US, China: Say they are open to talks amid escalating trade war. The US and China signaled they were open to resuming negotiations over trade after days of exchanging retaliatory threats, though Treasury Secretary Steven Mnuchin said Beijing must commit to deeper economic reforms. High-level discussions over trade between the world’s two largest economies have stalled since June after a month of talks led by Mnuchin and Commerce Secretary Wilbur Ross with Chinese Vice Premier Liu He. Mnuchin told the House Financial Services Committee on Thursday that he and administration officials are “available” for negotiations, as he called US tariffs imposed on China a “modest” step aimed at leveling the playing the field. (Bloomberg)
US: Consumer comfort nears 17-year high on better finance views. Americans’ sentiment improved for a fifth-straight week, buoyed by brighter views of their personal finances and record-high confidence among Republicans, the Bloomberg Consumer Comfort Index showed Thursday. Weekly index increased to 58, the highest since mid-April and matching the second-strongest reading since Feb 2001, from 57.6. Gauge of personal finances rose to 65.1, the best since mid-April, from 64. Confidence continues to strengthen amid a tight labor market, tax cuts and a drop in gas prices since late May that are making Americans more likely to make purchases. (Bloomberg)
US: Budget deficit jumps first nine months of fiscal year. The US budget deficit widened by 16% to USD607bn three-quarters of the way through Donald Trump’s first full fiscal year as president, as spending accelerated faster than revenue. The shortfall in the nine months through June was larger than the USD523bn gap in the same period of fiscal 2017, according to a report from the Treasury Department released Thursday. Revenue rose to USD2.54trn in the period, up 1.3% from a year earlier. Spending rose 3.9% to USD3.15trn. (Bloomberg)
US: Fed’s Powell says economy in good place as trade risks mount. Federal Reserve Chairman Jerome Powell gave an upbeat assessment of the US economy but warned a sustained period of high tariffs on a wide variety of imports could be harmful to growth. “I sleep pretty well on the economy right now,” Powell said, noting that it’s in a “good place” with unemployment at its lowest level in years and inflation close to the central bank’s 2% target. He cautioned, however, that trade disputes could end up being a negative for the economy if they result in a protracted period of widespread higher tariffs. (Bloomberg)
US: Tariffs lurk around corner after inflation tame in June. A lull in US consumer inflation in June may prove temporary, as the White House ramps up plans to impose tariffs on Chinese goods and trucking costs soar. The Consumer Price Index rose 0.1% from the prior month, less than projected and restrained by falling utility prices and a record decline in hotel costs, Labor Department data showed Thursday. While that was slower than the 0.2% rise in May, inflation on an annual basis picked up slightly. What’s more, the 2.3% gain in the core gauge – which excludes food and energy costs -- roughly matched the fastest pace of this expansion. (Bloomberg)
US: Jobless claims reach two-month low amid July 4 holiday. US filings for unemployment benefits fell more than forecast last week to a two-month low, reflecting volatility that’s typical around periods with holidays, Labor Department figures showed Thursday. Initial claims decreased by 18k to 214k (est. 225k), lowest since week ending May 5. Four-week average of initial claims, a less-volatile measure than the weekly figure, dropped to 223,000 from the prior week’s 224,750. Seasonal adjustments to the claims data tend to be more difficult during and around weeks with holidays, especially if this year’s timing of Independence Day on a Wednesday spurred Americans to take longer vacations. (Bloomberg)
EU: Trade warnings pile up as EU joins chorus, cuts growth forecast. Escalating trade tensions with the US pose a significant downside risk to growth, the European Commission warned as it lowered its forecast for expansion this year. The report is the latest in a constant string of warnings that the global tit-for-tat tariff battle sparked by the US will damage the world economy. In its economic outlook, the EU’s executive body highlighted trade tensions, market volatility, tighter financing conditions, US spending and political uncertainty in some EU countries as big threats. It cut its forecasts for both the EU and the 19- nation euro area compared with projections made barely two months ago. It now sees 2018 expansion of 2.1% -- down from 2.3% previously and sees growth slowing to 2% in 2019. (Bloomberg)
TM (Trading Buy, TP: RM4.65): Offers up to 10x free speed upgrade for Unifi, pushes top speed to 800Mbps. TM offers up to 10x speed for existing unifi users while the new unifi basic broadband with speed of 30Mbps will be limited exclusively for households with income of RM4,500 and below. (StarBiz) Comments : Data usage for unifi basic is capped at 60GB and is priced at RM79. Meanwhile, existing customers will be upgraded in phases by up to 10x at no extra cost. The new entry-level package and speed upgrade will be made available starting August 15. This is in line with what TM has guided earlier pertaining to its plan to fulfill the new government’s aspiration to provide faster speed and lower price broadband services. No change to our earnings estimates and TP of RM4.65. Maintain Trading Buy on TM.
JAKS (Neutral, TP: RM1.30), Star (Neutral, TP: RM1.07): JAKS loses lawsuit against Star Media; Court orders banks to release RM50m bank guarantee. The High Court has ordered the two issuing financial institutions to release a RM50m bank guarantee called on by Star Media Group in Feb, in relation to an agreement for the purchase of a piece of land in Section 13, Petaling Jaya for RM135m. This means JAKS Resources will have to pay the RM50m sum to the two issuers. Star Media said the Court has dismissed the legal suit filed by JAKS to restrain the financial institutions from releasing the bank guarantee to Star Media, with costs. (The Edge)
Gas Malaysia: Teams up with Tokyo Gas to invest in Asean. Gas Malaysia has teamed up with Tokyo Gas Co. Ltd to scout for new investments in natural gas in Asean except Vietnam. Gas Malaysia said on Thursday it had inked an MoU with Tokyo Gas – Japan's largest provider of city gas – to cooperate and collaborate in any new investments in the development of natural gas value chain in the region. Under the MoU, the scope includes developing the natural gas chain in technical and commercial information and collaborative investments in new projects. (StarBiz)
Kumpulan Jetson: To undertake RM88m job at Jalan Yap Kwan Seng. Kumpulan Jetson's unit Jetson Construction SB has received a letter of award for the construction of four blocks of service apartments at Jalan Yap Kwan Seng in KL for RM88.03m. The 32- month project involving the completion of 140 apartment units and external works will commence at a date to be confirmed by the architect. (StarBiz)
SKH: To buy 70% stake in firm to gain rights to affordable housing project. SKH Consortium is planning to acquire a 70% stake in property development firm Rimbun Gabungan SB for RM12m, from a company in which Bina Puri Holdings' founder Dr Tony Tan Cheng Kiat is a director. SKH said it inked a share sale agreement with Bijak Fajar SB and Newston Development SB for the proposed acquisition. The directors of Rimbun Gabungan are Tan, David Ng Chee Hwa, Zailan Abdul Ghapar and Heap Wei Guan. (The Edge)
DNeX: To challenge MyCC over RM17m fine for monopoly. Dagang NeXchange (DNeX) will challenge the proposed RM17.39m fine to be imposed by the Malaysia Competition Commission (MyCC) for alleged monopoly abuse by its subsidiary. The MyCC had proposed to fine Dagang Net Technologies SB for abusing its position as a monopoly in the provision of trade facilitation services under the National Single Window (NSW). (StarBiz)
Nova MSC: Sells majority stake in PrimusTech. Nova MSC is disposing a 51% stake in loss-making wholly-owned subsidiary, PrimusTech Pte Ltd, to JAG Ltd of Japan for RM8.9m. Nova MSC said it inked an agreement to sell 31,875 shares in Singapore-based PrimusTech to JAG. The price took into account PrimusTech group's unaudited net assets -- 51% of which amounted to RM4.4m for FY18 -- as well as the group's loss-making position. PrimusTech, which provides integrated control and automation systems and information technology solutions for buildings and facilities, posted an unaudited loss after taxation of RM1.76m for FY18. (StarBiz)
Lafarge: RM270m cement contract for ECRL suspended due to project's review. Lafarge Malaysia's RM270m cement supply contract for the proposed East Coast Rail Link (ECRL) project has been suspended by China Communications Construction (ECRL) SB, following the suspension of the project pending a government review. This follows the instruction received by China Communications from Malaysia Rail Link SB on July 3 on the ECRL project suspension; Lafarge received a letter from China Communications on the suspension of the cement supply with immediate effect until further notice. (The Edge)
FPSO tenders highest in 3 years, says Yinson CEO. Tenders for floating production, storage and offloading (FPSO) jobs are now at the highest in three years, Yinson Holdings group CEO Lim Chern Yuan said, adding that this bodes well for the offshore production and support services provider. "We see more bidding activities. I have never seen it (number of tenders) this high in the last three years. Over the past few years, we believe there were some underinvestment in the O&G business and now is mainly a catch-up. So, we will see a lot of jobs being awarded in the industry in the short term. On our part, we have already secured one project this year and we are in an exclusive discussion with another," he said. (The Edge)
Gabungan AQRS: Net profit more than doubles in 2Q. Gabungan AQRS' net profit for 2QFY18 more than doubled to RM19.1m from RM7.23m a year ago, thanks to higher revenue from both its construction and property development segments. Quarterly revenue jumped 134% YoY to RM187.19m from RM79.83m. For its 1HFY18, the group's net profit jumped 52% YoY to RM35.57m from RM23.37m, as revenue strengthened 32% to RM314.69m from RM238.77m. Moving forward, Gabungan AQRS said the group anticipates a better financial performance in FY18 compared to FY17, as construction progress for its ongoing construction jobs picks up pace. (The Edge)
Plantations: Price of CPO dips below RM2,000. The price of crude palm oil (CPO) futures contract in KL, the global benchmark, fell to its lowest level since Sept 2015 as slow export growth and rising stockpile curbed the market's appetite for the commodity. In the derivatives market, the most active CPO futures contract declined RM18 to RM2,186 a tonne. The contract had tumbled 13% so far his year. Plantation companies, especially those that have higher exposure in Sabah and Peninsular Malaysia, are likely to register weaker quarterly results due to weaker CPO production and lower CPO average selling prices in 2Q18. (StarBiz)
The FBM KLCI might open higher today after world equities and industrial metals regained their poise after the previous day’s steep falls as participants attempted to look beyond the mounting trade tensions between the US and China. The US S&P 500 benchmark equity index closed at a five-month while the tech-heavy Nasdaq Composite hit an intraday record peak. Copper and nickel prices rallied off one-year lows. Brent oil had a very choppy session following its biggest one-day drop in more than two years, reflecting continued worries over the potential damage to demand that a trade war could inflict. On Wall Street, the S&P 500 ended 0.9% higher at 2,798, its best finish since early February. The Nasdaq Composite also closed at a record, up 1.4% at 7,824. The Dow Jones Industrial Average rose 0.9%. Across the Atlantic, the Europe-wide Stoxx 600 ended 0.8% as the Xetra Dax in Frankfurt rose 0.6% and London’s FTSE 100 added 0.8%.
Back home, the FBM KLCI index gained 14.80 points or 0.88% to 1,703.57 points on Thursday. Trading volume increased to 2.69bn worth RM2.51bn. Market breadth was positive with 598 gainers as compared to 294 losers. The regional markets finished broadly higher with shares in China leading the region. The Shanghai Composite was up 2.16% while Japan's Nikkei 225 added 1.17% and Hong Kong's Hang Seng rose 0.60%.
Source: PublicInvest Research - 13 Jul 2018