. First time claims for US unemployment benefits pulled back by less than expected in the week ended May 4th, according to a report released by the Labor Department. The report said initial jobless claims dipped to 228,000, a decrease of 2,000 from the previous week's unrevised level of 230,000. Meanwhile, the Labor Department said the less volatile four week moving average rose to 220,250, an increase of 7,750 from the previous week's unrevised average of 212,500. Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also climbed by 13,000 to 1.684m in the week ended April 27th. The four-week moving average of continuing claims still fell to 1,665,750, a decrease of 8,000 from the previous week's unrevised average of 1,673,750. (RTT)

US: Producer price growth matches economist estimates in April. Reflecting a continued jump in energy prices, the Labor Department released a report showing producer prices increased in line with economist estimates in the month of April. The Labor Department said its producer price index for final demand rose by 0.2% in April after climbing by 0.6% in March. The uptick in prices matched expectations. The modest increase in producer prices was partly due to a continued spike in energy prices, which surged up by 1.8% in April after soaring by 5.6% in March. Gasoline prices led the way higher, skyrocketing by 5.9%. On the other hand, the report said food prices dipped by 0.2% in April after rising by 0.3% in March, reflecting an 11.6% nosedive in prices for fresh and dry vegetables. (RTT)

EU: Greek Feb unemployment eases to 18.5%, lowest since July 2011. Greece’s jobless rate eased to 18.5% in Feb from an upwardly revised 18.6% in the previous month, data from the country’s statistics service ELSTAT showed. Feb’s unemployment rate was the lowest reading since July 2011. Seasonally adjusted data showed the number of unemployed at 871,556 people, with younger persons aged up to 24 bearing the brunt of being out of work. Among younger persons aged 15 to 24, the jobless rate fell to 38.8% from 46% in the same month in 2018. Greece’s jobless rate, which hit a record high of 27.8% in Sept 2013, has been falling since but remains the highest in the euro zone. The government expects unemployment to decline to 18.2% this year as the economy recovers. (Reuters)

China: Banks temper April lending as debt worries rise, but all eyes on US trade threat. Chinese banks throttled back new lending in April after a record 1Q that sparked fears of more bad loans, but the central bank will have to keep up policy support for the economy due to escalating trade tensions with the US. Chinese banks extended CNY1.02trn (USD150.16bn) in net new yuan loans in April, the central bank said, well below analysts’ expectations of CNY1.2trn in a Reuter’s poll and March’s surprisingly strong CNY1.69trn. The credit data was released unexpectedly early, hours ahead of the resumption of last ditch US-China trade talks and a day ahead of a threatened US tariff increase on Chinese goods. The numbers are usually released between the 10th and 15th of every month. (Reuters)

China: More policy easing seen as lending slows, trade risks rise. Chinese banks throttled back new lending in April after a record 1Q that sparked fears of more bad loans, but the central bank will likely have to step up support for the economy as trade tensions with the US escalate. Global investors are closely watching to see how much more support Beijing will inject to shore up growth. But those policy expectations are swinging wildly as a sudden blowup in diplomatic ties threatens China’s nascent recovery. US President stunned financial markets this week by announcing he will hike tariffs on Chinese goods unless Beijing agrees to a trade deal, sharply escalating their dispute after months of negotiations. (Reuters)

Japan: Consumer confidence lowest in over 3 years. Japan's consumer confidence weakened to the lowest level in more than three years in April, data from the Cabinet Office showed. The consumer confidence index for households with two or more persons fell to a seasonally adjusted 40.4 in April from 40.5 in March. Economists had expected a score of 40.3. The latest reading was the lowest since Feb 2016, when the confidence index was 40.2. Among the four sub indexes of the consumer confidence index, the index reflecting households' inclination to buy durable consumer goods declined in April along with those measuring expectations on employment, livelihood and income growth. (RTT)

Markets

Handal: Bags Repsol offshore crane maintenance contract. Handal Resources has secured a contract to repair and maintain 19 offshore cranes from Repsol Oil and Gas Malaysia Ltd. The contract, estimated at between RM20m and RM25m, was for a primary period of three years from April 10, 2019, with a one-year extension option, Handal said. The actual value depends on Repsol’s maintenance and repair schedule as the contract award is on a "call-out” basis. (StarBiz)

Willowglen: Bags maintenance contract worth RM9.2m. Willowglen MSC has secured a contract worth RM9.2m from Singapore's SP PowerAssets Ltd for a 6.6kV Remote Terminal Unit Maintenance. It said the five-year contract was awarded to its wholly owned subsidiary Willowglen Services Pte Ltd until May 8, 2024. "The contract is expected to contribute positively to the group's earnings and net assets per share for the FYE Dec 31, 2019 to 2024," Willowglen said. (The Edge)

Sin Heng Chan: To sell Melaka land for RM14.4m. Sin Heng Chan (Malaya) (SHC) is selling a tract of land in Melaka for RM14.4m. The group said it was selling the 2.4ha leasehold plot to Sumber Setiamas SB for a gain of RM4.6m. Proceeds from the sale would be utilised to finance its day-to-day operations, as well as pare down its borrowings, the group said. (The Edge)

MMC Corp: Submitted revised proposal on MRT3 at end-2018. MMC Corp had submitted a proposal to revise the Mass Rapid Transit 3 (MRT3), which is also known as the Circle Line, to the government at the end of last year, said the group's MD Datuk Seri Che Khalib Mohamad Noh. He said the proposal provides an alternative for reducing the project cost, which is at RM45bn under the original plan. However, he is tight-lipped about the cost reduction, adding the proposal is a completely different solution. (The Edge)

Metronic Global: Takes legal action against shareholders for conspiracy, blackmail. Metronic Global has launched legal action against its shareholders who collectively hold a 39% stake in the company, alleging they had conspired to injure and had blackmailed the company for RM20m and to withdraw a police report against Tan Ew Chew. It claimed these shareholders had also failed to undertake a mandatory general offer, after they had gained control over the company. (The Edge)

Teo Seng: Pays three sen dividend as 1Q net profit more than triples. Teo Seng Capital announced that net profit more than tripled to RM22.1m in its 1QFY19, from RM6.6m a year earlier, as poultry farming revenue rose primarily on stable selling prices of eggs and improved production efficiency. The group declared a dividend of three sen a share and the dividend is payable on June 26 this year, while its ex date falls on June 17. (The Edge)

MRCB-Quill REIT: Posts lower earnings in 1Q. MRCB-Quill REIT said realised net income in the 1QFY19 fell 7.6% from a year ago due to lower revenue from selected properties. With about a fifth of its net lettable area due for renewal this year, the REIT manager are having a tough time getting new tenants. "The Klang Valley office market is expected to remain challenging," it said. In 2019, 19% of MQ REIT's total net lettable area or approximately 369,000sqft are due for renewal. "Approximately 97% of the leases due were not renewed by the existing tenants," it said. (StarBiz)

Market Update

The FBM KLCI might open lower after US stocks fell for a fourth straight day, but managed to pull themselves off their session lows after President Donald Trump said a trade deal with Beijing was still possible — comments that helped beat back some of the market jitters set off by his threat to ramp up tariffs on China this week. The S&P 500, which had been down by as much as 1.5%, closed down 0.3% at 2,870.72. The Dow Jones Industrial Average finished 0.5% lower at 25,828.36 after having dropped 1.7%. The Nasdaq Composite fell 0.4% to 7,910.58, compared to the 1.9% decline earlier in the day. The bounce back comes after Mr Trump said on Thursday that he received a “beautiful letter” from Xi Jinping, his Chinese counterpart, urging the two countries to “work together” to resolve their differences on trade. The comments, coming ahead of the start of another round of top-level negotiations this afternoon, gave investors some much needed hope that the two sides may be able to reach a compromise on trade. European and Asian markets, which closed before Trump’s Xi comments, also ended Thursday in the red. The region-wide Stoxx 600 and Frankfurt’s Xetra Dax 30 both fell 1.7% while London’s FTSE 100 dropped 0.9%.

Back home, the FBM KLCI index lost 15.02 points or 0.92% to 1,618.53 points on Thursday. Trading volume decreased to 2.14bn worth RM2.02bn. Market breadth was negative with 246 gainers as compared to 610 losers. China’s CSI 300 was on course for its worst week since October, down by around 8% since Monday after a fall on Thursday of 1.9%

Source: PublicInvest Research - 10 May 2019

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