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PublicInvest Research

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

 

PublicInvest Research Headlines - 26 Aug 2019

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Economy

Global: Moody's cuts growth forecasts of 16 Asia pacific economies on weaker outlook. Moody's Investor Service announced that it has revised down the 2019-20 growth forecasts for 16 countries in the Asia Pacific due to weaker trade and investment. The weaker outlook is offsetting the support from stable private and public consumption. Among the 16 Asia Pacific countries, Hong Kong and Singapore are set to have significantly weak growth this year. GDP growth slowed sharply in both economies in the first half of the year versus the same period last year. Hong Kong's growth prospects are dampened by continuing anti-government protests and Singapore's outlook is clouded by the trade tensions and the overall slowdown in the global economy. The rating agency downgraded both Hong and Singapore's growth forecasts for this year to 0.5% from 2.3. Hong Kong's growth outlook for next year was lowered to 1% from 2.7% and that of Singapore to 1.2% from 2.5%. (RTT)

US: New home sales drop sharply, point to more housing weakness. Sales of new US single-family homes sank more than expected in July, a sign that the housing market continued in low gear despite lower mortgage rates and a strong labor market. The Commerce Department said new home sales dropped 12.8% to a seasonally adjusted annual rate of 635,000 units last month. It was the biggest monthly decline since July 2013. Economists had expected a sales pace of 649,000 units. Concerns about slowing growth, especially tied to trade tensions between the US and China, as well as weakness in overseas economies are seen encouraging the Federal Reserve to cut interest rates in Sept for the second time this year. US stock prices opened lower but pared losses after Fed Chair Jerome Powell said the economy faced significant risks and the US central bank would act as appropriate to keep the economic expansion on track. (Reuters)

US: Powell pledges to "act as appropriate" but continues to draw Trump's ire. Federal Reserve Chairman Jerome Powell delivered his highly anticipated speech at the Jackson Hole Economic Policy Symposium, reiterating the Fed will "act as appropriate" to sustain the US economic expansion. Powell described the three weeks since the Fed decided to lower interest rates by 25bp at its July meeting as "eventful." The Fed Chief cited President Donald Trump's announcement of new tariffs on Chinese imports as well as further signs of a global economic slowdown, notably in Germany and China. Powell also pointed to several geopolitical events, including the growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government. As a result of the subsequent uncertainty, Powell said the Fed is carefully watching developments as we assess their implications for the US outlook and the path of monetary policy. (RTT)

US, Japan: Agree in principle on trade deal focused on farmers. The US and Japan agreed in principle on a trade deal under which Japan will slash tariffs on US beef, pork and other agricultural products, while continuing to face levies on its own auto exports. Announcing the deal, US President Donald Trump also said Japan would purchase large quantities of US wheat and corn. Japanese officials may consider that a good deal if they can elicit a promise in return that its automakers will be shielded from Trump’s threat of more painful tariffs. The US president and Japanese Prime Minister Shinzo Abe announced the agreement in Biarritz, France, at the Group of Seven summit following a bilateral meeting earlier in the day. Trump said there would be no change to U.S. tariffs on Japanese cars. The countries have reached consensus on core elements and are setting a goal to sign a deal at the end of Sept during United Nations meetings (Bloomberg)

EU: Germany in uproar as negative rates threatens saving obsession. Most Germans live by the credo that saving is a virtue, but the European Central Bank’s negative interest rates risk making a mockery of the national obsession, prompting politicians to seek ways to insulate thrifty citizens and keep the burden on the country’s beleaguered banks. Finance Minister Olaf Scholz says he’ll look into whether it’s possible to prevent German banks from charging most retail-banking clients for deposits, after such a measure was proposed by the leader of Bavaria. Lenders have rejected the idea, saying bans don’t ultimately help clients and could even destabilize financial markets. Germany’s overcrowded banking industry has long contended with sub-par profitability, but after five years of negative rates, lenders are running out of ways to offset the hit to earnings. The ECB is an easy target for a country known for its risk-averse attitude to money and its habit of hording savings. (Bloomberg)

China: Housing market slows on policy tightening. China’s housing market continued to slow in July, even as prices picked up, according to our gauges of activity and financing conditions. With regulators tightening policies on the housing sector, the slowdown is likely to stretch into the quarters ahead. The average home price across 70 cities continued to climb, jumping 10.1% from a year earlier, according to calculations by Bloomberg Intelligence based on data from the National Bureau of Statistics. Economics’ gauge of the sector, which takes in house prices, activity and financing, fell deeper into negative territory. Activity remained sluggish, reflecting weak investment and land purchases by developers. Financing conditions were more constrained, due to recent tightening on developers’ funding by regulators. The Bloomberg Economics China Real Estate Comprehensive Index came in at -7.5 in July, down from -2.4 in June. (Bloomberg)

Singapore: Inflation moderates more than forecast. Singapore's inflation slowed more-than-expected in July, data from the Monetary Authority of Singapore and the Ministry of Trade and Industry showed. The consumer price index rose 0.4% YoY in July, slower than the 0.6% increase in June. Economists had expected a 0.5% rise. The slowdown in inflation reflected lower prices of retail and other goods, and electricity and gas. MAS core inflation, which excludes the costs of accommodation and private road transport, slowed to 0.8% from 1.2% in the previous month. This was the lowest since April 2016. On a MoM basis, consumer prices declined 0.4% in July, following a 0.2% fall in the preceding month. MAS core CPI rose 0.1% monthly, after remaining unchanged in the previous month. The MAS and the ministry forecast core inflation to come within the lower half of the 1-2% range in 2019. Meanwhile, overall inflation is expected to average 0.5-1.5% in 2019. (RTT) 

Markets

London Biscuits (Trading Sell, TP: RM0.24): Raises RM11m via share placement but defaults in loan payment. London Biscuits, which defaulted on a RM9.8m loan payment, has managed to place out its last tranche placement share at an average issue price of 32.4 sen per share, more than double its current share price. The amount raised is estimated to be about RM11m fresh cash. It said the private placement is deemed completed following the expiry of the approval from Bursa Securities which was granted vide its letter dated Feb 26, 2019, for the implementation of the private placement. (The Edge)

Tan Chong: Files claims against Nissan Vietnam. Tan Chong Motors Holdings’ wholly-owned subsidiary, TCIE Vietnam Pte Ltd has filed a claim against Nissan Vietnam Co Ltd with the People’s Court in Hanoi, Vietnam for the repayment of a USD9.4m (RM39.4m) loan and interest. Nissan Vietnam is a JV between Tan Chong’s wholly owned subsidiary ETCM (V) Pte Ltd and Nissan Motor Co Ltd, with each holding a 74% and 26% stake respectively in the company. “On Aug 15, 2019 Tan Chong had issued a letter of demand to Nissan Vietnam for the immediate repayment of the loan together with incurred interests,” it said. Nissan Vietnam failed to make the payment of the loan along with the incurred interest. (SunBiz)

Petronas Dagangan: Lower margin pulls down 2Q net profit by 45%. Petronas Dagangan reported a 45% drop in its net profit to RM172.7m for the 2QFY19, from RM314.4m in the previous year, amid lower margins for its retail and commercial operations. This was despite higher quarterly revenue of RM7.6bn, up 4.5% from RM7.3bn a year earlier, as a result of higher contribution from both its retail and commercial segments. However, both segments saw lower profit contribution. (The Edge)

BHIC: Quarterly profit slumps on lower JV contributions, higher finance costs. Boustead Heavy Industries Corp (BHIC) saw its net profit contract 59% YoY in the 2QFY19 despite higher revenue, following lower contributions from JVs, higher finance costs, and as negative contribution from associates widened. Revenue was up 10% at RM53.9m versus RM49.1m previously. Share of BHIC's JV results fell 71% to RM1.8m from RM6.5m, while its associates' contribution widened to a loss of RM3m from RM1.8m. (The Edge)

IPO: SDS Group aims for Ace Market listing in Oct. SDS Group is aiming to list on Bursa Malaysia's ACE Market on Oct 7. At the group's prospectus launch, the Johor-based bakery products manufacturer and distributor said it would be raising RM23.9m from its IPO of 23 sen a share. Some RM6m or 25% of the IPO proceeds will be used to expand its business presence for both its wholesale and retail channels within the northern and central regions of Peninsular Malaysia, RM7.8m or 32.5% will be used for working capital requirements, RM7m or 29.2% to repay bank borrowings and RM3.2m or 13.3% to defray listing expenses associated with the IPO. (The Edge)

IPO: Solarvest inks underwriting agreement for ACE Market listing. Solarvest Holdings has entered into an underwriting agreement with M&A Securities SB in conjunction with its IPO on the ACE Market of Bursa Malaysia. It is scheduled to be listed by Oct 2019. The solar photovoltaic system specialist said that the IPO exercise entails a public issue of 98.8m new shares, representing 25.3% of its enlarged share capital. (SunBiz) 

Market Update

The FBM KLCI might start the week with a negative note as Wall Street fell sharply last Friday as tensions between the US and China reached new heights after Donald Trump demanded American companies seek “an alternative” to China in response to Beijing’s latest volley of tariffs. Beijing said on Friday it would apply additional levies of between 5 and 10 percent on $75bn of US imports from September, marking the latest escalation in the tit-for tat trade war between the two countries. The S&P 500 sunk in response to the escalation, posting its third-worst day of the year with a drop of 2.6%. The Nasdaq Composite shed 3% while the Dow Jones Industrial Average was down 2.4%. In Europe, the composite Stoxx 600 index dropped 0.8%, with Germany’s Dax and France’s CAC both down roughly 1.2%, while in London the FTSE 100 fell 0.5%. Shares across the retail, automotive and shipping sectors weakened Friday, while tech stocks suffered some of the heaviest losses.

Back home, the FBM KLCI index gained 6.86 points or 0.43% to 1,609.33 points on Friday. Trading volume decreased to 2.01bn worth RM1.74bn. Market breadth was negative with 381 gainers as compared to 400 losers. The regional markets also finished higher on Friday with shares in Hong Kong leading the region. The Hang Seng was up 0.50% while China's Shanghai Composite added 0.49% and Japan's Nikkei 225 rose 0.40%.

Source: PublicInvest Research - 26 Aug 2019

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